XXVIIIth Report on Competition Policy 1998 : published in conjunction with the 'General Report on the activities of the European Union - 1998'.
Date: 1999-11-26
Institutions: European Commission
Subjects: EU competition policy, EU law - national law, State aid, activity report, anti-trust legislation, application of EU law, competition, competition law, coordination of financing, economic concentration, intervention policy, merger control, restriction on competition, small and medium-sized enterprises

European  Commission

XXVIIIth Report
on Competition  Policy
1998

(Published  in conjunction  with the
'General  Report on the
Activities of the European  Union — 1998')

European Commission

XXVIIIth Report
on Competition Policy
1998

(Published in conjunction with the
‘General Report on the
Activities of the European Union — 1998’)

Brussels (cid:240) Luxembourg, 1999

A great deal of additional information on the European Union is available on the Internet.
It can be accessed through the Europa server (http://europa.eu.int).

Cataloguing data can be found at the end of this publication.

Luxembourg: Office for Official Publications of the European Communities, 1999

ISBN 92-828-7198-3

(cid:147) European Communities, 1999
Reproduction is authorised provided the source is acknowledged.

Printed in Belgium

PRINTED ON WHITE CHLORINE-FREE PAPER

Contents

NOTICE TO THE READER

FOREWORD BY MR KAREL VAN MIERT

Part One — XXVIIIth Report on Competition Policy 1998

SEC (99) 743 final

INTRODUCTION

I — Antitrust — Articles 81 and 82

State monopolies and monopoly rights — Articles 31 and 86

A — Modernisation of the legislative and interpretative rules
B — Consolidating the single market
C — Sector-based policies
D — Statistics

II — Merger control

A — Introduction
B — New developments
C — Statistics

III — State aid

A — General policy
B — Concept of aid
C — Assessing the compatibility of aid with the common market
D — Procedures
E — Statistics

IV — International activities

A — Enlargement
B — Bilateral cooperation
C — Multilateral cooperation

V — Outlook for 1999

ANNEX — CASES DISCUSSED IN THE REPORT

COMPETITION REPORT 1998

6

7

13

19

27

27
35
41
59

61

61
64
79

81

81
84
89
104
109

111

111
114
118

121

125

4 CONTENTS

Part Two — Report on the application of the competition rules in the

European Union

I — Antitrust: Articles 81 and 82 of the EC Treaty — Articles 65 and 66 of the ECSC

Treaty

A — Case summaries
B — New legislative provisions and notices adopted or proposed by the Commission
C — Formal decisions pursuant to Articles 81, 82 and 86 of the EC Treaty
D — Cases closed by comfort letter in 1998
E — Notices pursuant to Articles 81 and 82 of the EC Treaty
F — Press releases
G — Judgments and orders of the Community courts

II — Merger control: Council Regulation (EEC) No 4064/89 and Article 66 of the ECSC

Treaty

A — Summaries of decisions taken under Article 6(1)(b) of Council Regulation (EEC) No

4064/89

B — Summaries of decisions taken under Article 8 of Council Regulation (EEC) No 4064/

89

C — Decisions pursuant to Article 2(4) of the ECMR (joint venture cases)
D — Commission decisions
E — Press releases
F — Judgments of the Community courts

III — State aid

A — Overview of cases
B — New legislative provisions and notices adopted or proposed by the Commission
C — List of state aid cases in sectors other than agriculture, fisheries, transport and the

coal industry

D — List of state aid cases in other sectors
E — Judgments of the Community courts
F — Enforcement of Commission decisions ordering the recovery of aid

IV — International

V — The application of competition rules in the Member States

A — Legislative developments
B — Application of the Community competition rules by national authorities
C — Application of the Community competition rules by courts in the Member States
D — Application of the 1993 notice on cooperation between the Commission and national

courts

Annex Application of Articles 81 and 82 by national competition authorities

131

137

137
171
172
173
178
179
181

185

185

190
196
198
205
213

215

215
273

274
294
304
305

313

329

329
337
349

357
361

COMPETITION REPORT 1998

VI — Statistics

A — Articles 81, 82 and 86 of the EC Treaty + Article 65 of the ECSC Treaty
B — Merger Regulation
C — State aid

VII — Studies

VIII — Reactions to the Twenty-seventh Report

A — European Parliament
B — Economic and Social Committee

CONTENTS 5

363

363
364
365

369

373

373
390

COMPETITION REPORT 1998

Notice to the Reader

The Treaty of Amsterdam entered into force on 1 May 1999. This Treaty provides for the renumbering
of the Articles of both the Treaty on European Union and the Treaty establishing the European
Community. While dealing primarily with the year 1998, this report adopts the new numbering system.
Nevertheless, reference is made to the old numeration, when quoting from the titles of legislative acts
adopted prior to the alteration in numbering or when quoting from the content of documents written
prior to 1 May 1999. To draw the attention of readers to these changes, all quotations using the old
numbering appear in italics.

In order to facilitate the reading of the XXVIIIth Report, the corresponding old and new numbers of
the Articles cited in this report are set out in the following table:

Old number
Article 37
Article 85
Article 86
Article 89
Article 90
Article 92
Article 93
Article 100A
Article 173
Article 175
Article77
Article 190

New number
Article 31
Article 81
Article 82
Article 85
Article 86
Article 87
Article 88
Article 95
Article 230
Article 232
Article 234
Article 253

COMPETITION REPORT 1998

FOREWORD BY MR KAREL VAN MIERT,
Member of the Commission with special responsibility for competition policy

Last year’s Report ushered in a new form of introduction which afforded me the opportunity of raising
issues that transcended present-day concerns and turned competition policy towards broader horizons.
This innovation was, I know, well received and I have decided to continue in the same vein. Heeding
the oft-repeated call of the European Parliament and the Economic and Social Committee, I propose
this year to turn the spotlight on to our international activities because of the increasing importance of
the international dimension to the competition rules that the Commission is enforcing.

I would like, in particular, to highlight the desirability of enhanced international cooperation between
competition law enforcement authorities. To date, such cooperation has been largely confined to
bilateral arrangements, many of which are proving very effective. In the long run, however, I believe
that the desirability, even the necessity, of also putting in place a multilateral framework ensuring the
observance of certain basic competition principles will be widely recognised. This would guarantee that
the impressive progress which has been made in trade liberalisation over the past few decades is not
undermined by a failure to deal effectively with anticompetitive behaviour by firms competing in the
global economy.

Globalisation and the threat posed by anticompetitive practices

The ever-increasing integration of the world economy is creating an unprecedented inter-dependence
between countries. Over the past decade, with the successful conclusion of the Uruguay Round, we
have seen an acceleration in the progressive dismantling of trade barriers. Business is taking advantage
of this openness, and there has been a huge growth in the volume of trade. In many industries,
companies are competing in worldwide markets, and are becoming larger and multinational as a result.
The past year has seen a series of so-called “mega-mergers” between companies based in different
parts of the world, creating new corporations of truly global dimensions. Where companies are not
already present in several countries, they are often forming strategic alliances which enable them to
penetrate foreign markets together with international partners. This is particularly true in high-
technology sectors such as the telecommunications,
information technology, entertainment, air
transport and pharmaceutical industries. The Commission has had to keep pace with the increasing
globalisation of markets and its analyses of competition problems are, to an increasing extent, taking
into account market data from outside the European Union.

It is not surprising to find that, in these circumstances, competition problems are also taking on global
dimensions. Anticompetitive behaviour, including restrictive arrangements between companies and
abuses of market dominance, does not respect borders. The emergence of ever-larger multinational
companies, with the technological means and resources to do business on a global level, brings with it
the danger that they may be tempted to take measures — either unilaterally or in collusion with other
firms — which restrict competition or abuse their market power on these global markets. If such
anticompetitive behaviour is allowed to go unchecked, it is no exaggeration to say that many of the

COMPETITION REPORT 1998

8 FOREWORD BY MR KAREL VAN MIERT

benefits that have been achieved in terms of opening markets across the globe could be negated. The
enhanced opportunities which trade liberalisation has provided for the interpenetration of markets
around the world could very well be seriously undermined by restrictive commercial behaviour. Such
practices may be resorted to by companies seeking to protect their traditional — often national —
markets from foreign competitors.

The need for cooperation in enforcement

The removal of barriers to market integration resulting from anticompetitive commercial practices is
nothing new for the European Union. Since 1958, the Community’s competition rules have served as
an indispensable tool in carrying out the task of creating a single European market, and in helping to
ensure that it becomes and remains a reality. In the absence of such control over restrictive and abusive
behaviour by companies, or without merger control, national markets would remain much more
difficult for newcomers from both inside and outside the Community to penetrate. Where such
practices are carried on outside the Community, however, combating them is much more complicated.

National or regional competition authorities are ill-equipped to grapple with the problems posed by
commercial behaviour occurring beyond their borders. Information may be difficult to obtain, and
decisions — once taken — may be impossible to enforce. Although new competition legislation has
been introduced in many countries in recent years, some behaviour might not be unlawful in the
country where it is being carried out, or the authorities there may be unwilling to condemn it.
Alternatively, incoherent or even directly contradictory conclusions might be reached by different
enforcement authorities, both of which may claim jurisdiction over the same subject-matter. Such
divergent treatment not only entails the risk of precipitating a dispute between countries or trading
blocks, as was illustrated by the initial disagreement between the US and the EU over the proposed
Boeing/MDD merger last year, but is also a source of considerable uncertainty and cost for companies
engaging in global transactions.

It is clear, therefore, that cooperation is necessary in order to deal effectively with competition
problems having transnational characteristics. There is already a degree of bilateral cooperation
between authorities and there is reason for optimism that this will continue apace. In order for such
cooperation to be effective, however, I am convinced that it is necessary not only to put in place
arrangements regarding the logistics for cooperation, but also that there should be some common
agreement at the international level regarding the content of a basic set of substantive principles of
competition law.

In my view, the advantages of such cooperation will not accrue to the industrialised countries of the
world alone. Indeed, I believe that developing countries can benefit substantially from enhanced
cooperation of this kind. 1998 has been a year of turmoil and uncertainty for many of the world’s
“emerging” economies, particularly in Asia. It is generally accepted that one of the main causes of the
problems experienced by these economies is the lack of genuine market openness. So-called “crony
capitalism” meant that competition between firms was very often foregone in favour of opaque
arrangements having little to do with market forces. I am convinced that the pursuit of a robust
competition policy, at both the national and the international level, would provide an important
antidote to such tendencies by promoting the competitiveness of industry, decentralising commercial
decision-making, fostering innovation and maximising consumer welfare.

These issues were considered in 1994 by a group including three independent experts who, at my
request, made a number of recommendations regarding the European Union’s competition policy

COMPETITION REPORT 1998

objectives in the post-Uruguay Round era. They compiled a report which recommended that efforts
should in the future be made on two parallel fronts: firstly, to further extend the Commission’s bilateral
cooperation with third countries; and, secondly, to develop a multilateral framework ensuring
compliance with certain basic competition rules by all countries involved.

FOREWORD BY MR KAREL VAN MIERT 9

Bilateral cooperation with the United States and Canada

The European Union has in recent years been actively advancing bilateral cooperation in the field of
competition with its main trading partners. The best example of such cooperation is provided by the
agreements concluded with the USA, the first of which was concluded in 1991 and entered into force in
1995. When this first agreement was conceived, the EU and the USA were witnessing a rapid growth in
the number and importance of transatlantic commercial transactions and, at the same time, coming to
recognise the dangers posed by the emergence of cross-border anticompetitive practices. There was
consequently a common recognition of the importance of avoiding conflicting decisions, and of
coordinating enforcement activities to the extent that this would be mutually beneficial.

In substance, the agreement was designed to facilitate logistical cooperation between the Commission,
on the one hand, and the US Department of Justice or Federal Trade Commission, on the other. It
provides for: the reciprocal notification of cases under investigation by either authority, where those
cases may affect the important interests of the other party; the exchange of non-confidential
information between the authorities; the possibility of coordination by the two authorities of their
enforcement activities, and of rendering assistance to each other; and, finally, the possibility for one
authority to request the other to take enforcement action (“positive comity”), and for one authority to
take into account the important interests of the other party in the course of its enforcement activities
(“traditional comity”).

This amounts to a commitment by the EU and the USA to cooperate with respect to antitrust
enforcement, and not to act unilaterally and extraterritorially unless the avenues provided by comity
have been exhausted. This commitment has been strengthened by the positive comity agreement
concluded with the US in 1998, which further reinforced the provisions contained in the 1991 accord.
The new agreement provides that each party’s respective authority will normally defer or suspend its
enforcement activities in respect of anticompetitive practices which occur principally in, and are
directed principally towards, the other party’s territory, where that other party is prepared to deal with
the matter.

The Commission’s experience in operating the agreement with the US since 1991 has demonstrated
that such cooperation can be highly effective, substantially reducing the risk of divergent or incoherent
rulings. Cooperation to date has helped to build confidence between the Commission and the US
competition authorities, and has facilitated an increasingly convergent approach toward the analysis of
markets and regarding appropriate remedies. 1998 saw an intensification of this transatlantic
cooperation including, for example, the closely coordinated parallel investigations of the WorldCom/
MCI and Dresser/Haliburton mergers.

The Commission has finalised a bilateral agreement with the Canadian Government which is closely
analogous to the 1991 EU/US agreement. It is expected that it will be adopted, during the course of
1999. It is also worth noting that similar cooperative arrangements also exist between some other
countries, for example between the USA and Canada, and between Australia and New Zealand.

COMPETITION REPORT 1998

10 FOREWORD BY MR KAREL VAN MIERT

Bilateral cooperation with a view to enlargement

The EU has entered into bilateral arrangements regarding competition of a somewhat different kind
with the countries of central and eastern Europe. The demise of the Eastern bloc has provided us with
an unprecedented opportunity to heal the wounds of our continent and to assist in the transition from
command to market economies, an essential aspect of which process involves the introduction of a
functional competition policy. The Community has since developed close relationships with the central
and eastern European countries, including the Baltic States, and the so-called “Europe Agreements”
are aimed at paving the way for future membership of the EU. The same applies to Cyprus and Malta,
candidates for membership with which the Community has concluded association agreements. The
harmonisation of competition rules — including those governing state aid — is an important feature of
these agreements, and hence of the Community’s pre-accession strategy with respect to these countries.
Enforcement bodies are also expected to be put in place. In line with the same logic as applies within
the Community, the competition rules are considered necessary to ensure that the elimination of trade
barriers between countries should not be circumvented by anticompetitive commercial conduct and
state measures producing the same effects.

Progress in relation to the adoption of antitrust rules and the establishment of appropriate competition
enforcement authorities is, in my view, promising. There still remains considerable work to be done,
however, in relation to the introduction of adequate frameworks for the control of state aid. Detailed
arrangements have also been put in place for cooperation between the Commission and the various
enforcement authorities. Formal accession negotiations have now begun with Poland, Hungary, the
Czech Republic, Estonia, Slovenia and Cyprus.

Bilateral cooperation with other countries

The 1995 Customs Union Agreement with Turkey is one of the best examples in recent years of a
bilateral agreement containing detailed provisions dealing with competition and state aid. Free trade
agreements concluded between the Community and third countries, such as the Association
Agreements concluded over the last few years with several Mediterranean countries, have also
usually included such provisions. The Community has recently concluded a series of so-called
Partnership and Cooperation Agreements (PCAs) with Russia, Ukraine, and several of the other ex-
Soviet states. These agreements, while less ambitious than the Europe Agreements, none the less
involve a commitment by these countries to move progressively towards an approximation of their
competition and state aid legislation with that of the Community. There is as yet no formal bilateral
framework for the Community’s cooperation in the field of competition with its other principal trading
partners, most notably Japan. Notwithstanding this, regular contacts — including an annual high-level
bilateral meeting and the reciprocal notification of cases affecting each other’s important interests —
take place between the Commission and the Japanese Fair Trade Commission.

Multilateral cooperation — the need for a new worldwide framework

In spite of the considerable progress that has been made at the bilateral level, however, the fact must
be faced that arrangements for international cooperation in competition policy based solely on a
bilateral approach entail major shortcomings. In particular, it is evident that bilateral cooperation will
inevitably only take into account the interests of the countries involved and, as a result, the interests of
third countries are likely to be neglected. Moreover, many countries still have no competition
legislation at all. Despite a marked increase in enthusiasm for introducing competition rules over the
past decade, still only about half the World Trade Organisation’s member countries have competition

COMPETITION REPORT 1998

laws. The substance of these rules, and the zeal with which they are enforced in the various countries,
also show considerable divergence.

FOREWORD BY MR KAREL VAN MIERT 11

The OECD’s 1995 recommendation concerning competition cooperation, and the recommendation on
“hard core” cartels which it adopted earlier this year, represent important guidelines for the shape
which bilateral cooperation should take, particularly when several member countries are grappling
with the threat posed by an international cartel. The recommendations are addressed only to OECD
member countries, however, and are not binding even on them. Nor are the current WTO rules
adequate for dealing with competition problems. The WTO Panel’s ruling in April 1998 on the dispute
between the USA and Japan, which involved allegations of anticompetitive behaviour by Fuji aimed at
denying its US rival Kodak access to the Japanese market for photographic film and paper, provided a
clear illustration of this inadequacy.

I am therefore convinced that a comprehensive worldwide multilateral framework, providing for the
application of a basic set of common competition rules, needs to be established as a necessary
complement to trade liberalisation. Because of this complementary relationship between trade and
competition policy, the WTO would appear to be the multilateral organisation best suited to house
such a framework. The idea of creating a supranational structure of this kind was the subject of a
Commission Communication to the Council in 1996, which proposed that the WTO should set up a
working group with a remit to explore the desirability of going down that path. This proposal, which
was endorsed by the Council, provided the principal inspiration for the ministerial decision, taken in
Singapore in December 1996, to establish a WTO working group to study the interaction between
trade and competition policy. This group has already met on a number of occasions and will continue
its deliberations in 1999. Although the degree of interest shown by both the industrialised and the
developing countries (including some countries which have no domestic competition rules) in the
discussions is very encouraging, it is too early to say whether they will ultimately lead to the launching
of formal negotiations between the members of the WTO. It is very much my hope that they will, as
part of the next Round of multilateral negotiations.

Such negotiations could focus on the following four proposals for possible agreement: firstly, the
members could agree to each adopt domestic competition rules, and to the establishment of
appropriate enforcement bodies. This would mean the adoption of basic rules for dealing with
restrictive business practices, abuse of market power and mergers, together with adequate enforcement
provisions, and a right of access for companies to the enforcement authorities and courts. Secondly, the
members could at the same time agree on a common set of core principles for addressing
anticompetitive practices with an international dimension. Initially, it would seem reasonable to
concentrate on practices whose harmful nature is generally recognised — in particular horizontal
restrictions such as price and output fixing, market sharing, bid rigging and export cartels. Agreement
on other practices, such as abuse of market power and vertical restraints may prove more difficult, but
could be envisaged in the longer term. Thirdly, the elements of an instrument for multilateral
cooperation could also be developed. This would be designed to facilitate cooperation between
enforcement authorities, and could include provision for consultation, avoidance of conflicts,
exchanges of non-confidential information, reciprocal notification and comity. Finally, it would also
seem logical to provide for a mechanism to enable the settlement of disputes in clearly specified
circumstances. This could involve the adaptation of the present dispute mechanism of the WTO to that
purpose by, for example, ensuring that patterns of failure to enforce competition law affecting trade
between member countries are dealt with. To extend such a mechanism to settlement in individual
cases, however, would not be appropriate.

COMPETITION REPORT 1998

12 FOREWORD BY MR KAREL VAN MIERT

These proposals should not be interpreted as a call for the establishment of a new international
organisation, with its own powers of investigation and enforcement. Rather, they are intended to form
a basis for the creation of a new multilateral framework whose purpose would be to strengthen the
world trading system by ensuring that liberalisation and market access are not circumvented by
anticompetitive commercial practices. With that objective in mind, I believe that the proposals are
modest, but reasonable and coherent, and likely to prove effective in grappling with one of the most
important challenges faced by the economies of the world as the new millennium approaches.

COMPETITION REPORT 1998

Part One

XXVIIIth Report on
Competition Policy 1998

SEC (99) 743 final

Contents

INTRODUCTION

1. Competition policy: defending and facilitating the single market
2. Modernisation of competition law
3. The liberalisation process
Insert 1: The euro and competition

I — Antitrust — Articles 81 and 82

State monopolies and monopoly rights — Articles 31 and 86

A — Modernisation of the legislative and interpretative rules

1. Assessment of the first measures to refocus efforts
2. Communication on the application of the Community competition rules to

vertical restraints

3. Review of the policy on horizontal agreements
4. Review of procedural regulations

B — Consolidating the single market

1. Cartels
2. Opening-up of markets
Insert 2: Motor vehicle distribution: a consumer-oriented policy
3. Undertakings in a dominant position
Insert 3: Commission policy on fines

C — Sector-based policies

1. Telecommunications
2. Postal services
3. Media
4. Transport
Insert 4: European competition policy and airports
5. Insurance
6. Energy
7. Competition and the environment
Insert 5: Globalisation of markets and competition analysis

D — Statistics

19
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22
24

27

27
27

29
32
33

35
35
36
37
38
40

41
41
45
46
48
48
51
53
56
57

59

NB: In the interests of readability, the Report contains a number of inserts in which stock is taken of matters of

general interest or of specific points arising in the competition field.
It should be noted that the equivalents of currency amounts are expressed in ecus for 1998 inasmuch as the euro
exists only as from 1 January 1999.

COMPETITION REPORT 1998

16 CONTENTS

II — Merger control

A — Introduction

Insert 6: Merger review

B — New developments

1. Market definition
2. Dominance assessment
3. Remedies
4. Referrals to Member States
5. Rules and procedures
Insert 7: Implementation of the new Article 2(4) of the Merger Regulation

C — Statistics

III — State aid

A — General policy

1. Improving the efficiency of state aid monitoring
2. Block exemptions for state aid
3. Procedural regulation
4. State aid contained in tax systems

B — Concept of aid

1. Advantage to a firm or firms
2. Origin of resources
3. Specificity criterion
4. Distortion of competition and effect on intra-community trade

C — Assessing the compatibility of aid with the common market

1. Horizontal aid
2. Regional aid
3. Aid to outward foreign direct investment
4. Sectoral aid

D — Procedures

1. Rights of third parties
2. Recovery of aid
3. Consequences of a judgment annulling a decision
4. Application of the state aid rules by national courts

E — Statistics

IV — International activities

A — Enlargement

1. Pre-accession
2. Accession negotiations

B — Bilateral cooperation

1. North America
2. Other countries

61

61
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64
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81

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104
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109

111

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COMPETITION REPORT 1998

C — Multilateral cooperation

1. WTO: Trade and competition policy
2. OECD, Unctad

V — Outlook for 1999

1. Legislative and regulatory activities
2. International field
3. Supervisory activities

ANNEX — CASES DISCUSSED IN THE REPORT

1. Articles 81, 82 and 86
2. Merger control
3. State aid

CONTENTS 17

118
118
120

121

121
121
122

125

125
126
127

COMPETITION REPORT 1998

XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 19

INTRODUCTION

1998 was the last year before the Union changed over to the single currency, and the
1.
Commission naturally had to make every effort to ensure that the economic environment into which
the euro was born was a healthy and vigorous one. Competition policy contributed to this process
within its own sphere and within the limits of its own resources. The Commission worked in two main
directions here. First, it sought to underpin and consolidate the operation of the single market, by
improving market structures and taking firm action against anticompetitive practices, so as to provide a
sound and healthy basis for economic and monetary union. Second, it took decisive steps towards the
modernisation of Community competition law. Thus at
issued a
communication on the application of the Community competition rules to vertical restraints. At the
end of November the new procedural regulation for state aid secured agreement in principle from the
Council, and this should clear the way for its adoption in the course of 1999. Throughout the year the
Commission sought
the
international dimension has now become a constant in its work. 1

to strengthen links with competition authorities outside the Union;

the end of September it

1. Competition policy: defending and facilitating the single market

2.
This was a very satisfactory year for Commission competition policy. The Commission clearly
demonstrated its determination to use competition policy to defend and facilitate the single market in
the run-up to economic and monetary union. It imposed severe penalties in a number of exemplary
cases. It also took the first steps in what is intended to be a series of measures aimed at focusing the
supervisory work of its departments on those cases where the Community interest is manifest.

1.1. Invigorating the single market

The Commission sought to consolidate the single market and to fend off attempts by firms to set

3.
artificial bounds to its development.

It exercised particular vigilance with regard to practices that tend to partition markets. It fined the
motor manufacturer Volkswagen ECU 102 million for obstructing trade within the Community by
preventing its Italian dealers from selling Volkswagen and Audi cars to foreign customers.

It also penalised the abuse of a dominant position by the Italian Amministrazione Autonoma dei
Monopoli dello Stato, which had been favouring the cigarettes it manufactured itself over cigarettes
manufactured abroad.

In the same spirit it continued the fight against price cartels, in order to counter their inflationary
effects and to ensure that competition could operate efficiently. It prohibited several restrictive
practices and imposed heavy fines on firms that had been taking part. There were cases of this kind in
areas such as stainless steel, sugar, district heating pipes and sea transport. The fines imposed totalled
ECU 178.83 million.

1

International cooperation is not discussed here as it already forms the subject-matter of Mr Van Miert’s foreword.

COMPETITION REPORT 1998

20 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

Discriminatory abuses of dominant positions are likewise practices which weaken the health of the
single market, because they inhibit the development of firms that find themselves dependent on the
dominant company and of others that might wish to enter a particular market, such as a network
industry that may be in the process of liberalisation. The Commission acted against such abuse in
several cases, for example in air and sea transport.

If the single market is to work properly its structures must continue to be flexible and open, so that the
interplay of competitive forces can be as effective as possible. The Commission banned mergers
between Bertelsmann, Kirch and Premiere and between Deutsche Telekom and BetaResearch on the
ground that they would have established structures for digital television in Germany in which the
parties would have held dominant or indeed monopolistic positions on several markets. It authorised
several transactions on condition that the firms involved complied with undertakings they had given
which would ensure that sufficient competition was maintained on the relevant markets.

The monitoring of state aid also makes a major contribution to this effort to assist the development of
the single market. The Commission takes the view that unjustified state aid leads to market distortion
and inefficient resource allocation. The effect is to increase barriers to trade and hence put at risk the
achievements of
the single market. The continuing disparities in the levels of aid between
Member States jeopardise the objective of economic and social cohesion. The Commission therefore
continued the strict exercise of its responsibility to control state aid. The number of cases it had to
decide decreased, but unfortunately remained high. A sizeable proportion of cases (about 20%) were
cases where Member States failed to comply with the obligation to notify new aid measures to the
Commission. This confirmed the Commission in its view that it must consistently order the recovery of
non-notified aid that is incompatible with the Treaty. Without such a practice, Member States would
not have sufficient incentive to observe their procedural obligations. Major aid cases concerned
additional aid to Cre´ dit Lyonnais (between ECU 8 billion and ECU 15 billion, which is quite
unprecedented) and the aid package for the construction of the Channel Tunnel Rail Link. This latter
case is exemplary in addressing the implications of the construction and provision of transport
infrastructure by private investors.

All these Commission decisions are directed towards the same objective, namely consolidating the
single market, which is the foundation of economic and monetary union. But the somewhat severe
picture conveyed by this brief review should not be allowed to obscure the fact that the great majority
of agreements, mergers and state aid measures notified to the Commission in 1998 were the subject of
positive decisions.

1.2. Refocusing the Commission’s supervisory work

4.
One of the main aims of modernising competition law and Commission practice is to allow the
Commission departments to concentrate on those cases where the Community interest is manifest.
This intention was clearly announced in 1997, with the first package of initiatives, namely the
de minimis notice and the notice on cooperation between Community and national competition
authorities. At the end of 1998 the results were encouraging, but did not go far enough.

5.
There was intense supervisory activity once again in 1998, in all the Commission’s spheres of
responsibility. The total number of new cases was 1 198, comprising 509 under Articles 81, 82 or 86, 245
mergers 2 and 444 state aid cases; this total was down substantially on 1997, by 134, owing to a drop in

2

Including 10 ECSC decisions.

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XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 21

the number of state aid cases. In conventional antitrust cases the number of notifications is tending to
stabilise, which is an encouraging development, and is no doubt partly the result of the new de minimis
notice. The number of complaints lodged with the Commission continues to be high. The explosion in
merger notifications which the Commission had expected as a result of the revision of the Merger
Regulation (Regulation No 4064/89), and more especially the new powers which that regulation gives
to the Commission in respect of cross-border transactions, did not in fact materialise; but the total
number of transactions notified under the regulation nevertheless rose by 36%, or 5 points more than
in 1997, when the corresponding figure was 31%. This increase has to be seen against the background
of the current international environment, which tends to encourage mergers, and of the girding-up of
markets for economic and monetary union. The total number of new state aid cases over the year
showed a spectacular fall by comparison with 1997, down 32%, taking it lower than it has been in the
last three years. The number of cases terminated was 1 279, comprising 581 under Articles 81 and 82,
238 mergers and 460 state aid measures; this is an increase of 119 cases closed by comparison with last
year. These figures bear witness to the Commission’s desire to speed up the handling of cases wherever
possible.

2. Modernisation of competition law

The Commission took a further step in its policy of modernisation when it published its
6.
communication on vertical restraints. The year also saw the adoption of the regulation empowering the
Commission to declare block exemptions for certain types of state aid, and the securing of agreement
in principle to the procedural regulation, which came at the Council meeting on industrial affairs on
16 November.

2.1. Antitrust policy

7.
The communication from the Commission on the application of the Community competition
rules to vertical restraints, which was approved on 30 September, is in many ways a major innovation in
the Commission’s approach to antitrust policy. It breaks with a method which was differentiated by
industry and category of agreement, and had become extremely complex. It is based on the economic
analysis of the effects of vertical restraints; exemption is to depend on the market power of the firms
involved. Simplification of procedures, realistic analysis and greater involvement of courts and
competition authorities in the Member States are the fundamental principles of the Commission’s new
approach, and will continue to guide it in the months ahead.

8.
The general idea is that there should be a single and very broad block exemption regulation
covering all vertical restrictions of competition in respect of all intermediate and finished goods and all
services. A limited number of restrictions would be excluded, such as price-fixing agreements for
example. These would form a “black list” of clauses that were not exempted by the regulation. The
regulation would not seek to list the clauses that were exempted, as is done in the block exemption
regulations currently in force, and this would immediately remove the straitjacket effect associated
with the present “white lists”, which incite firms to force their agreements into a mould provided by the
relevant block exemption regulation.

9.
The main objective of this wide-ranging and flexible exemption regulation would be to give a
measure of freedom and legal certainty to the very many firms that do not possess market power.
Within the limits thus mapped out they would not have to be concerned for the validity of their
agreements under Community law. To preserve competition on markets, and to confine the benefit of
the exemption to firms with no great market power, the regulation would lay down market share

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thresholds beyond which the block exemption would no longer apply. The fact that these thresholds
were exceeded would not mean that the agreements were necessarily unlawful, but only that they
would have to be examined for compatibility on an individual basis.

To help firms see what sort of analysis they have to carry out in order to establish that their
10.
agreements are compatible with Article 81(1) and (3), the Commission intends to publish guidelines
which would supplement the legislative provision in the new regulation.

11.
To pursue this policy the Commission will have to obtain new legislative powers from the
Council. The Commission has submitted a proposal for a Council regulation amending Regulation
No 19/65/EEC so as to authorise the Commission to adopt a block exemption regulation of the new
type. The Commission has also put forward a proposal to amend Council Regulation No 17 of
6 February 1962 so as to enlarge the scope of the exemption from notification laid down in Article 4(2).

2.2. State aid

12.
In 1998 the Commission pressed forward with the measures it had launched in autumn 1996 for
the reorientation and modernisation of state aid monitoring. The aim of the initiative is to improve
transparency and legal certainty by simplifying and clarifying the procedural rules, and to improve the
efficiency of the state aid monitoring system for less significant cases. Given the high number of aid
measures the Commission has to assess, it must inevitably concentrate on major cases involving large
amounts of aid or new legal issues. This necessity is underlined notably by the growing number of
individual ad hoc aid measures, where intensities are often very high.

13.
As an important step in the exercise of modernising state aid monitoring, the Council reached
political agreement, pending receipt of the European Parliament’s opinion, on a Commission proposal
for a procedural regulation. This regulation will clearly define the procedural steps to be observed by
the Commission and Member States in the application of Article 88 of the Treaty, notably concerning
time limits, injunctions, and recovery of incompatible aid. The Council formally adopted the proposal
for a regulation enabling the Commission to exempt certain categories of horizontal state aid from the
notification requirement. Exemption regulations of this kind should simplify procedures by relieving
the Commission of the assessment of numerous aid cases where there is no major risk of competition
being distorted.

14.
The Commission also took other steps to clarify its assessment of aid measures. The
multisectoral framework on regional aid for large investment projects entered into force on
1 September. The Commission adopted a framework on training aid. The Council adopted a regulation
establishing new rules on aid to shipbuilding, replacing the Seventh Directive; this had become
necessary because the United States had failed to ratify the OECD Shipbuilding Agreement. Finally,
the Commission issued a notice explaining its new approach towards assessing possible aid elements in
direct business taxation in the Member States. This move runs parallel to the efforts of Member States
within the Code of Conduct Group to put an end to harmful tax competition.

3. The liberalisation process

Another component in the policy of consolidation of the single market is the continuing process
15.
of liberalisation in the network industries which were formerly public monopolies. The opening-up of
the sectors associated with the information society or the production and distribution of energy is vital
to the competitiveness of European industry and the dynamism of the single market. It provides an

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incentive for the development of technological innovation, and promotes the creation of new, stable
and durable employment.

3.1. Telecommunications

Telecommunications moved over to full liberalisation on 1 January, and the Commission was

16.
particularly active in this sphere.

In the first few months of the year the Commission supplemented the body of aids to
17.
interpretation by adopting a notice on the status of voice communication on the Internet and a notice
on the application of the competition rules to access agreements in the telecommunications sector. In
this latter notice the Commission among other things said it wanted to see most cases dealt with by the
regulatory authorities in the Member States and, if need be, by the national competition authorities,
and to have to intervene itself only where necessary.

18.
The Commission has set up a joint follow-up team with representation from the Directorates-
General responsible for competition and for telecommunications. In the course of the year it published
two reports on the implementation by the Member States of the telecommunications liberalisation and
harmonisation directives. The reports give a broadly encouraging picture of the process under way in
the Union. In all Member States apart from Greece and Portugal, which benefit from derogations until
2000, new operators have been authorised to supply voice telephony services or to establish and
operate public telecommunications networks in competition with the existing operator. The
Commission has nevertheless observed that some shortcomings continue. At the beginning of 1998
infringement proceedings were in progress in 35 cases. But the Commission terminated several of these
after the Member State concerned took appropriate steps.

19.
The Commission continues to check the conformity with the Treaty of national measures
governing interconnection, the concept of universal service, the methods of calculating the cost and
financing of universal service, and the procedures and conditions for the granting of authorisation, in
order to ensure that these measures do not place barriers in the way of new entrants.

All of these measures are intended to ensure the success of the process of liberalisation, which
20.
has aroused great enthusiasm among business people. Across the Community more than 500 licences
for access to the local loop had been granted by the end of February. The spectacular development of
mobile telephony which has been encouraged by free competition has not come to an end. The
Commission will of course support it, particularly as the prospects held out by the combined effect of
mobile telephony, satellite links and the Internet are promising in terms of growth.

3.2. Energy

The Member States approved the directive opening up the Community market in natural gas at
21.
the Council meeting on energy on 11 May; this completed the process of liberalising the energy sector,
which began with the directive on the single market in electricity. The new directive establishes
common rules for the transmission, distribution, supply and storage of natural gas; it lays down rules
on access to the market, the operation of systems, and the criteria and procedures applicable to the
granting of authorisations for the construction and operation of natural gas facilities.

22.
The market is to be opened up in respect of at least 20% of the total annual gas consumption of
each national gas market as soon as the directive is transposed into national law, that is to say in 2000;

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24 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

this minimum is to rise to 28% within five years and 33% within 10 years. At the same time the
category of natural gas customers entitled to negotiate their own supply contracts with the supplier of
their choice is to be gradually widened.

For the organisation of access to the system, Member States may choose either or both of two
procedures, known as negotiated access and regulated access. Both must operate in accordance with
objective, transparent and non-discriminatory criteria. Upstream pipelines are as a general rule to be
open too, but the procedure here is to be determined by the particular Member State.

23.
The Commission may allow certain derogations where companies which have concluded “take-
or-pay” gas-supply contracts encounter difficulty as a result of liberalisation. The directive also
provides for derogation where a Member State is not directly connected to the system of any other
Member State and has only one external supplier, for emerging markets and regions in Greece and
Portugal, and for areas where the gas infrastructure is still being developed.

Insert 1: The euro and competition

In 1998, the preparations for the launch of the euro were successfully finalised. The introduction of
the euro will have a profound impact on competition in Europe. In general, economic and monetary
union (EMU) will intensify competition for three reasons:

First, it will reinforce the positive effects of the single market programme. The single market has
had a pro-competitive impact by integrating markets effectively and making the relevant markets
broader. The euro should enhance this effect because, for trade between the participating
Member States, it will eliminate exchange-rate risk and the transaction costs associated with
converting one currency into another. As a consequence, trade flows are likely to increase. Whereas
the effects of the single market programme were mainly concentrated on certain manufacturing
sectors which had hitherto been protected by high non-tariff barriers, the euro is likely to affect a
wide range of sectors, including notably financial services and distribution. In particular, the
markets for many financial services, which are at present national because of the existence of
separate currencies, will gradually be widened to cover the whole euro zone.

The broadening of geographic markets offers new opportunities to exploit economies of scale and
will lead to an increase in merger and acquisition activity. This will be true especially for industries
where sales networks have previously been confined largely within national boundaries, and where
companies see prospects of obtaining major cost savings by enlarging these to a European scale. On
the other hand, competition will expose the weaknesses of less efficient companies, which will
become vulnerable to takeover bids. In general, the restructuring arising from EMU will pose no
competition problems and should enhance the overall efficiency of the Community economy.
Provided that market entry is easy, no major competition problems should result from the reduction
in the total number of firms as inefficient firms exit and more efficient firms expand. Although the
number of domestic suppliers in any local market should fall, the total number of actual or potential
competitors in that market should increase after it has been incorporated into a wider geographic
market.

Secondly, EMU will increase price transparency. After the introduction of the euro, the greater ease
with which prices in different countries can be compared will mainly affect those sectors where
price dispersion between Member States is high and not due to structural causes such as differences

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XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 25

in consumer tastes and indirect taxation, but rather to the market-segmentation strategies of firms.
Certain consumer durables sectors, such as motor vehicles, are likely to be particularly strongly
affected by increased price transparency, since each purchase represents a high proportion of the
consumer’s total expenditure. For such products the potential savings which the consumer can
achieve by cross-border purchasing can easily outweigh the additional costs which he incurs.

Thirdly, the impact of the euro on the market for corporate equity will have repercussions on
competition in products and services. EMU will reduce the cost of capital, which could lead to an
increase in the number of mergers. New financing techniques and markets can be put to work for a
new generation of EU entrepreneurs, thus facilitating market entry. Therefore, in principle, the
change in the market for capital should further increase the pro-competitive impact of EMU.

In the context of this overall pro-competitive impact of EMU, competition policy has an important
role to play in safeguarding or enhancing the flexibility of product and service markets. Companies
which are able to protect themselves through anticompetitive behaviour against competitive
pressures are likely to be less efficient and innovative and hence less well able to adapt in the event
of macroeconomic shocks.

Some companies will inevitably experience difficulties as a result of more intense competition.
Consequently, Member States are likely to experience strong pressure to protect these companies
by means of state aid, notably rescue and restructuring aid. Such aid can lead to serious distortion of
competition at the expense of more efficient companies.

The potential for increased competition could also lead to attempts by companies to find ways to
reduce the actual level of competition. For example, increased price transparency will create further
incentives for parallel trade, but will also increase the temptation for companies to create new
obstacles to arbitrage. Similarly, new competitive threats arising from EMU may induce incumbents
to enter into vertical or horizontal agreements with the object of foreclosing rivals’ markets, or
alternatively to seek state aid. Finally, in the longer run, the expected increase in mergers and
acquisitions could create oligopolies in some industries. Companies in these industries could be
tempted to reduce the competitive pressure either by engaging in tacit collusion or by forming
cartels. This will be made easier as the increased price transparency will facilitate the monitoring of
competitors’ prices. It will also be more difficult to deviate from agreed prices and hide this fact
behind exchange rate fluctuations.

Competition policy therefore needs to remain vigilant to ensure that the euro can deliver its full
benefits. Both Community and national competition policy have a vital role to play in ensuring that
product and service markets are flexible so that European consumers will truly benefit from the
common currency.

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XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 27

I — ANTITRUST — ARTICLES 81 AND 82

State monopolies and monopoly rights — Articles 31 and 86

A — Modernisation of the legislative and interpretative rules

24.
For the last two years the Commission has been modernising its competition policy to ensure
that it reflects contemporary economic realities and, in particular, to prepare it for the challenges of
economic and monetary union and Community enlargement. 3 One of the main aims of modernising
the rules and practice is to ease the administrative burden on firms, particularly those without market
power, and to refocus the Commission’s efforts on cases of clear relevance to Community competition
policy. In 1997, the Council adopted a revised Merger Regulation and the Commission adopted several
notices designed to clarify and modernise its practice as regards antitrust legislation. In 1998, the
Commission took a major step forward when it published its communication on vertical restraints.

1. Assessment of the first measures to refocus efforts

25.
In 1997 the Commission adopted two notices designed to enable its supervisory arm to focus
efforts on cases with a definite impact on competition within the Union. The first was the revised
notice on agreements of minor importance which are not deemed to have an appreciable effect on the
functioning of the common market, and the second was the notice on cooperation between the
Commission and national competition authorities which followed up the notice on cooperation with
the national courts. These new provisions are designed to enable the Community’s supervisory arm to
focus more effectively on cases with a definite impact on competition within the single market. It is
worthwhile drawing up an initial assessment now that these two notices have been in force for one
year.

As regards Articles 81 and 82, the situation in 1998 was virtually identical to that in 1997. The
26.
number of new cases recorded in 1998 was 509, as against 499 the previous year (447 in 1996), and
therefore seems to have stabilised. The number of notifications has also tailed off, although it remains
high. The situation is similar as regards complaints and proceedings initiated by the Commission.

27.
The stabilisation in the number of notifications, which fell from 221 in 1997 to 216 in 1998, can
probably be attributed partly to the provisions which the Commission adopted last year, particularly
the notice on agreements of minor importance. The Commission invoked this notice on only about ten
occasions in the course of the year. It will probably have encouraged a number of firms not to notify
agreements of minor importance and, had it not existed, the number of notifications might well have
been higher. Nevertheless, the results for the first year of implementation (a decrease of 0.2%) are still
insufficient.

As regards complaints, the number of which was slightly higher than in the previous year (192,
28.
as against 177 in 1997), the Commission observes that, whereas some of them are of manifest
Community relevance and have given rise to major decisions like the one on Greek ferries, many of the
complaints it receives are not. The number of Commission decisions rejecting a complaint because it
was not of manifest interest to the Community is revealing. The Automec precedent, which enables the
Commission to reject complaints of this type, is useful but probably insufficient. What is needed is an
instrument to facilitate the rejection procedure.

3

1997 Competition Report, points 36 to 50.

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28 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

The number of cases instituted by the Commission on its own initiative was the same in 1998 as
for which full

29.
the previous year (101). Most concern a specific sector,
liberalisation came into effect on 1 January. Hence close scrutiny by the Commission is necessary.

telecommunications,

The notice on cooperation between the Commission and national competition authorities in
30.
handling cases caught by Articles 81 and 82 began to make itself felt. The Commission rejected fifteen
complaints for lack of Community interest; these cases were handled by the authority of the
Member State most affected by the practice complained of. It should also be noted that 89 requests for
information changed hands between national authorities and the Commission regarding cases handled
by both bodies on a joint basis. Lastly, it should be noted that the Commission was consulted on ten
cases handled by the competition authorities acting alone and that it encountered three cases of
dilatory notification as defined by the notice. This first set of instances of application of the notice
reflects increased cooperation between Community and national authorities and illustrates their
common determination to implement Community antitrust legislation on a decentralised basis.
However, it is clear that even more intensive use could be made of this notice.

31.
In any event, the notice on cooperation between the Commission and national competition
authorities will not be fully effective until work on decentralising implementation of the Community
competition rules has been completed. In 1998, in the fifteen Member States, only eight authorities
were in a position to apply Articles 81(1) and 82 directly, following the adoption of specific legislation
by the national legislators. The countries concerned are Belgium, France, Germany, Greece, Italy, the
Netherlands, Portugal and Spain. The Commission hopes that those Member States which have not to
date adopted legislation for the direct implementation of those articles will do so at the earliest
opportunity. However,
it should be noted that, when Member States revise or adopt national
competition law, they very often base their work on Community law, thereby carrying out voluntary
harmonisation which can only promote the emergence of a common legal framework in the European
Community. The Netherlands and the United Kingdom both recently amended their national
legislation. The Dutch law is very similar to Articles 81 and 82, as are the Dutch rules on merger
control. 4 The United Kingdom’s new Competition Act 5 is essentially based on Articles 81 and 82.
Section 60 of the Act specifies that,
law, the United Kingdom
authorities must take account of the principles and analyses resulting from Commission decisions and
Court of Justice case-law.

in implementing their national

32.
The number of cases closed in 1998 was 581 (the corresponding figures for 1997 and 1996 were
517 and 388 respectively). The number of formal decisions grew substantially, rising from 27 in 1997 to
42 in 1998. Of special significance, apart from decisions rejecting complaints and non-opposition
decisions in the transport field, were 11 formal decisions based on Articles 81(1) and 82, most of which
were coupled with fines. This increase in the number of cases closed reflects a commitment on the
Commission’s part to speed up the handling of antitrust cases. However, this improvement cannot
conceal the slow processing of certain cases. On the basis of the 11 formal decisions referred to above,
the average length of proceedings was four years and 10 months, the shortest duration being two years
and one month and the longest eight years. The length of proceedings was essentially due to complex
procedures which entailed delays. For that reason the Commission reviewed a number of procedural
regulations during the year,
including Regulation No 99/63/EEC on hearings, with a view to
streamlining and speeding up the processing of cases. This streamlining is an ongoing process.

4

Law of 22 May 1997, which entered into force on 1 January 1998 (Mededingingswet).

5 Act of 9 November 1998, which will enter into force on 1 March 2000.

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XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 29

In view of the stabilisation in the number of notifications and the development of cooperation
33.
with national competition authorities, the impact of measures to refocus efforts may be described as
encouraging, even if the results are still limited as yet. The review of the policy on vertical restraints
should allow further progress to be made. Nevertheless, the Commission will continue its work on this
subject and will put forward new modernisation proposals during 1999.

2. Communication on the application of the Community competition rules to

vertical restraints

34.
On 30 September the Commission adopted a communication on the application of the
Community competition rules to vertical restraints 6 setting out its proposals for reform in this field.
The Commission also adopted two proposals for Council regulations amending, respectively, Council
Regulation No 19/65/EEC of 2 March 1965, with a view to granting the Commission the necessary
legislative powers to implement the proposed new policy, and Council Regulation No 17 of 6 February
1962, with a view to extending the waiver from notification provided for in Article 4(2) to all vertical
agreements.

This communication and the related proposals follow the publication of the Commission’s
35.
Green Paper on vertical restraints in EC competition policy 7 in January 1997, and the very wide-
ranging debate that ensued. Subject to the adoption of two proposed Council regulations, the
Commission intends to enact a new type of block exemption regulation for vertical restraints,
complemented by a set of guidelines. New competition rules for the distribution of goods and services
should be in place for the year 2000.

2.1. Outline of the policy proposal

A more economics-based approach

36.
In its communication, the Commission recommends a shift from the current policy relying on
form-based requirements with sector-specific rules to a system based on economic effects covering
virtually all sectors of distribution. 8 It proposes to achieve this by means of one wide-ranging block
exemption regulation that covers all vertical restraints concerning intermediate and final goods and
services except for a limited number of hardcore restraints. It is based mainly on a ‘black list’ approach,
i.e. defining what is not exempt under the block exemption instead of defining what is exempt. This
removes the straitjacket effect, a structural flaw inherent in any system which attempts to identify the
clauses which are exempt.

37.
The principal objective of such a wide-ranging and flexible block exemption regulation is to
grant companies which lack market power, and most do, a safe harbour within which it is no longer
necessary for them to assess the validity of their agreements in the light of the EC competition rules. In
order to preserve competition and to limit the benefit of this exemption to companies which do not
have significant market power, the future block exemption regulation will make use of market share
caps to link the exemption to market power.

6 COM(1998) 544 final.
7 COM(96) 721 final.
8

The block exemption regulation on car distribution, which expires in 2002, is not covered by the current proposal.

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30 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

Companies with market shares above the thresholds of the block exemption will not be covered
38.
by the safe harbour. It must, however, be stressed that, even in such circumstances, their vertical
agreements will not be subject to any presumption of illegality. The market share threshold will serve
only to distinguish those agreements which are presumed to be legal from those that may require
individual examination. To assist companies in carrying out such an examination, the Commission
intends to issue a set of guidelines basically covering two issues: the application of Articles 81(1) and
81(3) above the market share threshold and the Commission’s policy on withdrawal of the benefit of
the block exemption, particularly in cumulative effect cases. In most cases, these guidelines should
allow companies to make their own assessment under Articles 81(1) and 81(3). The objective is to
reduce enforcement costs for industry and to eliminate, as far as possible, notifications of agreements
that do not give rise to any serious competition problem.

Market share threshold(s)

39.
A choice will have to be made between systems based on one or two thresholds, an issue which
is still being discussed. In a two-threshold system, the first and main market share figure would be 20%.
Below this it would be assumed that vertical restraints had no significant net negative effects and
therefore all vertical restraints and their combinations, with the exception of hardcore restraints, would
be exempt. Above the 20% threshold, there would be room to exempt certain vertical restraints up to a
higher level of 40%. This second threshold would cover vertical restraints that, on the basis of
economic thinking or past policy experience, lead to less serious restrictions of competition (e.g.
exclusive distribution, exclusive purchasing, non-exclusive types of arrangement such as quantity
forcing on the buyer or supplier, agreements between SMEs). A two-threshold system has the
advantage of providing for an economically justified graduation in the treatment of vertical restraints.
The system’s principal drawback is its complexity and the risk of reintroducing formalistic criteria for
the identification and definition of the individual vertical restraints covered by the higher threshold.

In a one-threshold system all vertical restraints and their combinations, with the exception of
40.
hardcore restraints, would be automatically exempted up to the level of a single market share ceiling.
The level of such a ceiling has not been proposed, but it would have to be below 40%, the level at
which single market dominance may start. It is likely to be in the 25-35% range. The advantage of a
single-threshold system lies in its simplicity, there being no necessity to define specific vertical
restraints other than hardcore restraints.

Hardcore restraints

These are restrictions which always fall outside the block exemption regulation. They include
41.
agreements concerning minimum and fixed resale price maintenance and agreements resulting in
absolute territorial protection. In addition, the Commission proposes to make wider provision for
arbitrage by both intermediaries and final consumers and therefore to blacklist, more generally, resale
restrictions in so far as these restrictions result from factors within the parties’ control. However, the
exact content of the hardcore list is still subject to further discussions. Maximum and recommended
resale prices, provided that they do not amount to fixed resale prices, would as a general rule be
deemed to fall outside the scope of Article 81(1).

No sector-specific rules

42.
It has been decided to propose one wide-ranging block exemption regulation instead of
different regulations for specific forms of vertical restraints or sectors. Different forms of vertical

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XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 31

restraints with similar effects will thus be treated in a similar way, preventing unjustified differentiation
between forms or sectors. This avoids, as far as possible, a policy bias in the choices companies make
concerning distribution formats. The company’s choice should be based on commercial merit and not,
as under the current system, on unjustified differences in exemptability.

43.
Selective distribution, including quantitative selective distribution, would be covered by the
proposed block exemption regulation, subject to certain conditions. In a two-threshold system, the first
market share threshold of 20% would apply. It is proposed to indicate in the guidelines that, as a
general rule, qualitative selective distribution and agreements providing for service requirements fall
outside the scope of Article 81(1).

44.
Although franchising would be covered, it would not be given preferential treatment as it is a
combination of vertical restraints. Usually franchising is a combination of selective distribution and
non-compete obligations for the goods which form the subject of the franchise. Sometimes exclusive
distribution obligations like a location clause or exclusive territory are also added. These combinations
would be treated according to the general criteria set out in the block exemption regulation, whereby
absolute territorial protection would, in any event, come under the hardcore list.

45.
It is proposed that the block exemption regulation cover associations of independent retailers
set up for the purpose of collectively purchasing goods for resale to final customers under a common
format. To benefit from the block exemption, the individual members of the association must be SMEs.
It is recognised that there are horizontal aspects to these associations, and therefore the benefit of the
block exemption is also subject to the proviso that the horizontal aspects do not infringe Article 81.
These horizontal aspects will be examined in a manner which accords with the general approach to
vertical restraints as part of the review of the Commission’s policy on horizontal agreements (see
below).

46.
It is proposed to make non-compete agreements limited in duration in view of their potential
foreclosure effects. The idea of making exclusive purchase agreements combined with quantity forcing
limited in duration is also being considered, as is the possibility of dispensing with duration limits for
non-compete obligations imposed by the supplier where it owns the premises from which the buyer
operates. The guidelines will take account of the need for longer limits where this is justified by long-
term investments.

47.
For reasons of coherence and unity of policy, it is proposed that sector-specific rules for beer and
petrol be withdrawn as the continuation of a special regime for these sectors is not justified on
economic or legal grounds. In so far as sector-specific treatment is justified, this will be done by means
of guidelines. It should be noted that the block exemption regulation on car distribution, which expires
in 2002, is not covered by the current proposal.

Withdrawal of the benefit of the block exemption

48.
The Commission intends to maintain the withdrawal mechanism for the rare cases where a
serious competition problem may arise below the market share threshold(s). The withdrawal
mechanism would in particular be applied in cumulative effect cases. In order to ensure effective
supervision of markets and greater decentralisation in the application of the Community competition
rules, it is proposed that not only the Commission but also national authorities be empowered to
withdraw the benefit of the block exemption in future.

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2.2. The proposed Council regulations

These proposed regulations provide for two major changes:

(a)

Extension of the Commission’s powers under Council Regulation No 19/65

49.
Council Regulation No 19/65 gives the Commission the power to declare by regulation that
Article 81(1) does not apply to categories of bilateral exclusive agreements concluded with a view to
resale which relate to the distribution and/or exclusive purchase of goods or comprise restrictions on
the acquisition or use of intellectual property rights. However, the powers thus conferred on the
Commission do not allow it to implement the envisaged new policy in the field of vertical restraints.

50.
The proposed Council regulation therefore extends the scope of Articles 1(1)(a) and 1(2)(b) of
Council Regulation No 19/65 in order to enable the Commission to cover, by block exemption
regulation, all types of agreement concluded between two or more firms, each operating at a different
stage of the economic process, in respect of the supply and/or purchase of goods for resale or
processing or in respect of the marketing of services (i.e. vertical agreements).

51.
Furthermore, in order to ensure greater decentralisation in the application of the Community
competition rules, it is proposed to amend Article 7 of Regulation No 19/65 so as to provide that,
where the effects of vertical agreements are felt in a Member State which possesses all the
characteristics of a distinct market, the competent national authority may withdraw the benefit of the
block exemption in its territory and adopt a decision for the purpose of eliminating those effects.

52.
Finally, in order to ensure effective control of the effects of parallel networks of similar
agreements on a given market, it is proposed to amend Article 7 to allow the block exemption
regulation to establish the conditions under which such networks of agreements are excluded from its
application.

(b)

Relaxation of the notification procedure in Regulation No 17

53.
The proposal is designed to extend the scope of Article 4(2) of Regulation No 17 with a view to
granting dispensation from the prior notification requirement in respect of all vertical agreements. The
practical advantage of the proposed amendment is to enable the Commission, even in cases of late
notification, to consider whether the agreements in question satisfy the conditions of Article 81(3) and,
if so, to adopt an exemption decision taking effect on the date on which the agreement was entered
into. In this way the legal certainty afforded to firms would be strengthened without jeopardising the
enforcement of Article 81(1) in respect of anticompetitive agreements.

3. Review of the policy on horizontal agreements

54.
In 1997 9 the Commission’s departments decided to begin assessing the policy on horizontal
agreements. The fact-finding exercise carried out that year revealed that the existing notices and block
exemption regulations in this field 10 were not much used, were partly outdated and entailed a number

9

1997 Competition Report, points 46 and 47.

10 Block exemption regulations concerning specialisation and R&D agreements and notices on cooperation

between companies (1968) and cooperative joint ventures (1993).

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XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 33

of notifications, and should therefore be reviewed. The Commission’s departments took the view that
this exercise should be seen as an important complement to the project on vertical restraints.

55.
In 1998 the Commission’s departments intensified their thinking on the review of the policy on
horizontal agreements. Various initial conclusions were reached. The review of the current rules should
take on board the need to update and improve the existing provisions in terms of both clarity and
coherence. In many respects, the body of law and regulations on horizontal agreements appears to be
incomplete. The aim is therefore to make it more efficient and transparent in the light of the criticisms
expressed by companies in the survey. In this review exercise, the Commission’s departments should
propose the adoption of an approach which focuses systematically on economic analysis, in line with
the way in which the vertical restraints exercise was tackled. They should propose following a course
probably involving the drawing-up of guidelines, accompanied, as necessary, by revised block
exemption regulations for certain types of agreement.

A consultation paper for discussion with Member States and other interested parties would be made
available in 1999.

4. Review of procedural regulations

56.
The Commission has a general objective of modernising and simplifying its procedures for
investigating competition cases and making them more user-friendly. As part of that process, on
22 December it adopted two regulations to streamline the legislative framework. The first regulation
(No 2842/98) spells out how the Commission guarantees the right of the different parties involved in
competition cases, including those in the transport sector, to be heard. It has replaced Regulation No
99/63 on hearings, which served its purpose but now has to be updated to reflect case-law, Commission
practice and new concepts that have developed since 1963. The second regulation sets out how to lodge
applications and notifications in competition cases relating to the transport sector. Both regulations
enter into force on 1 February 1999 and replace five existing Commission regulations.

4.1. Commission Regulation (EC) No 2842/98 of 22 December 1998 on the hearing of parties in

certain proceedings under Articles 85 and 86 of the EC Treaty 11

57.
The new regulation sets out how the Commission will safeguard the right of the various parties
involved in competition cases to be heard. Parties entitled to submit comments under the regulation
will in future also be able to do so in writing without prejudice to the possibility of an oral hearing. To
make the provisions clearer and more user-friendly, the regulation is divided into different chapters
according to the status of the party. 12

58.
To facilitate the handling of individual cases by the Commission departments, and to avoid
unnecessary delays, the Commission is not obliged to take account of written comments from the
addressees of a statement of objections received after the date by which they must make their views
known. The addressees of a statement of objections must also indicate, by a date set by the
Commission, any parts of its objections which, in their view, contain business secrets or other
confidential material. The regulation also refers to the role of the Hearing Officer in the hearing

11 OJ L 354, 30.12.1998.
12 Chapter II: Hearing of parties to which the Commission has addressed objections; Chapter III: Hearing of

applicants and complainants; and Chapter IV: Hearing of other third parties.

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procedure, and to the right of access to the file without, however, pre-empting the Commission’s
further intentions in this field.

59.
The regulation makes provision for the applicant 13 or complainant 14 to be provided with a copy
of the non-confidential version of the objections and to be given a date by which it may make its views
known in writing. This applies in cases where the Commission raises objections.

60. With a view to simplifying the way in which the time limit for submissions by the parties to the
Commission is calculated, all submissions under the regulation must reach the Commission by a certain
date set by the Commission in its written submission to the party concerned. The time allowed is at
least two weeks. Setting a specific date by which the submission must reach the Commission is
considered less likely to result in legal uncertainty than if the parties calculate the time limit
themselves.

In order to simplify and expedite the hearing procedure, and in line with Commission practice on
mergers, statements made by each person at the hearing will be recorded and the respective tape will
replace the written minutes.

4.2. Commission Regulation (EC) No 2843/98 of 22 December 1998 on the form, content and other
details of applications and notifications provided for in Council Regulations (EEC) No 1017/68,
(EEC) No 4056/86 and (EEC) No 3975/87 applying the rules on competition to the transport
sector 15

61.
In 1994 the Commission modernised the rules for notifying restrictive agreements in sectors
other than transport by adopting Regulation (EC) No 3385/94 and Form A/B. 16 Commission
Regulation (EC) No 2843/98 and the new Form TR (Annex I to the regulation) have introduced
similar rules for companies which wish to notify restrictive agreements in the transport sector. Form
TR specifies the information that must be provided by companies when applying for exemption under
the three transport regulations and for negative clearance under Regulation (EEC) No 3975/87. It has
replaced the previous Form II (transport by rail, road and inland waterway), Form MAR (maritime
transport) and Form AER (air transport). Form TR(B) (Annex II to the regulation) has replaced Form
III for crisis cartels notified under Article 14(1) of Regulation (EEC) No 1017/68.

62.
The regulation differs, however, from Regulation (EEC) No 3385/94 in that references to
Regulation No 17 are replaced by references to the three transport regulations (EEC) No 1017/68,
(EEC) No 4056/86 and (EEC) No 3975/87. The regulation provides that where an application is
wrongly made under one of the transport regulations it can be examined under another regulation, as
applicable. Furthermore, provision is made for the notification of awards at arbitration and
recommendations by conciliators, and also for applications and notifications under the competition
rules of the EEA Agreement to be made in one of the official languages of the EFTA States as well.

13 Applications made under Article 3(2) of Regulation No 17.
14 Complaints made under Article 10 of Council Regulation (EEC) No 1017/68, Article 10 of Council Regulation

(EEC) No 4056/86 and Article 3(1) of Council Regulation (EEC) No 3975/87.

15 OJ L 354, 30.12.1998.
16 Commission Regulation (EC) No 3385/94 of 21 December 1994 on the form, content and other details of

applications and notifications provided for in Council Regulation No 17 (OJ L 377, 31.12.1994).

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B — Consolidating the single market

63.
Consolidating the single market is of prime importance in ensuring that economic and monetary
union is a success. Of the Community policies that help to further single market consolidation,
competition policy plays a key role, not just because it strengthens structures by tackling private or
public initiatives designed to prevent or delay the opening-up of markets, but also because it stimulates
the operation of the single market by promoting positive cooperation between companies in areas such
as R&D or environmental protection, 17 and by punishing anticompetitive conduct. The Commission
believes that this action to consolidate the single market has an immediate impact on the progress of
economic and monetary union.

1. Cartels

Of all restrictions of competition, restrictive practices in the form of secret agreements are
64.
undoubtedly the most destructive. Very often, these concerted practices involve a substantial number
of economic operators in a given area of activity and, as such, they have a very marked impact on the
relevant markets. Furthermore, these agreements almost invariably concern prices and thus severely
undermine competition. The Commission is committed to an extremely tough stance against cartels,
particularly in the months immediately prior to and following completion of economic and monetary
union. The positive impact of the launch of the euro, which should increase price transparency within
the Union and, as a result, intensify competition to the benefit of consumers, must not be countered by
restrictive agreements designed to side-step market confrontation by artificially fixing prices or other
trading conditions, which in the longer term could push up inflation and undermine the foundations of
economic and monetary union.

65.
During 1998 the Commission demonstrated its firm commitment by its strong action against
secret agreements between companies. Final decisions were issued in no less than four cases during the
year, and additional sets of proceedings have been instituted.

Pursuant to Article 65 of the ECSC Treaty, the Commission prohibited a price-fixing agreement in the
steel sector. Six producers of stainless-steel flat products, accounting for more than 80% of European
production of stainless-steel finished products, had decided on a concerted increase in stainless steel
prices by changing the method for calculating the ‘alloy surcharge’. The Commission decided to fine
the members of the cartel a total of ECU 27.3 million. 18

The Commission also prohibited an agreement between four sugar producers. British Sugar, Tate &
Lyle, Napier Brown and James Budgett, which together controlled 90% of the white granulated sugar
market in the United Kingdom, had developed a collaborative strategy of higher pricing for that
product on the industrial and retail markets. Fines totalling ECU 50.2 million were imposed on the
participating companies, including ECU 39.6 million on British Sugar 19.

The Commission also took action on an agreement between producers of district heating pipes which
was characterised by the variety of competition restrictions involved: price fixing, market sharing and
bid rigging. The cartel began in Denmark and soon extended throughout the Union, thus cartelising

17 Most of the cases which gave rise to a positive approach on the part of the Commission are discussed in the

following section (C - Sector-based policies).

18 OJ L 100, 1.4.1998.
19 OJ L 284, 19.10.1998

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the whole of the European market. The Commission imposed fines totalling ECU 92.21 million on the
ten companies involved, including ECU 70 million on ABB. A particularly aggravating factor was that
the cartel continued for nine months after the Commission had discovered its existence 20.

Lastly, the Commission prohibited a price-fixing agreement between seven ferry companies operating
services between Greece and Italy. Investigations at the offices of five Greek operators and one Italian
operator revealed overwhelming evidence of an agreement in the form of regular meetings and
exchanges of correspondence involving the collective readjustment of prices for passengers and
vehicles. The fine of ECU 9.12 million is relatively light given the seriousness of the infringement: the
Commission took account of the fact that it had had a fairly limited impact on the market.

The Commission imposed fines totalling ECU 178.83 million on the companies involved in these four
cases, reflecting its determination to take vigorous action to combat anticompetitive practices of this
type.

66.
The Commission concluded from the above proceedings that its notice of 10 July 1996 was
beginning to bear fruit. 21 The notice, which provides for fines to be reduced or even waived for firms
which denounce cartels in which they have taken part, was applied in the sugar case.

67. With a view to detecting and combating cartels more effectively, the Commission has decided to
reorganise part of its Directorate-General for Competition and to set up a unit within its ambit
specialising in proceedings of that type. This demonstrates that the Commission has placed its anti-
cartel policy among the items at the top of its agenda.

Using the limited resources at its disposal, the Directorate-General has assigned about fifteen case-
handlers to this new unit, which should eventually comprise about twenty officials with significant
experience in investigations of this type.

By carrying out this reorganisation the Commission is again sending an important signal to companies
engaged in these practices, which are particularly harmful to consumers and to the European economy
in general.

2. Opening-up of markets

68.
The Commission has always kept a close eye on distribution agreements and their restrictive
effects in so far as they hindered intra-Community trade. Some exclusive distribution agreements lead
to the setting-up of watertight national distribution networks. In particular, clauses which prohibit
distributors from supplying customers based outside the contract territory. In this way, national
markets are artificially isolated from one another. The Commission considers that measures should be
taken to combat this situation, not just in order to re-establish effective competition between economic
operators but also in order to promote market integration. In practice, the compartmentalisation of
national markets prevents price convergence within the Union and restricts access by consumers to the
markets with the lowest prices. With the creation of the single currency, price differentials will be
obvious because they will be expressed in euros. They will be increasingly viewed as unjustified by
ordinary people, who will want to derive full benefit from economic and monetary union.

20 OJ L 24, 30.01.1999
21 OJ C 207, 18.7.1996; 1996 Competition Report, points 34 and 35.

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1998 was a year in which the Commission clearly demonstrated its determination to promote
69.
the opening-up of markets, a prime example of this being the Volkswagen case. Since 1995 the
Commission had received numerous complaints from European consumers, particularly from
Germany and Austria, who had been confronted with various difficulties when attempting to buy
new Volkswagen and Audi cars in Italy. These consumers wanted to benefit from the price differentials
between their Member State and Italy, where prices were particularly advantageous. Following a series
of inspections at the offices of Volkswagen AG, Audi AG and Autogerma SpA, which is a subsidiary of
Volkswagen and the official importer for both makes in Italy, and at the offices of a number of Italian
dealers, the Commission concluded that Europe’s largest motor-manufacturing group had been
pursuing a market-partitioning policy in the Union for about ten years. Volkswagen AG had
systematically forced its dealers in Italy to refuse to sell Volkswagen and Audi cars to foreign buyers,
especially from Germany and Austria. The Commission fined Volkswagen ECU 102 million, the
largest fine ever imposed on a single company.

70.
The case of Amministrazione Autonoma dei Monopoli dello Stato (AAMS) provided a further
indication of the Commission’s determination to open up national markets, in this particular instance
by means of Article 82. AAMS, an Italian cigarette producer and distributor which had a dominant
position on the Italian market for the wholesale distribution of cigarettes,
imposed on foreign
producers wholesale distribution contracts containing numerous restrictive clauses which limited the
access of foreign cigarettes to the Italian market and favoured its own production. The Commission
fined AAMS ECU 6 million and ordered it to put an end to the infringements.

Insert 2: Motor vehicle distribution: a consumer-oriented policy

EU competition law contains specific provisions on motor vehicle distribution. The legislation
(Regulation (EC) No 1475/95) came into force on 1 October 1995. One aim of the block exemption
was to reinforce the right of consumers to purchase a new car, either directly or through an
authorised intermediary, wherever they wish in the European Community.

Accordingly, the regulation prohibits any direct or indirect hindrance of parallel trade, i.e.:

refusals by dealers to supply a consumer simply because he/she is a resident of another Member
State;

charging foreign consumers higher prices or imposing longer delivery periods than for consumers
based in the Member State;

refusing to perform guarantee services or other free services for cars imported from another
Member State;

hindering the activities of intermediaries authorised by consumers by applying excessive criteria as
regards their mandate;

restricting supplies by manufacturers to dealers who sell cars to consumers resident in another
Member State;

threats by manufacturers to terminate contracts with dealers who sell cars to consumers resident in
another Member State;

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any interference by manufacturers with the freedom of consumers to resell new cars, provided that
the sale is not effected for commercial purposes.

Use of these ‘blacklisted’ measures can result in automatic loss of the benefit of the block
exemption.

The regulation requires manufacturers to supply their dealers with cars produced to the
specifications of consumers from other Member States — for example, right-hand-drive
(RHD) — if the dealers wish to sell them. However, EU competition law does not impose a
legal obligation on individual car dealers to sell cars.

By its decision to fine Volkswagen/Audi for forcing its authorised dealers in Italy to refuse to sell
Volkswagen and Audi cars to foreign buyers, the Commission demonstrated that it will not tolerate
practices which are contrary to consumers’ interests. The Commission is currently examining similar
cases involving other manufacturers. In so far as infringements of Community competition rules
seem likely to be proven, the Commission will investigate cases of coordinated refusals to sell and,
as in the recent Volkswagen case, take the necessary decisions. The Commission reiterates that it
will not hesitate to act against manufacturers who fail to comply with Community law.

In addition to such direct action, the Commission continues to increase price transparency by
publishing twice-yearly reports on car prices in the Union. Growing consumer demand for this
report — about 8 000 copies are distributed annually — illustrates that consumers are increasingly
aware of the benefits that the single market can provide. The introduction of the euro, which will
increase price transparency and facilitate comparisons, is expected to reinforce this behaviour
within the European Community.

This heightened awareness has led to greater demand from individuals for assistance in purchasing
cars abroad. This applies in particular to difficulties encountered by British citizens when trying to
purchase RHD cars outside the United Kingdom. The Commission has succeeded in helping a large
number of these individuals. In fact, the figures supplied by some manufacturers indicate an
increase in sales of RHD cars for import into the United Kingdom. In order to provide an
appropriate solution to this specific problem, most manufacturers, i.e. BMW, Fiat, Ford, Mercedes-
Benz, Opal/Vauxhall, PAS (Peugeot/Citroe¨ n), Volvo, VW/Audi, Honda, Nissan and Renault have,
at the Commission’s suggestion, established information centres for European consumers wishing
to buy a car abroad.

3. Undertakings in a dominant position

71.
Article 82 prohibits undertakings in a dominant position on a given market from abusing this
situation to the prejudice of third parties. Such abuse consists, inter alia, in limiting production,
charging excessive prices, discriminatory or predatory pricing, tied sales or other commercial practices
not based on the principle of economic efficiency. The Commission takes the view that such practices,
which undermine competition, are particularly dangerous when they are carried out by undertakings
with the power to shield themselves from competitive pressure and eliminate their competitors without
significant damage to themselves or to block market access by new entrants to a significant degree. In
the context of further development of the single market, these practices are particularly damaging
because they lead to market partitioning and delay the integration of the Member States’ economies.
In addition, in recently liberalised markets there is a danger that they will wipe out the expected

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innovation or job creation. This is why the Commission is
benefits in terms of restructuring,
particularly alert to the effects of dominant positions on these processes. The number of formal
decisions pursuant to Article 82 has increased steadily over the last two years. In 1998 the Commission
concluded six cases 22 under that article.

72.
Two cases concerned the airports at Frankfurt and Paris, which are operated by companies in a
dominant position. The abuses identified by the Commission concerned groundhandling and self-
handling services, which were liberalised under a directive adopted in 1996. In addition to the direct
there were
anticompetitive effects on the suppliers involved,
repercussions on non-domestic airlines, with market partitioning occurring as a result. The abuses
also slowed down the liberalisation of groundhandling services.

the Commission showed that

The Frankfurt Airport case concerns groundhandling. Following complaints from several airlines, the
Commission found that the operator of the German airport (Flughafen Frankfurt/Main AG (FAG))
had abused its dominant position as operator by prohibiting airlines from providing self-handling
services and by denying access to any independent providers of groundhandling services, thus creating
on the related but separate groundhandling market a monopoly situation of which it was the
beneficiary. The Commission therefore ordered FAG to bring its monopoly to an end. 23 It also found
that the long-term contracts (three to ten years) that FAG had awarded to its best customers were
contrary to Community law in that they effectively closed the groundhandling-services market to new
entrants or made it less attractive to them, thus reinforcing its dominant position. FAG agreed to
amend the contracts in question by granting contracting parties an annual right of withdrawal.

In the Alpha Flight Services/Ae´roports de Paris (ADP) case, the Commission found that the operator
of the two Paris airports had abused its dominant position as operator by imposing discriminatory
commercial fees on suppliers or airlines providing groundhandling or self-handling services such as
catering, cleaning and freight handling. ADP charged different levels of fees to the two third-party
suppliers, AFS, the plaintiff, and OAT, a subsidiary of Air France. In addition, the fee charged by ADP
to airlines providing catering services for passengers via specialist subsidiaries was either zero or less
than that charged to companies providing similar catering services for third parties. There was no
objective justification for the differences, which distorted competition between suppliers since some
benefited from lower operating costs. The Commission therefore ordered Ae´ roports de Paris to bring
its fee arrangements to an end.

73.
The Commission also invoked Article 82 in another case involving the transport sector. This was
the TACA (Trans-Atlantic Conference Agreement) case, in which the Commission fined the members of
the liner conference ECU 273 million. 24

74.
In the IRE/Nordion and Van den Bergh Foods cases, both involving very different markets, the
Commission devoted a great deal of attention to the effects of contracts concluded by companies in a
dominant position and containing exclusivity clauses: such clauses may make the other parties involved
so dependent on the dominant company that the residual competitors’ ability to counter its dominant
position is severely restricted.

22

Including the AMMS case discussed under point 2.

23 Decision 98/190/EC of 14 January 1998 (OJ L 72, 11.3.1998).
24 Since the TACA case also involved application of Article 81, see the comments on the case in the section on

sector-based policies (I-C-4).

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Nordion, a Canadian company operating on the world market for the production and sale of
molybdenum 99, a base product for radiopharmaceuticals used in nuclear medicine, concluded
exclusive, long-term supply agreements with its customers, with the result that the main competitor, the
Belgian company IRE, which was the complainant in this case, was prevented from developing and
ultimately even from maintaining its presence on the market. This situation also made the entry of
potential new competitors impossible. After receiving a statement of objections charging it with
abusing its dominant position, Nordion undertook to renounce the exclusivity clauses in its contracts.
The Commission then decided to terminate the proceedings. 25

Van den Bergh Foods, a Unilever subsidiary, holds more than 85% of the Irish ice cream market. The
company has an extensive network of freezer cabinets which are provided to retailers free of charge on
condition that they are used exclusively for the storage of Unilever’s products. The Commission found
that, in the circumstances of the Irish market, the provision of cabinets on exclusive terms constituted a
real barrier to market entry for Unilever’s competitors. Given the reluctance of Irish retailers to
replace Unilever cabinets, or to install additional ones, 40% of retail outlets in Ireland offered Unilever
products only. By virtue of its dominant position on this market, Unilever had been able to encourage
retailers to enter into exclusive arrangements with it. The Commission took the view that this practice
constituted an abuse of a dominant position and issued a decision condemning Unilever. 26

Insert 3: Commission policy on fines

1998 seems likely to go down as the strictest year of the decade, with fines totalling ECU 560
million, followed by 1994 (ECU 535 million, with inter alia the Beams, Cartonboard and Cement
cases). It was also noteworthy for the variety of anticompetitive practices which were identified:
four cartels but also three abuses of a dominant position. The severity of the penalties and the
diversity of the practices and economic sectors involved reflect the Commission’s determination to
consolidate the single market with a view to completing economic and monetary union.

At the end of 1997 the Commission adopted guidelines on setting fines. The various cases
concluded in 1998 reflect the implementation of these guidelines, which were designed to ‘help to
make the Commission’s policy on fines more coherent and to strengthen the deterrence of the
financial penalties.’

One of the major innovations of this new system consists in adjusting the basic amount of the fine,
which is determined according to the gravity and duration of the infringement. The basic amount
may be increased to take account of aggravating circumstances or reduced to reflect attenuating
circumstances.

Aggravating circumstances include repeated infringements, refusal to cooperate or the role of
leader in the infringement. In the Volkswagen case, the Commission took into account when setting
the fine the fact that the company had failed to take appropriate action when instructed to put an
end to a serious infringement. It took account of similar behaviour in the case concerning the pre-
insulated pipe cartel, which continued to operate for nine months after the investigation carried out
by the Commission’s inspectors. In the case of the restrictive agreement in the UK sugar industry, the

25 Proceedings were also instituted against IRE/Nordion in Japan, with the result that the Commission cooperated

with the Japanese authorities (JFTC). See Chapter IV-International cooperation.

26 The Commission also took the view that the exclusivity condition constituted a restriction of competition which

infringed Article 81.

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XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 41

aggravating circumstance found against British Sugar was that the company was the instigator of
the infringement and, throughout the relevant period, remained the driving force.

The attenuating circumstances specified in the guidelines include an exclusively passive role in the
infringement, or termination of the infringement as soon as the Commission intervenes. A
reduction in the amount of a fine may be justified on the basis that the company concerned
cooperated in the proceedings. In the case of the price cartel in the stainless-steel sector, two
companies which were parties to the agreement cooperated, one by putting an end to the
investigations, and the other by providing
infringement following the Commission’s initial
important information in the course of the proceedings. These companies were fined a smaller
amount than their partners. An attenuating circumstance which was taken into account in the case
of ferry services between Greece and Italy was the fact that the infringement had had a fairly limited
impact on the market.

Also of relevance is the notice of 10 July 1996 on the waiving or reduction of fines in cartel cases,
which states that the Commission should take into account, when calculating the amount of the fine,
cooperation on the part of companies which inform it of cartels in which they were involved.
Accordingly, in the case involving the British sugar industry, the Commission substantially reduced
the fine on Tate & Lyle to take account of the fact that it had submitted self-incriminating letters
which provided evidence of the cartel’s existence. The notice reflects a concern to make the
detection of cartels more efficient, and indeed several have been detected since its adoption.

The Commission is relatively satisfied with the arrangements for calculating the amount of fines,
but it takes the view that, in the light of the wealth of experience acquired during 1998, certain
aspects should be reviewed after consulting the national competition authorities with a view to
finalising this crucial instrument of Community competition policy.

C — Sector-based policies

1. Telecommunications 27

1.1. The process of supervised liberalisation

75.
1 January 1998 was the date fixed by the Directive of 13 March 1996 on the implementation of
full competition in telecommunications markets 28 for the abolition of the remaining monopolies for
the provision of voice telephony services and the supply of telecommunications infrastructure in the
Community, with the exception of certain Member States to which the Commission had granted
additional implementation periods (Ireland, Portugal, Spain, Luxembourg and Greece). The additional
periods granted to Luxembourg and Spain ended on 1 July and 1 December respectively. In addition,
Ireland, which had been granted an additional period due to terminate on 1 January 2000, decided in
June to anticipate the full liberalisation of its telecommunications market on 1 December, so as to
benefit earlier from the advantages associated with the opening-up of this market to competition.

27 See also Insert 7, Chapter II (Mergers), which discusses several decisions affecting the telecommunications

sector.

28 Directive 96/19/EC (OJ L 74, 22.3.1996).

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In view of the economic importance of the telecommunications sector, which may be put at some ECU
150 billion, and its impact on job creation, the Commission continued throughout the year to monitor
the implementation of this liberalisation by the Member States and the establishment of the regulatory
framework in the two Member States where the additional implementation period was due to
terminate.

1.1.1. Monitoring the implementation of the directives

The ‘1998 joint Team’ (the body responsible for implementing Community telecommunications
76.
legislation), comprising officials drawn from the Directorates-General
for Competition and
Telecommunications, working together with the Legal Service, continued the work it had begun in
1997. 29 It prepared two reports on progress in implementing the directives, which were adopted by the
Commission on 18 February 30 and 25 November. 31 The first was based on the results of bilateral
meetings with the Member States, while the second summarised the findings of a survey carried out by
the Commission among the Member States (questionnaires and contacts with the competent national
authorities) and the audit findings of independent consultants on the actual implementation of the new
regulatory framework in each of the Member States.

The report of 18 February points to considerable progress in those Member States in which,
77.
according to the report of 8 October 1997, transposal into national law was less advanced and a
substantial amount of work still needed to be done. The Commission noted in the report that the bulk
of the Community regulations had been transposed into national law in most of the Member States.

78.
That notwithstanding, the Commission was obliged to institute new infringement proceedings
against Member States which had failed to transpose the directives in full, in addition to the 35
infringement proceedings pending at the start of the year, some of which it was able to wind up
following the recent notification of measures adopted by the Member States concerned. Apart from
problems associated with legislative or regulatory delays, the main difficulties concern the non-
compliance of certain specific conditions for licences in some Member States (obligation to allocate a
certain amount of investments or turnover to R&D, obligation to obtain a bank guarantee for the
completion of business plans, etc.). In addition, some Member States had failed to ensure that
operators published their standard terms and conditions governing interconnection. In some Member
States (Austria and Italy), the prices put forward by the operator were approved by the regulatory
authority only towards the end of the year. However, about half of the tariffs published were within the
range recommended by the Commission as regards charges for call termination. 32

1.1.2. Price surveys

79.
Concerned at the continuing high cost of mobile communications in Europe, and in particular of
calls from fixed lines to mobile phones, the Commission carried out a survey early in 1998 on the
interconnection charges of fixed-line and mobile telecommunications operators in the European
Community. In particular, the Commission wanted to ascertain whether operators of a certain type of
network applied similar, non-discriminatory conditions to other operators, in particular as regards
interconnection charges. It also examined the impact of these charges on the level of charges for calls

29 1997 Competition Report, point 102.
30 COM(1998) 80.
31 COM(1998) 594.
32 Recommendation 98/195/EC (OJ L 73, 12.3.1998).

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made by users of fixed-line networks to mobile phones. Interconnection charges for call termination,
which are set by operators, have a tangible impact on the level of charges for calls between fixed-line
and mobile phones.

In the light of this survey in the fifteen Member States, the Commission found that there were
80.
preliminary indications that excessive or discriminatory prices were indeed being charged and that,
accordingly, in-depth investigations needed to be carried out. In five of these cases, the Commission
suspended proceedings so as to allow the national supervisory authorities to take action. In the ten
others, namely two cases on call termination charges made by mobile telephone operators in Italy and
Germany and eight cases concerning income retained by operators of public switched telephone
networks (PSTNs), namely Belgacom, Telecom E´ ireann, British Telecom, P&T Austria, Telefo´ nica,
KNP Telecom, Telecom Italia and Deutsche Telecom, on calls from fixed-line telephones to mobile
telephones, the Commission launched an enquiry based mainly on tests to detect excessive and/or
discriminatory prices. It found that four PSTN operators charged higher call termination tariffs to
mobile operators than to fixed-line operators. The Commission also found anomalies in mobile
operators’ call termination charge structures, particularly in Italy and Germany. Lastly, it demonstrated
that the income retained by PSTN operators for calls from fixed-line telephones to mobile telephones
where these operators were present on both markets appeared to be significantly higher than the
benchmark established by the Commission with the assistance of an external auditor as part of the
enquiry.

81.
Following this in-depth investigation, the Commission took note of several positive changes and
closed a number of case-files. The operators decided to bring the discriminatory arrangements
complained of to an end and to set new tariffs at a lower level. For example, Telecom Italia began to
apply identical charges to operators of mobile and fixed-line networks for call termination on its
network, which led to a reduction of about 40% in the costs paid by mobile operators. The national
regulatory authorities took the necessary steps to examine the practices revealed by the Commission.
In the case of Spain, for instance, the national regulator ordered Telefo´ nica to change its charge
structure.

82.
Last year the Commission started proceedings against dominant telephone operators in respect
of the accounting rates (transfer prices) which they charge for transferring international telephone
calls. 33 Following this initial phase of the investigation, the Commission decided to focus on the
charging practices of seven operators which possibly derived excessive margins from the accounting
rates: OTE Greece, Post & Telekom Austria, Postes et Te´ le´ communications Luxembourg, SONERA
(formerly Telecom Finland), Telecom E´ ireann, Telecom Italia and Telecom Portugal. The Commission
invited the national regulatory authorities of the Member States concerned to investigate these
charging practices.

1.2. Clarifying the legal framework

1.2.1. Notice on access agreements

83.
On 31 March, after carrying out a wide-ranging consultation of interested parties, the
Commission adopted a notice on the application of the competition rules to access agreements in the
telecommunications sector. 34 The notice, which is addressed primarily to telecommunications

33 1997 Competition Report, point 78.
34 OJ C 265, 22.8.1998.

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companies and to the national authorities responsible for regulating the industry or competition, is
designed to clarify the way in which the principles of competition law as derived from Commission
decisions and Court of Justice case-law are applied to agreements governing access to telecommunica-
tions infrastructure. The Commission believes that it is vital for easy, non-discriminatory access to this
infrastructure to be guaranteed for new entrants to the liberalised telecommunications markets so that
they can take advantage of open access and pass on the benefits to users.

84.
The purpose of the notice is threefold. First, to set out access principles stemming from
Community competition law in order to create greater market certainty and more stable conditions for
investment and commercial initiative in the telecoms and multimedia sectors. Second, to define the
relationship between competition law and sector-specific legislation adopted for harmonisation
purposes under the Article 95 framework. And third, to explain how the competition rules will be
applied in the sectors involved in the provision of new services.

1.2.2. Notice concerning the status of voice communications on the Internet

85.
On 7 January the Commission adopted a notice concerning the status of voice communications
on the Internet pursuant to Directive 90/388/EEC. 35 The adoption of this notice followed the
publication for comment, on 2 May 1997, of an initial draft and a public consultation procedure. 36

The Commission’s position is that such communications do not at present constitute voice telephony
within the meaning of the Community directives, since they do not yet satisfy all the criteria laid down
in the definition of this service (they must be the subject of a commercial offer and the service must be
provided for the public to and from public switched-network termination points). This service may,
therefore, be subjected by Member States not to individual licensing procedures but, at the most, to
declaration procedures.

However, suppliers of voice services between two telephone handsets connected to the PSTN via the
Internet may be regarded as providers of voice telephony and will be subject to the relevant
regulations once they offer a quality of service equivalent to traditional voice telephony.

1.2.3. Draft directive under Article 90(3) concerning the legal separation of cable and

telecommunications activities

Further to the adoption on first reading on 16 December 1997 37 of a draft directive under
86.
Article 86 aimed at preventing former telecommunications monopolies from extending their dominant
position to cable television networks, the Commission organised a wide-ranging consultation of
interested parties. The consultation took place between March and June. Seventeen associations and
companies sent in their comments, as did five national authorities. With a view to discussing these
comments further, the Commission also held a hearing in October which was attended by 43
representatives of businesses and national authorities The Council, Parliament, the Economic and
Social Committee and the Committee of the Regions were also consulted.

35 Bull. 1/2 –1998, point 1.3.55; OJ C 95, 30.3.1998.
36 1997 Competition Report, point 105.
37 1997 Competition Report, point 109.

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Anticipating its adoption, some Member States and dominant companies have already begun to
87.
implement the principles enshrined in the draft directive. For instance, Deutsche Telekom announced
in May that it would create a structural separation between its telephone network and cable networks.

1.3. Individual cases

SNCF/Ce´ge´tel 38

Socie´ te´ nationale des chemins de fer (SNCF), the French national railway company, and
88.
Ce´ ge´ tel have entered into an agreement for the development, via Te´le´ com De´ veloppement (TD), of a
fixed-line telephone network using railway infrastructure which, together with electricity, gas or
motorway networks, provides a means of rapidly deploying a national telecommunications network.
Under the agreements, SNCF is to grant TD a ‘priority right’
its
telecommunications network along railway lines and to provide a guarantee in the form of a penalty
clause which will remain in force for three and a half years.

for the deployment of

89.
In cases of this type, the Commission takes the view that the main objective is to avoid, while
competition is in the process of emerging, a situation in which access to physical infrastructure is
restricted by exclusivity agreements or agreements resulting in de facto exclusivity. In this particular
case, the Commission responded favourably to the agreement. Given the scope of TD’s deployment
plan, SNCF’s capacity for installing telecommunications infrastructure will be close to saturation point
for several years. Under the circumstances it is thus justifiable to give priority access to TD provided
that this does not prevent SNCF from making any spare installation capacity available to other
operators.

Restructuring of Inmarsat

90.
Inmarsat is an intergovernmental treaty organisation set up in 1979 with over 80 member
countries, normally represented by the former national telecom provider. It is currently the major
international mobile satellite operator. Inmarsat has put forward a restructuring plan under which it
will be converted into a public company whose shareholders will be its former signatories. After a two-
year period, Inmarsat envisages a public offering of shares (IPO) which should dilute the shareholdings
of the former signatories. Having been converted into a public company, Inmarsat will no longer have a
privileged position on the market.

The Commission gave its approval to the restructuring of Inmarsat on the basis that a capital
91.
increase will take place within a short period of time. It regards this case as a model for the reform of
the other intergovernmental satellite organisations.

2. Postal services

92.
Following the adoption of the postal services directive 39 and the Commission notice 40 in late
1997, the Commission has made preparations for the second step of the liberalisation process.

38 Commission notice pursuant to Article 19(3) of Council Regulation No 17 (OJ C 293, 22.9.1998).
39 European Parliament and Council Directive 97/67/EC on common rules for the development of the internal

market in Community postal services and the improvement of quality of service (OJ L 15, 21.1.1998).

40 Commission notice on the application of the competition rules to the postal sector (OJ C 39, 6.2.1998).

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According to the postal services directive, the Commission should table a proposal for further
liberalisation of the sector before the end of 1998, following a comprehensive review. By 1 January
2000 Parliament and the Council are to decide on the further gradual and controlled liberalisation of
the postal market.

With the aim of carrying out a comprehensive review of the sector, the Commission has initiated a
number of studies on different aspects of liberalisation. External consultants have been commissioned
to carry out the following studies: (1) liberalisation of clearance, sorting and transport, (2) costing and
financing of universal service obligations, (3) liberalisation of direct mail, (4) the impact of
liberalisation of cross-border mail and (5) weight and price limits of the reserved area. A sixth study, on
modelling and quantifying scenarios for liberalisation, based on the results of the first five studies, has
also been commissioned.

The Commission also pursued its examination of the REIMS II agreement 41on terminal dues,
93.
which is the term used for the fees that a postal operator sending cross-border mail has to pay to the
receiving postal operator for delivering the mail to its final addressee. In a memorandum sent to the
notifying parties, the Commission expressed its concerns regarding certain provisions in the agreement.
Following a series of consultations with the Commission, twelve of the parties entered into a
supplementary agreement amending and clarifying the original agreement. In November the contents
of the amended REIMS II agreement were published in the Official journal. 42 In that notification, the
Commission stated that it intended to take a favourable view of the agreement in the light of
improvements to benefit customers. Before doing so, it invited third parties to send in their comments.

94.
The public postal operators of the Netherlands and Sweden notified the Commission of a
bilateral agreement on terminal dues. The Commission’s examination of the agreement did not reveal
any grounds for action under Article 81(1) of the EC Treaty. Consequently, the Commission closed its
file by means of a comfort letter to the parties.

3. Media

95.
The audiovisual industry is being transformed by digital technology and globalisation. Digital
and interactive television are expanding rapidly and are impacting on existing market structures such
as acquisition of broadcasting rights. As these developments continue into the next century,
competition policy will need to evolve accordingly. The Commission aims to set out its policy in the
form of various key decisions. Most of these should be published in 1999 and are expected to relate to
digital platforms and broadcasting rights for sports events.

3.1. Digital platforms

96.
In several Member States, digital platforms for television and interactive services have been set
up and are being examined by the Commission. In this sector, two decisions were taken in 1998 to
prohibit planned mergers in Germany, namely Bertelsmann/Kirch/Premiere and Deutsche Telekom/
Betaresearch. 43 In two other cases, the United Kingdom’s British Interactive Broadcasting (BIB) and

41 Notification of 31 October 1997 of an Agreement for the Remuneration of Mandatory Deliveries of Cross-
Border Mails (Case No IV/36.748-REIMS II). Sixteen European public postal operators have signed the
agreement.

42 OJ C 371, 1.12.1998.
43 See Chapter II (Mergers) for further details of these two cases.

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France’s Te´le´vision Par Satellite (TPS), final decisions are expected early in 1999. These will spell out
how the Commission plans to support innovation and the development of new services to exploit
technological advances in the sector whilst also ensuring that the competing alternatives are able to
develop. The Article 19(3) notices published for both these cases outline this approach.

Te´le´vision par satellite (TPS) 44

97.
In the case of TPS, the Commission has stated that it intends to take a favourable view of the
creation of a new operator as it will encourage competition with established pay-TV operations in
France. The satellite-based digital platform, which provides pay-TV to satellite subscribers and cable
network operators, is a partnership involving four French television channels, the media group CLT-
UFA, France Te´ le´ com and Suez Lyonnaise des Eaux.

In its Article 19(3) notice, the Commission proposes to adopt a favourable attitude to a number of
restrictions, including one preventing TPS shareholders from participating in similar ventures and an
obligation to give TPS a first option on their programmes as well as final refusal where these are
offered to third parties. The Commission envisages granting a three-year exemption as regards the
obligation on the four broadcasters to grant TPS exclusive distribution rights to their general interest
channels.

British Interactive Broadcasting (BIB) 45

The United Kingdom now has satellite, cable and terrestrial digital television platforms, the
98.
latter (BDB) benefiting from a Commission decision detailed in Part II. BIB, the satellite-based joint
venture between BSkyB, BT, Midland Bank and Matsushita, aims to provide interactive shopping,
services, games, etc. and interactive television programmes via a satellite signal and a telephone line
linked to a set-top box. The box will initially be subsidised, the cost being recovered from content
providers. Access to BIB will be controlled by conditional access systems provided by a Sky subsidiary.
The viewer will navigate via a BSkyB proprietary electronic programme guide (EPG).

99.
Following third-party consultations, the Commission negotiated several undertakings with the
parties to guarantee the benefits of the innovation in interactive services whilst also ensuring that
competing services are not prevented from developing by the joint venture. Structural undertakings,
such as the legal separation of BIB’s service and subsidy recovery arms, and the end of exclusivity for
the EPG, should achieve this aim without necessitating ongoing monitoring. Behavioural undertakings
were also necessary,
including ensuring access to the set-top box for third parties and making
information available on the subsidy recovery mechanism.

3.2. Broadcasting rights for sports events

100. The development of pay-TV services over digital networks in recent years is increasing the
importance of legal and economic issues related to the rights in broadcast content. As regards the
broadcasting of sports events, practice in relation to Articles 81 and 82 is being developed on a case-by-
case basis. The Commission is examining several cases in this area and expects to be able to clarify its
position in 1999 through a series of decisions linked to the collective buying of rights by the EBU, as
well as one relating to the UEFA statute governing the broadcasting of football.

44 Commission notice pursuant to Article 19(3) of Council Regulation No 17 (OJ C 65, 28.2.1998).
45 Commission notice pursuant to Article 19(3) of Council Regulation No 17 (OJ C 322, 21.10.1998).

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4. Transport

4.1. Air transport

Transatlantic airline alliances

101. On 30 July the Commission published notices 46 concerning the alliances between British
Airways and American Airlines and between Lufthansa, SAS and United Airlines. The notices set out
measures that the Commission could appropriately address to the companies in a Commission
proposal under Article 85(1) of the Treaty. The draft measures were designed to address infringements
of EC competition rules identified by the Commission. The companies themselves, and interested third
parties, were invited to submit their comments on the draft measures.

102. The carriers of the Lufthansa, SAS and United Airlines alliance asked for a hearing, which took
place on 14 and 15 December. As had occurred during the hearing in the British Airways and
American Airlines case in February, the parties took the opportunity to give an extensive presentation
of their views on the Commission’s legal assessment of the case, including its draft measures. A large
number of third parties also submitted comments on the draft measures.

The next procedural step is a meeting of competition experts of the Member States before the
Commission adopts a proposal under Article 85 (1) of the Treaty.

103. British Airways and American Airlines did not ask for a hearing on the draft measures. The
Commission was informed that the plans to create an alliance between the two air carriers had been
put on hold at the end of the year following the breakdown of the negotiations for an open skies
agreement between the United States and the United Kingdom. No indication was given of when these
talks would resume.

104. The Commission also continued to investigate the alliances between Sabena/Austrian Airlines/
Swissair and Delta Air Lines and between KLM and Northwest.

Insert 4: European competition policy and airports

The liberalisation of air transport, which has been under way for a number of years, has been
reflected in price cuts on many routes, mainly for leisure travellers, rising supply and demand and
the incipient restructuring of national airlines, which have chosen, in order to adapt to the new
market conditions and reduce their operating costs, to form alliances. Against that background,
airports now represent a vital asset for airlines faced with increased competition.

The growth of the market has created new needs in terms of airport services and has aggravated
congestion at major airports. Airport access has therefore become an important factor influencing
the development of airlines. The growth of hubs has increased demand for slots and is thus likely to
give rise to tougher competition in airports already suffering from congestion problems. In such a
context, the advantage conferred on carriers solidly established in congested airports is becoming
ever bigger in view of the grandfather rights rule recognised by the code of conduct. In addition, the

46 OJ C 239, 30.7.1998.

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costs generated by airport services have become crucially important as cost-cutting intensifies. It is
therefore important to ensure that these services, too, are brought into the competitive arena and
that no companies are discriminated against.

The Commission, which initiated the liberalisation of air transport, has had to be vigilant to ensure
that the forces of competition apply in airports, in particular by facilitating access to major
congested airports by guaranteeing equality of treatment between airlines and by bringing real
competitive pressure to bear on the price and quality of airport services. A series of decisions
adopted in recent months reflects the Commission’s determination to open up the Union’s airports
to competition.

As regards airport access, the main problem lies in the lack of availability of slots, a situation which
has worsened since liberalisation. Lack of availability of slots effectively puts paid to any
competition. For that reason, the Commission gave the green light to the alliance between
Lufthansa and SAS on condition that the airlines sold off a substantial number of slots so as to
facilitate the entry of new competitors on certain routes between Germany and Scandinavia.

The managing bodies of airports are often associated with the national public authorities. In some
cases, such as those involving the airports of Brussels, Frankfurt and Paris, these bodies were
sometimes less than impartial and tended to favour the dominant national carrier by charging
discriminatory fees to new entrants, thus giving the national carrier a competitive edge. The
Commission ordered the managers of the airports referred to above to put an end to these practices.

Council Directive 96/67/EC of 15 October 1996 liberalised the groundhandling market, with the
result that these discriminatory fees are set to disappear. The Commission has shown its
determination to enforce the objectives of this directive, in particular by making a careful analysis
of applications for exemption with a view to maintaining groundhandling monopolies temporarily
in cases where sufficient space is not available to accommodate the competing companies.
Accordingly, the Commission adopted two decisions concerning Frankfurt Airport. In the first
decision, it asked the German Government to limit the scope of this exemption, and in the second
decision, which was addressed to the airport managing body, it took the view that the managing
body’s monopoly on the groundhandling market constituted an abuse of a dominant position since
the monopoly on the market for the making-available of airport infrastructure had been extended
without any objective reason to include that for the provision of groundhandling services.

The Commission also limited the scope of the exemptions granted by the German Government in
the airports of Stuttgart and Hamburg, and rejected the exemption granted to Cologne/Bonn
Airport. 1 However, it authorised the exemption granted to Du¨ sseldorf Airport. 2

1 Decisions of 30 October 1998, not yet published in the Official Journal.
2 Decision of 14 January 1998 (OJ L 173, 18.6.1998).

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4.2. Maritime transport

105. The highlight of 1998 as regards maritime transport was the TACA (Trans-Atlantic Conference
Agreement) case. This culminated in a Commission decision finding an infringement of Article 81 read
in conjunction with Article 82. 47

106. The TACA agreement superseded the Trans-Atlantic Agreement, which was prohibited in 1994.
It has seventeen parties representing more than 60% of the market for maritime transport services
between northern Europe and the United States. The TACA parties notified the Commission of their
agreement in 1994 with a view to securing an exemption.

The Commission found that several of the agreement’s clauses were caught by Article 81(1). These
concerned price fixing for maritime transport services between Europe and the United States, price
fixing for inland transport services supplied within the territory of the Community, agreement on the
terms and conditions under which they entered into service contracts with shippers and the fixing of
prices paid to freight forwarders.

The first of the agreements fell within the scope of the block exemption for liner conferences. 48 The
Commission refused to grant individual exemption for the remaining three agreements.

107. The impact of these competition restrictions was heightened by the behaviour of the parties to
the TACA, which is in a joint dominant position on the market, insofar as they abused that situation by
encouraging two potential market entrants to join the agreement, thus eliminating competition. The
Commission noted that, between 1994 and 1996, two major Asian shipping companies entered the
transatlantic market and eventually signed up to the TACA. During the same period, none of the
parties to the TACA left the conference to act as an independent shipping company. In that context,
the European Shippers’ Council estimated that, between 1993 and 1995, the TAA, then the TACA,
imposed overall price increases of more than 80%.

In the decision, the Commission noted that the parties to the TACA were in a joint dominant
108.
position on the market for containerised cargo between northern Europe and the United States, and
that they had abused this dominant position by restricting the availability to customers of service
contracts with individual shipping lines and by dissuading potential competitors from entering the
market. As regards the latter point, the TACA had encouraged two of its potential competitors to join
the organisation by offering them incentives. Thus, liner shipping companies which were not parties to
the agreement were induced to sign up to it by being authorised to charge lower prices than the
traditional members. The dual-rate service contract arrangements established by the liner conference
had therefore restricted competition on the part of independent shipping companies. In addition, the
founding members of the TACA had agreed, for certain contracts, not to engage in competition with
shipping companies which did not form part of the first circle. In view of the significance of the
potential competition on the market for liner shipping services, this infringement was regarded as
especially serious. The Commission imposed a fine of ECU 273 million on the fifteen TACA parties,
half of which are non-European companies.

47 For Article 82 aspects, see I-B-3.
48 Council Regulation (EEC) No 4056/86 of 22 December 1986 laying down detailed rules for the application of

Articles 85 and 86 of the Treaty to maritime transport (OJ L 378, 31.12.1986).

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109. This case does not call into question the Commission’s policy with regard to traditional liner
conferences. The Commission takes the view that the behaviour of the TACA parties deviated from
the conduct authorised by the block exemption.

4.3. Application of Article 86 to the transport sector

110. Two cases on which the Commission had adopted decisions pursuant to Article 86 were
satisfactorily concluded in 1998.

Following a complaint lodged by British Midland, the Commission adopted, on 28 June 1995, 49 a
decision pursuant to Article 86(3) of the Treaty, read in conjunction with Article 82, which concluded
that Belgium had infringed Article 86(1), read in conjunction with Article 82, by imposing on Re´ gie
des voies ae´riennes/Regie der Luchtwegen, a public body responsible for operating Brussels Airport, a
system of discounts on landing fees which resulted in discrimination. Since Belgium had not complied
with the aforementioned decision, the Commission called on the Court of Justice on 19 March 1997 50
to find that Belgium had failed to fulfil its obligations. By Royal Decree of 20 January 1998, the
Belgian Government put an end to the infringement and the Commission therefore terminated the
proceedings.

On 21 October 1997, the Commission adopted a formal decision pursuant to Article 86(3) of the
Treaty, read in conjunction with Article 86, on the system of reductions in piloting tariffs in the port of
Genoa. 51 By decree of 8 June 1998, the Italian Government put an end to the infringement.

5. Insurance

5.1. Insurance pools : an enquiry in the aviation insurance sector

111.
In September 1997, in order to provide insurance pools with a degree of certainty as to whether
the block exemption regulation (Regulation No 3932/92) applied to them and to clarify the
Commission’s policy regarding pools not covered by the block exemption, the Directorate-General for
Competition started investigating an entire segment of the insurance industry, namely aviation.
Extensive requests for information were sent to thirteen aviation pools in Europe. The Commission
had been informed of eight of these pools pursuant to Regulation No 17; the other five had not been
notified.

112. The block exemption regulation covers only pools whose members have a limited market share
(10% for co-insurance pools and 15% for co-reinsurance pools). As to pools that exceed these
thresholds, no matter how high the market share is, the view is that they cannot be considered to be
anticompetitive as long as pooling is necessary to allow their members to provide a type of insurance
that they could not provide alone. This is the case when the particular nature of the risks involved (e.g.
catastrophic risks) requires the pooling of capacity from different insurers in order to cover them
profitably.

49 OJ L 216, 12.9.1995.
50 Case C-155/97 Commission v Belgium.
51 OJ L 301, 5.11.1997.

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113. The enquiry into aviation insurance pools showed that the geographic market is mainly
international. Aviation pools on this market do not present any competition problem. Even if most
pools count among their membership almost all insurance companies established in the Member State
in question, they cover only a very minor share of the international market and, in any case, do not
exceed the thresholds of the block exemption regulation.

114. None the less, for small aviation risks, a national market seems to exist. These small risks are
non-catastrophic ones (i.e. risks which have a low frequency but a large volume such as product
liability for aircraft manufacturers), representing a low insured value in relation to other risks of the
same class. Customers are smaller aircraft owners with limited opportunities to seek better insurance
conditions abroad. These risks represent a very minor volume of aviation insurance.

Most aviation pools cover large shares of these markets and do not appear to be necessary in order to
allow their members to be present on these markets. It cannot be ruled out that, for some small risks
for which the market is national, the pool restricts competition and is not eligible for exemption, either
under Regulation No 3932/92 or individually. Nevertheless, this potential infringement was considered
not worth pursuing at Community level because of the very limited turnover generated in these
national markets.

115. The investigation was therefore concluded by means of comfort letters addressed to those
aviation pools of which the Commission had been notified indicating that they were covered either by
the de minimis notice or by the market share thresholds set out in Regulation No 3932/92 as regards
the international market for aviation insurance. The comfort letters included a caveat concerning
national markets indicating that the Community interest was not sufficient for the Commission to
formally find infringements if these related only to a minimum fraction of the aviation market business,
but that national authorities could, in any case, intervene against the anticompetitive structure of these
pools or anticompetitive behaviour by their members where appropriate.

5.2. Application of the new policy to the P&I Clubs case

116. The new policy towards insurance pools has already been applied to a claim-sharing
arrangement between insurance mutuals (the equivalent of a pool in the non-profit insurance sector).
In the P&I Clubs case, the Commission intends to adopt a formal decision in the coming months
concluding that a claim-sharing agreement between mutuals covering 89% of the world market for
maritime third party and contractual liability insurance (protection and indemnity insurance) is
definitely not caught by Article 81(1) because it appears to be necessary to allow its members
profitably to insure some very large maritime liability risks (e.g. marine pollution).

117. A notice pursuant to Article 19(3) of Regulation No 17 was published in August indicating that
the Commission intends to clear the Pooling Agreement concluded within the International Group of
P&I Clubs. This was only possible, however, after the IG had amended the Pooling Agreement to
ensure that it no longer contained an infringement of the competition rules. In particular, the IG
lowered the level of cover offered jointly by all its members to ensure that a substantial section of
demand did not remain unsatisfied, following a complaint submitted by the Greek Shipping
Committee, an association of shipowners.

118. A second notice pursuant to Article 19(3) was published in October indicating that the
Commission also intended to clear the International Group Agreement, which lays down rules for
competition between the members of the Pooling Agreement. This was only possible after the IG

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XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 53

modified the original restrictions which prevented the P&I Clubs from setting rates freely. Once the
new agreement enters into force, the P&I Clubs will be able to compete for the first time on the rates
they charge to their members; in particular, they will be free to set the part of the rate corresponding to
their administrative costs. Restrictions on the freedom to set the remaining part of the rate seem
necessary to ensure the Pooling Agreement functions properly.

If adopted, the final decision on the P&I Clubs case would spell out the new policy towards

119.
insurance pools.

6. Energy

120. The process of liberalising the internal market in electricity is set to begin early in 1999. As from
19 February 1999, 25% of consumers in at least twelve Member States will be free to opt for the
supplier of their choice. This new freedom, stemming from transposal of the electricity directive into
national law, will clearly have an impact on the Commission’s priorities when it applies competition
law in this sector.

The contribution of the directive

121. The directive formalises the existence of at least two clearly distinct markets, namely electricity
sales and electricity transmission. It recognises that there is a natural monopoly in electricity
transmission by regulating this area and organising a competitive market in electricity. To that end, the
directive focuses on demand (freedom of choice of supplier) and on supply (arrangements for the
construction of new generating capacity).

This opening-up of the market must be carried out in a way which does not undermine public service
obligations in the general economic interest imposed on certain bodies. The directive acknowledges the
right of the Member States to determine such obligations, which may reflect objectives associated with
social cohesion or security of supply, and to ensure that market liberalisation does not obstruct their
performance.

122.
First, the directive entitles certain ‘eligible’ customers to purchase electricity from the supplier
of their choice. The initial opening-up — involving about 25% of the market — will concern, in any
event, all companies consuming more than 100 GWh per year on a consumption-site basis, and will be
gradually increased to about 33% after 2003.

The levels of market opening provided for in the directive are merely minima. Each Member State is
free to proceed further or faster, and many have already done so. In response to concerns expressed by
those Member States regarding the imbalances thus created — some opening up their market in full,
with others limiting their action to the requisite 25% — the directive provides for a mechanism
whereby, for a transitional period, they may refuse to accept imports from those Member States which
are the least open to competition.

123. The granting of a right of ‘eligibility’ to certain customers would only have a symbolic value if
access to the network by those same customers were not organised and guaranteed. It is not surprising
that half of the directive’s chapters 52 deal with subjects relating to the organisation and operation of

52 Chapters IV, V, VI and VII.

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the network. The practical arrangements governing access may, according to the directive, take one of
three forms. 53 The choice of one or other of these options is left to the Member State but must, in all
cases, give rise to an equivalent result in terms of opening-up of the market.

There is no need to dwell on the detailed arrangements for each of the aforementioned options. It is
sufficient to recall that access to transmission systems and, where appropriate, to distribution systems,
must be guaranteed for all eligible customers on a non-discriminatory basis irrespective of the identity
or nationality of the customers and suppliers. In particular, an integrated system operator may not give
preferential treatment to a parent company or subsidiary and must maintain an independent
management structure and business secrecy in respect of them.

Access to the system gives rise to a fee which is either negotiated between parties or paid by the State.
The identification of a specific system access price is a recent innovation in most of the Member States.
Its corollary is the establishment of separate accounts for network activities as opposed to the other
activities (such as generating activities) that may be carried out by certain integrated undertakings. The
objective is to guarantee transparency and to avoid the emergence of cross-subsidies between system
activities — caught by the natural monopoly — and other activities, which are usually subject to
competition.

124. The opening-up resulting from the directive is not limited to customers. Producers should also
benefit from the creation of new generation capacity — for the purpose of own consumption or for
sale — provided for by the directive. These measures, which provide for example for the granting of
operating permits for new generating capacity on a non-discriminatory basis, should promote the
development of a varied supply which makes optimal use of technological and environmental
innovation.

125. These changes in generating arrangements will be accompanied in some Member States by the
emergence of new operators or products: electricity brokers, spot markets and derivatives will develop
as the market is opened up.

A competition policy geared to liberalisation

126.
System access is an essential element of liberalisation. It should also be borne in mind that, in
contrast to a sector such as telecommunications, in which technological development led to the
creation of new systems, the electricity sector seems unlikely to develop in a way which undermines the
essential nature of the existing systems.

There are many potential obstacles to system access, such as unfounded refusals on the part of system
operators and abusive or discriminatory transmission tariffs.

It will therefore be necessary to ensure that tariffs do not result from the knock-on effect of excessive
or uncontrolled costs or from the invoicing of services which have not been used. Particular attention
should be paid to the latter point in cases of transmission between Member States. Transmission prices
could also be fixed using a tariff method involving anticompetitive effects, such as one favouring
producers with substantial, varied capacity as opposed to new producers entering the market. Lastly, it
cannot be ruled out that refusals may be given because of insufficient capacity.

53 Negotiated access, regulated access and single buyer procedure without purchase obligation accompanied by

negotiated or regulated access.

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XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 55

In cases concerning access, the Commission will analyse the situation of the system manager in terms of
his independence vis-a` -vis the other activities of the integrated group to which he belongs. In general, it
would not necessarily be in the interest of an independent system manager to refuse to carry out a
transmission. On the contrary, he should seek to make maximum use of his capacity, even to the point
of creating new capacity in order to meet demand.

127. Two other questions are particularly important and are to be examined in depth.

First, electrical interconnections between the Member States will obviously play an important role in
the creation of a single market in electricity. It is probable that interconnectors will make a decisive
contribution to the initial phase of market opening by enabling foreign competitors to generate
competition. With that in view, a careful examination of the competition aspects of the development
and, in particular, the optimal use of existing interconnections should be carried out.

The second subject of concern as regards system access is known as ‘pancaking’. This refers to the sum
of transmission costs resulting from the use of systems belonging to several operators. A simple
illustration would be a transmission between Lille and Amsterdam: the sum total of the charges of the
French, Belgian and Dutch systems could result in a very high price compared to that charged for an
equivalent transmission between Lille and Paris. An initial solution to this problem has been
developed in Germany, where several system operators coexist, under the so-called Verba¨ndever-
einbarung. A European solution has not yet been found, but it will be essential if a genuine single
market is to be created. The Commission will help to bring this about by using the full range of
instruments at its disposal. For instance, it could investigate a case of combined costs resulting in
double invoicing of a single service from the angle of competition law.

Lastly, work on system access should be accompanied by measures to guarantee customers’ freedom of
choice, which risks being limited by the establishment of exclusive or long-term contracts between
customers and suppliers. The Commission will have to examine contracts in the light of practice on the
most competitive markets. For their part, the parties operating on the electricity market will have to
adapt their business practice to the new framework created by the directive. The objectives which the
previous contracts were designed to achieve (security of supply, return on investments, etc.) could be
realised by other methods with less of a competition-restricting impact (contracts with several
suppliers, risk-cover instruments, etc.).

Lastly, the guarantees to be given regarding system access and freedom of choice for customers will not
serve their intended purpose unless electricity is provided by a sufficient number of suppliers. A
detailed examination should therefore be made of all proposed mergers or start-ups to ensure that they
do not have the effect of undermining supply.

128. Competition policy should therefore be developed in parallel with legislative work, taking
account of the specific characteristics of the electricity sector — for instance, the existence of services
of general economic interest.

The Commission is not the only body with a mandate to act in these fields. It can count on the support
of national courts, national competition authorities and the industry regulators established when the
directive was transposed into national law.

As in the telecommunications field, the Commission’s task will be to focus on cases with a definite
Community interest or for which its involvement will be an essential pre-requisite for harmonisation of

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56 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

the antitrust approach. In particular, the Commission could focus more on structural elements of the
market (such as the methods used to calculate system access prices) than on individual cases (for
example, a dispute resulting from implementation of the aforementioned method).

7. Competition and the environment

129. At the Cardiff European Summit, the Member States recalled the provisions of the Treaty of
Amsterdam 54 stipulating that Community policies should take account of environmental protection
with a view to achieving sustainable development, an approach which was endorsed at the Vienna
Summit. In its XXVth Report on Competition Policy, the Commission spelt out its position regarding
implementation of the Community competition rules in the environmental field. In particular, it stated:
‘When the Commission examines individual cases, it weighs up the restrictions of competition arising
out of an agreement against the environmental objectives of the agreement, and applies the principle
of proportionality in accordance with Article 85(3). In particular, improving the environment is
regarded as a factor which contributes to improving production or distribution or to promoting
economic or technical progress.’ 55 In that connection, 1998 was marked by four cases reflecting the
Commission’s commitment to take a positive approach to environmental issues in its competition
analyses.

130. The Commission approved the agreement signed by the European Association of Consumer
Electronics Manufacturers (EACEM) and sixteen of its members, all major manufacturers of
television sets and video cassette recorders. This agreement is a voluntary commitment to reduce the
electricity consumption of this equipment when it is in stand-by mode. The Commission exempted the
agreement under Article 81(3) on the ground that the energy-saving and environmental benefits of the
scheme clearly represented technical and economic progress and, by their nature, would be passed on
to consumers. The energy saving could amount to 3.2 TWh a year from 2005. This reduction in energy
consumption will have a significant impact in terms of the management of energy resources, reductions
in CO2 emissions and, accordingly, measures to counter global warming. The Commission also
ascertained that the scheme would not eliminate competition in the affected markets and that its
restrictive effect was essential to achieving its full benefits.

131. The Association of European Automobile Manufacturers (ACEA) has undertaken, on behalf of
its members, to reduce CO2 emissions from passenger cars. This effort is in line with the Community
policy of reducing CO2 emissions into the atmosphere. 56 ACEA has set a reduction target of 25% by
2008. The Commission and the Member States will monitor the efforts made to achieve that target.
The Commission also took the view that this agreement between European automobile manufacturers
did not infringe the competition rules. ACEA determines an average reduction target for all its
members, but each of them is free to set its own level, which will encourage them to develop and
introduce new CO2-efficient technologies independently and in competition with one another
Accordingly, ACEA’s voluntary agreement does not constitute a restriction of competition and is not
caught by Article 81(1).

54 Article 6 of the consolidated Treaty.
55 1995 Competition Report, points 83 to 85.
56 Communication from the Commission to the Council and the European Parliament of 29.7.1998, ‘Implementing
the Community strategy to reduce CO2 emissions from cars : an environmental agreement with the European
Automobile Industry’ (COM (1998) 495 final).

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XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 57

In the EUCAR case, the Commission adopted a favourable stance on a cooperation agreement
132.
between Europe’s leading motor manufacturers which is designed to boost research in the motor
industry, particularly on environmental issues. Most of the projects that will be developed involve
experimental research on, for example, limiting noise or emission pollution caused by motor vehicles.
The products obtained from this research may not be directly usable in a specific type of vehicle. The
Commission therefore took the view that the research was at the pre-competitive stage and that the
agreements did not infringe Community law.

133.
Finally, the Commission approved the membership agreements of Valpak, a non-profit-making,
industry-led compliance scheme operating in the United Kingdom which has been set up to discharge
the packaging waste recovery and recycling obligations of its members. 57 The legal framework set up in
the United Kingdom to implement the directive provides scope for competition in the market for
compliance-scheme services which seek to fulfil recovery and recycling obligations on behalf of a
business. While Valpak is currently the largest compliance scheme operating in the United Kingdom,
other competing schemes exist and have notified their arrangements to the Commission.

134.
Following its examination of Valpak’s membership agreements, the Commission concluded that
the agreements restricted competition within the meaning of Article 81(1) because they obliged
businesses wishing to join the scheme to transfer the totality of their obligations in all packaging
materials. This ‘all or nothing’ approach, which transposes a regulatory provision, restricts the extent to
which Valpak and other schemes will be able to compete against one another on a material-specific
basis. The Commission went on to consider whether the notified arrangements could benefit from
exemption under Article 81(3). In view of the emerging nature of the market and the likelihood that
Valpak and other schemes would be obliged to invest in the United Kingdom’s collection and/or
reprocessing infrastructure in order to meet their members’ obligations in the future, the Commission
concluded that an ‘all or nothing’ approach was necessary, at least in the short term, if schemes such as
Valpak were to succeed in securing sufficient funding to allow the necessary investment to take place.
The Commission informed Valpak at the same time that it reserved the right to re-examine the case
after three years.

Insert 5: Globalisation of markets and competition analysis

As globalisation of markets progresses, the Commission is increasingly carrying out competition
analysis on markets which are not confined to Europe. For that reason, it takes account of the
geographical dimension of actual competition when defining the relevant market on which its
analysis is based. It may also examine the competitive situation in geographical areas outside the
relevant market when analysing potential competition.

The concept of market to which the Commission refers when assessing an agreement, a practice or
proposed merger from the viewpoint of Community competition law is based on specific criteria
which were laid down in 1997 in a Commission notice on the definition of relevant market for the
purposes of Community competition law. Essentially, the relevant market, the place where supply
and demand interact, constitutes a framework for analysis which highlights the competition
constraints facing the companies concerned. In other words, the task is to identify the competitors
of these companies which are genuinely able to affect their behaviour and prevent them from acting
independently of all real competitive pressure.

57 These obligations were introduced in March 1997 by government regulations implementing the requirements of

the EU directive on packaging and packaging waste (94/62/EC).

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In determining the geographical confines of the relevant market, the Commission takes account of
a number of factors, such as the reactions of economic operators to relative price movements, the
sociocultural characteristics of demand and the presence or absence of barriers to entry, such as
transport costs. It should also be mentioned that the Commission tends to focus on demand trends
in its analyses and that this has an impact on the geographical dimension of the relevant market.

As a result, the relevant market is a specific instrument of analysis and does not always reflect
vaguer concerns about economic reality. An economic sector of activity does not necessarily
constitute a relevant market. A product may be manufactured and sold throughout the world;
supply and demand do not necessarily coincide within that area. Price differences from one
geographical area to another will reflect the existence of separate geographical markets.

That notwithstanding, where appropriate and in accordance with its legislation, the Commission
refers in its competition analyses to worldwide relevant markets.

In recent years, as a result of merger controls, the Commission has increasingly identified world
markets, as it did in about 20 cases in 1998. A study of merger decisions shows that the Commission
has established the existence of world markets in a wide variety of economic sectors. For example,
in the Boeing/MacDonnell Douglas case, the Commission took the view that the market for large
commercial jet aircraft was a world market. Likewise, in the Gencor/Lonrho and Anglo American
Corporation/Lonrho cases, the Commission acknowledged the existence of world markets in
platinum and rhodium. In addition, even where the market is identified as European, the
Commission may take account of potential competition from other geographical areas when
assessing a transaction. In the Saint-Gobain/Wacker-Chemie/NOM case, for instance, while it
identified two markets for silicum carbide restricted to the EEA, it also looked into potential
competition from companies based in China or eastern Europe.

As regards Articles 81 and 82 of the Treaty, in certain sectors of activity which, by their nature,
involve European and non-European parties, the Commission regularly carries out competition
analyses on markets which are larger than the European Economic Area. For example, in the
TACA case, which concerned transatlantic shipping companies, the Commission had to take
account of the transatlantic dimension of the agreement and, accordingly, it imposed fines not just
on European companies, but also on US and Asian ones. The Commission has similar concerns as
regards transatlantic airline alliances or strategic alliances in the telecommunications sector (such
as Atlas/Global One or Uniworld). In some cases, with the world dimension of the relevant market
resulting from the small number of producers, coupled with worldwide demand, as in the IRE/
Nordion case, the Commission conducts its competitive analyses on world markets.

While the relevant market concept provides the Commission with an instrument enabling it to carry
out analyses and adopt decisions which take account of the world dimension of markets, it goes
without saying that it may face problems when it requires information available only outside the
Union or when it has to enforce its decisions or have them enforced. For that reason it has
developed a policy of international cooperation in competition matters with its main trading
partners.

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XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 59

D — Statistics

Figure 1:
New cases

600

500

400

300

200

100

0

426

21

400

26

110

170

509

499

101

101

177

192

447

82

159

521

47

114

360

264

235

206

221

216

1993

1994

1995

1996

1997

1998

own initiative

(cid:238) Cases opened on Commission’s
(cid:238) Complaints
(cid:238) Notifications

Figure 2:
New cases

14

792

900

800

700

600

500

400

300

200

100

0

33

27

42

14

21

495

490

539

403

367

(cid:238) Formal decisions

(cid:238) Informal procedure

1993

1994

1995

1996

1997

1998

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60 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

Figure 3:
End-of-year stock of cases over time

1400

1200

1000

800

600

400

200

0

1280

1262

1221

1204

1219

806

1117

528

521

400

426

417

447

388

581

517

499

509

1993

1994

1995

1996

1997

1998

(cid:238) Input of cases (cid:238) Output of cases —^— End-of-year stock of cases

COMPETITION REPORT 1998

XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 61

II — MERGER CONTROL

A — Introduction

135. The “merger wave” that can be traced back to at least the beginning of 1997 continued through
1998 and showed no sign of abating by the end of the year. The number and nature of the cases
examined by the Commission in 1998 naturally reflects this trend in merger activity. It has potentially
important consequences and implications for the work of the Commission in this area. To remain
effective and efficient, Community merger control will have to continue to adapt rapidly to the
significant challenges posed by changes in the economic environment on the one hand, and legal and
policy developments on the other, all within the context of a desire to minimise regulatory costs, delays
and uncertainties.

136. Against this background, therefore, it is unsurprising that the first keynote of the year has been
a continuation of the significant upward trend in the number of mergers examined by the Commission.
This has grown by substantially more than 10% in each of the last four years. This year, the annual total
number of notifications received under the Merger Regulation 58 exceeded 200 for the first time. The
year’s total of 235 represents an increase of 36% on last year’s, a rate of growth equal to last year’s
record level and well above the rate for any other year. Similarly for decisions. The year’s total of 238
“final” decisions is also by a large margin the highest ever, and shows an increase of over 66% on last
year, reflecting the continuing very high rate of growth.

137. Various factors, not all of them easily identified, drive the level of merger activity. In 1998,
however, an important factor in the large, frequently multinational mergers dealt with by the
Commission may well have been the advent of the single European currency, creating the possibility of
synergies from simplified financial and commercial operations within groups of companies, especially
those with substantial interests in several Member States. This appears to have been a factor in several
mergers in sectors as diverse as banking and finance, automotive components, and pharmaceuticals.
Another likely factor, reflected in the higher than usual level of merger activity in the oil sector and
those associated with it, was the fall in oil prices worldwide, prompting major restructuring operations
aimed at maintaining profitability in the face of lower margins.

138. Nor has the complexity of the Commission’s caseload reduced. The year’s total of 12 decisions
to open more detailed investigations (“phase II proceedings” — Article 6(1)(c) of the Merger
Regulation) remains stable, though slightly below last year’s as a proportion of the total caseload.
There were also slightly fewer cases decided at phase II. That should not, however, be taken as an
indication that the proportion of large-scale mergers which have potentially serious anticompetitive
effects on trade in the Community is declining. Account needs also to be taken of the significant
number of cases where the Commission’s new powers to accept formal remedies in the first stage of
investigation (Article 6(1)(b) as amended) have been used — twelve in all, over the nine months since
the powers were introduced. In addition, there have been several cases, including some (e.g. KPMG/
Ernst & Young, 59 Wienerberger/Cremer und Breuer, 60 Wolters Kluwer/Reed Elsevier 61 and LHZ/Carl

58 Council Regulation (EEC) No 4064/89 (OJ L 395, 30.12.1989), as amended by Council Regulation (EC) No 1310/

97 (OJ L 180, 9.7.1997).

59 Case No IV/M.1044.
60 Case No IV/M.1047.
61 Case No IV/M.1040.

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62 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

Zeiss) 62 where the phase II investigation was already under way, where the parties decided to abandon
their merger plans ahead of a potentially adverse final decision.

1998 also saw the first imposition by the Commission of a financial penalty on an enterprise for failure
to notify a concentration in time. 63

Changes to the thresholds for cases qualifying for investigation, and to the way in which certain joint
ventures are treated under the regulation, were also introduced in 1998. Overall, the impact of these
changes is relatively small compared with that of the other factors mentioned, but they have none the
less increased the number of cases dealt with under the regulation, and one of the joint-venture cases
(BT/AT&T) 64 has been the subject of a decision to open phase II proceedings.

139. The trend towards “globalisation” — the creation of businesses with worldwide leadership in
particular product areas, in contrast to the diversification and conglomeracy that were features of the
merger “wave” of the 1980s — also appears to have continued. The need for competition authorities to
be capable (whether alone or jointly) of effective action across national boundaries has likewise
intensified. In the light of experience, the Commission has developed methods for ensuring that
cooperation with non-member countries — in particular the USA — on merger control matters is
efficient and constructive; it will continue to keep them under review.

140. Another notable consequence of the trend towards globalisation and specialisation in merger
activity is the increased occurrence of mergers in markets that could be described as oligopolistic —
where there are only a few large players but no single potentially dominant firm. The judgment of the
European Court of Justice (ECJ) in the Kali und Salz case, 65 discussed further below, confirmed the
application of the regulation to collective dominant positions (i.e. to oligopoly), and the Commission is
reviewing its approach to such cases in the light of this judgment 66 and of other developments.

141. The year also saw final decisions on a number of other important cases, of which perhaps those
dealing with the rapidly evolving markets in digital television services and the Internet should be
highlighted. In the linked cases Bertelsmann/Kirch/Premiere and Deutsche Telekom/Betaresearch, 67 the
Commission decided to prohibit a major German-based project in digital television services. This
intervention was necessary to prevent foreclosure of the emerging markets in this sector to other
suppliers of pay-TV and related systems and services — notably cable network access, set-top digital
decoder technology, and films and other programming. The two mergers would create a grouping with
major strengths in all the key components of the package of goods and services required to bring
digital TV services onto the market, one or other of the parties having a very strong position in each of
the sectors concerned, even though the horizontal overlaps produced were not, in all instances, so
significant. Attempts to reach agreement with the parties on satisfactory undertakings to remedy the
competition problems so that the deal could go ahead proved unsuccessful; prohibition was the only
alternative. This decision underlines the Commission’s determination to act where necessary to ensure
that newly emerging markets are not foreclosed. Only in a competitive environment can their expected
potential for growth, necessary to satisfy the increasing consumer demand, be fully realised.

62 Case No IV/M.1246.
63 Case No IV/M.920, Samsung/Ast.
64 Case No JV.15.
65

Joined Cases C-68/94 and C-30/95 French Republic, SCPA and EMC v Commission [1998] ECR I-1375.

66 See, for example, case No IV/M.1016, Price Waterhouse/Coopers and Lybrand, also discussed below.
67 Cases Nos IV/M.993 and IV/M.1027.

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In Worldcom/MCI, 68 foreclosure of another relatively new product area — the Internet — was
142.
also the main issue. Here, a satisfactory solution was found, involving the divestment of MCI’s Internet
activities to a new entrant. This divestment was at the time the largest ever to result from antitrust
action. After a full investigation the Commission found that both parties to this very large merger,
covering a wide range of telecommunications activities, were significant suppliers of “universal
connectivity” — the ability to offer access throughout the Internet without having to pay others to
complete the connections. They would together become dominant on that market, with the ability to
dictate terms to competitors needing this important service. Another significant feature of this case was
that, like a growing number of others, it involved a carefully coordinated assessment and negotiation of
remedies with the US competition authorities, in this instance the Department of Justice (DoJ).

Insert 6: Merger review

The quickening pace of developments has been the year’s second keynote. Following the
completion of the review of the regulation last year, described in the XXVIIth Report, 1 a package
of changes was introduced with effect from the beginning of March. Probably the most significant
change, in practical terms, was that regarding acceptance of undertakings in phase I, mentioned
above. The formalisation of phase I undertakings has proved of interest and benefit to merging
parties and the Commission alike. It enables the delay and consequent uncertainty over the
outcome of a notified transaction to be reduced, and avoids the need to deploy some of the
substantial extra resources (at the Commission as well as by the parties) required for a full phase II
investigation and decision. Experience with the new power shows clearly that the revised system is
able to deal both quickly — in a matter of weeks, rather than several months — and efficaciously
with mergers where a potential dominant position may be created. However, for the new procedure
to be applicable, it is essential that the issues can be clearly identified and effective — and readily
implementable — remedies found and agreed within the short timescale. It is encouraging to note
that in several of these cases the merging parties frankly acknowledged, from the outset, both the
likely existence of competition problems, and also their willingness to offer suitably specific
remedies — which generally involve the divestment of part of the existing or acquired businesses —
and to cooperate fully with the Commission in the search for a solution. There will, of course,
continue to be cases where, even with good will and careful preparation, a full investigation is
needed in order to properly identify and assess the competition problems, and examine alternative
outcomes — including prohibition. But without the positive factors just mentioned, the prospects
for early resolution are bound to be severely reduced.

The supplementary turnover thresholds, 2 introduced with the aim of reducing the problem of
merging parties having to notify the same transaction to several national authorities, also appear to
be having the expected effect. Fourteen cases in all of this type were notified in the year, amounting
to six per cent of all cases notified. This is broadly in line with the Commission’s estimates.
Moreover, in most of the cases in question, the parties had substantial operations in several
Member States, such that an effect on competition in national or EU markets might be expected to
arise, and notification to several Member States was likely to have been necessary.

1 1997 Competition Report, points 148 to 157; SEC(1998) 636 final, pp. 49
2 Regulation (EC) No 1310/97, Article 1(1)(b).

68 Case No IV/M.1069.

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Revised Commission notices on various aspects of the regime were also published in March, and
work on the important task of producing a revised version of the notice on restrictions ancillary to a
concentration continued throughout the year. Other changes that were introduced following the
review — notably regarding the treatment of full-function joint ventures — are discussed elsewhere
in this Report.

The review of the regulation has also, however, highlighted the importance of the Commission
continuing to strive to optimise its merger control processes, against a background of the increasing
caseload on the one hand and the need to contain resource expenditure on the other. A significant
issue in this area is the treatment of the substantial number of notified cases which are prima facie
unlikely to raise competition problems. The Commission has therefore begun exploring options for
streamlining and simplifying the handling of these cases.

B — New developments

1. Market definition

Internet infrastructure and access services

143. The Commission dealt,ring the year with a number of cases concerning the supply of Internet
services. Some of these cases also involved full-function joint ventures which required an examination
of the possibility of substantial coordination of the activities of the parents, under the new procedures
adopted as part of the review of the Merger Regulation. These cases are discussed in more detail in
Insert 7. From the viewpoint of market definition, however, Internet services raise a number of
interesting issues, some of which were analysed by the Commission in the above-mentioned Worldcom/
MCI case. As a newly emerging sector, it was necessary for the Commission to construct an approach
to market definition on the basis of information assembled especially for the purpose. Reliable and
comprehensive information on, for example, market shares was not publicly available, and — together
with the US DoJ — the Commission organised the collection of information and views on the merger
from the many businesses active in the sector as well as from the parties themselves. This was in itself a
considerable task, albeit greatly facilitated by the ability — via the Internet — to communicate and
exchange data rapidly worldwide with a large number of third parties.

144.
It became clear from the phase II investigation in particular that, although superficially the
Internet presented many of the characteristics of a fragmented market with low entry barriers, the
basic market structure was in fact hierarchical or pyramidal, with different characteristics at different
levels. Whereas at the lower levels there were generally a range of suppliers and few barriers to entry,
the pyramid the industry was much more concentrated. So-called “universal
at
connectivity” — the ability to offer access to all points on the Internet, worldwide, without having
to pay others to complete the connection — was found to be a vital component of any package of
Internet services. Entry barriers at this level were, however, significant, enhanced by the so-called

the top of

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“network effect”, whereby subscribers will prefer to connect to the largest available network. This
aspect of Internet services was accordingly found to constitute a separate — worldwide — market, in
which there was only a small number of (very large) suppliers, among them the parties.

Accountancy services

145.
In analysing, for the first time, two major concentrations in the sector, the Commission was
required to develop an approach to market definition in the provision of accountancy services. The
proposed mergers between Price Waterhouse and Coopers and Lybrand (cleared after a phase II
investigation 69) and between KPMG and Ernst & Young (subsequently abandoned) would have
revealed little cause for concern if measured in terms of overall market share, whether nationally or on
a wider geographic basis. However, in an assessment which bore certain similarities to that of the
Internet sector just discussed, the Commission found that at the highest levels of this sector’s pyramidal
structure there was a very high degree of concentration. Third party contacts confirmed the existence
of a separate market for the supply of accountancy services (and, in particular, statutory audits) to very
large, usually multinational, firms. For these customers it was essential to be able to provide a
comprehensive service from a worldwide network of offices and staff with the necessary locally
recognised qualifications and specialist expertise. Together with the importance of choosing a firm with
an established reputation in order to maintain shareholder confidence in the financial results, this
meant in effect that, for many large companies, the market was restricted to the so-called “Big Six”
accountancy firms — which would reduce to four if the two proposed mergers went ahead.

Insurance markets

146. The insurance company sector is one in which mergers have rarely been found to give rise to
competition problems, even though in recent years the sector has become more concentrated.
Insurance (and reinsurance) for large risks tends to be carried out on an international basis, with
customers able to chose (either on their own or with the aid of a broker) between a number of
suppliers in various countries. At the level of supply to the small business or private consumer, markets
remain predominantly national owing to issues of language, custom and local laws and taxation
provisions. In most such markets there is, again, a satisfactory range of suppliers, large and small, and
entry is not generally difficult, at least for established financial institutions such as banks. Moreover,
supply-side substitution between products is generally relatively easy, so that most large insurers can
offer a full product range and move into new product areas without difficulty. In Allianz/AGF, 70
however, the Commission found that certain products constituted distinct markets, notably so-called
“delcredere” credit insurance (i.e. insurance against the risk that, as a result of the insolvency of the
buyer, a supplier will not be paid). Delcredere insurers require a detailed knowledge of the
(predominantly national) markets and buyers in and for which they offer cover. This can take a long
time to develop, since it can as a rule only be acquired through experience, and meanwhile the insurer
is exposed to risks which, in contrast to those of many other types of insurance underwriting, cannot be
accurately quantified. Entry barriers were therefore found to be sufficiently high for this product area
to constitute a separate market. Subsequent analysis identified a risk that the merger would create a
dominant position in this market, and the parties gave undertakings to divest AGF’s holding in a
subsidiary active in it, in order to resolve this problem.

69 Case No IV/M.1016.
70 Case No IV/M.1082.

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2. Dominance assessment

joint/collective dominance

147. The most significant development in the Commission’s approach to this subject was the
delivery, in March, of the judgment of the ECJ in the Kali und Salz case. The judgment, in response to
applications by the French Government and the French parties to the merger, dealt with various
procedural and substantive points, and concluded that the Commission’s (1993) decision to allow the
merger, but subject to certain undertakings, should be annulled. It was, however, also notable as the
first instance in which the ECJ had had to examine the Commission’s approach to the analysis of
oligopoly (“collective dominance”) as opposed to the more classical dominance by a single firm (or, at
most, two firms). In the Court’s view, to establish collective dominance in a merger situation the
Commission needed to establish that the notified operation would lead to a significant reduction in
competition between the parties to the merger and one or more third parties by giving them
collectively the ability, as a result of the existence of “correlative factors” amongst them, to adopt a
common policy on the market(s) concerned and to act substantially independently of other
competitors, customers and consumers. These correlative factors need not,
include
structural links, in the strict sense of cross-shareholdings, contracts etc. between the alleged dominant
firms, although where such links are cited, it is necessary to show how they would lead to the
elimination of competition between the firms concerned. But whatever factors are employed should at
the least provide, as well as support for the existence of a typical oligopoly market structure and
trading conditions, convincing evidence of the existence among the firms concerned of a common
interest in not competing actively against each other. This common interest might be demonstrated by
an analysis of factors such as the degree of symmetry of the market shares, production capacities and
cost structures of the alleged dominant firms. The Commission considered all these factors, to some
extent, in its original decision. The Court, however, whilst recognising the difficulties of analysis and
evidence-gathering posed by the short timescales for investigation under the Merger Regulation, found
that they had not been sufficiently well established to properly motivate the decision, and accordingly
annulled it. It was then necessary for the Commission to re-examine the case in the light of the
judgment, and an account of that action is given elsewhere in this Report (see “Rules and procedures”
below).

it appears,

148.
Since the decision, the Commission has been reviewing its approach to oligopoly in merger
cases, and this work is continuing. Many aspects require further consideration; for example, the
assessment of cost structures. However, the oligopoly issue was examined in some detail in two other
phase II cases in 1998 — the accountancy case Price Waterhouse/Coopers & Lybrand and the
Scandinavian paper and board case Enso/Stora. 71

149.
In Price Waterhouse/Coopers & Lybrand, the relevant product market, for auditing and
accountancy services to large firms (see above under “Market definition”), was found to be highly
concentrated, although there was not found to be a single dominant firm. Combined market share
post-merger would be below 40% in any Member State and four other competitors would remain. To
analyse the oligopoly aspects of the case, the Commission based its approach on the criteria used
previously in, among others, the Gencor/Lonrho case of 1996, 72 which also appear to have been
broadly accepted by the Court in Kali und Salz. Essentially, these are that collective dominance is
more likely to arise in heavily concentrated markets where there are in addition features likely to

71 Case No IV/M.1225.
72 Case No IV/M.619.

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further restrict competitive behaviour — such as homogeneous products, transparent pricing, high
entry barriers, mature technology, static or falling demand, links between suppliers, absence of
countervailing buyer power, etc. In these conditions there are likely to be incentives for suppliers to
engage in parallel pricing and other oligopolistic behaviour. The Commission found that several of
these characteristics were present. For example, demand was static, innovation unlikely, and prices
relatively transparent (in some countries, audit fees had to be published in the audited company’s
accounts). However, it was considered that the number of remaining competitors post-merger was
relatively large to support an effective oligopoly — the larger the number of participants, the harder it
becomes to maintain and, if necessary, enforce coherence of competitive behaviour among them.
Customers did not consider that oligopolistic behaviour was already occurring before the merger, and
there was evidence that customers were willing and able to move their business between suppliers in
order obtain improved terms, notwithstanding the long-term nature of most audit relationships.

In the absence of the merger between KPMG and Ernst & Young (which was abandoned earlier
150.
in the year after the Commission decided to open a phase II investigation) there was no risk of a joint
dominant position arising between the two largest firms. Moreover, the market shares of the
competitors would all be substantially less than that of the merged firm, and they also varied
considerably between the different (national) geographic markets. This implied substantially
asymmetrical cost structures, which would further increase the difficulty of sustaining anticompetitive
parallel behaviour. To secure coherence across a large part of the market, it would be necessary for the
merged firm to ensure parallel behaviour on the part of several of these smaller competitors, rather
than just one or two of them. Accordingly the Commission decided to clear this merger.

151.
In Enso/Stora, the oligopoly issue concerned the markets for newsprint and magazine paper.
The merging parties — Enso of Finland and Stora of Sweden, together constituting the largest
integrated paper and board group in the world — were two of only six significant suppliers of
newsprint (accounting together for around three quarters of total capacity) in the EEA market. The
combined group would become the largest of these. The market structure in magazine paper was only
slightly less concentrated. The Commission’s detailed investigation found that these markets displayed
many of the characteristics of an anticompetitive oligopoly — low demand growth, concentrated
supply side, homogeneous products, mature technology, high entry barriers, similar cost structures. The
merger would significantly increase the level of concentration in both markets. However, the
Commission also found that other key oligopoly characteristics were not present: in particular, there
was no market transparency — information on prices and quantities supplied was not readily available
to competitors, and indeed there were secret discounts. Moreover there was evidence that customers —
principally, large publishing groups — could exercise a measure of countervailing power. Accordingly
the Commission concluded that this aspect of the merger would not lead to the creation or
strengthening of a dominant position which would significantly impede competition in the common
market or a substantial part of it.

Foreclosure through ties with customers/suppliers

152. Two phase II cases completed in the year dealt with the creation of a dominant position via ties
with customers and/or suppliers. In Hoffmann-La Roche/Boehringer Mannheim, 73 the relevant
markets were in the sector of certain clinical chemistry test products. Competition concerns arose in
regard to in vitro diagnostics because not only would the merged company have a combined share of
between 40% and 80% (depending on the national market involved) in the products themselves, but

73 Case No IV/M.950.

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also it would benefit from the parties’ unequalled strength in the “installed base” of instruments on
which the in vitro tests are performed. There was a risk that customers would become “locked in” to
supplies of the test products from the merged company — and other suppliers excluded — because of
their dependence on it for service, maintenance, etc. of the instruments. Consequently the Commission
accepted a remedy whereby Roche undertook to divest the majority of its clinical chemistry products
business in certain Member States.

153.
In Agfa-Gevaert/Du Pont, 74 the Commission found competition concerns to arise in the markets
for negative plates for offset printing. In this EEA market, Agfa and, Pont — each of which already
had substantial market shares — also had various finance arrangements with plate manufacturers and
exclusive dealing arrangements with the main distributors of its plates and related equipment. Again,
the concern was that competitors would be unable to gain access to supplies or to distribution of their
products, enabling the parties to raise prices above the competitive level. To address this concern, Agfa
offered to terminate its exclusive arrangements with equipment suppliers and distributors; this would
allow competitors to offer their own plates to distributors and thereby develop their sales. The
Commission accepted this remedy and the operation was approved on that basis.

Dominance in neighbouring markets

154.
In Wolters Kluwer/Reed Elsevier, a proposal which would have resulted in the creation of one of
the world’s largest publishers of professional and specialist information, the Commission found
grounds for concern about the merger’s impact on competition in several neighbouring product
markets, of differing geographic dimensions: the market for academic journals and books (worldwide);
for professional books on law and taxation (in various Member States); for educational publishing for
schools (in the United Kingdom); for various kinds of business publication (the Netherlands); for
Dutch dictionaries; and for services provided from transport databases (Europe-wide). Each of these
markets presented its own competition problems. However, the parties’ strength across such a wide-
ranging series of closely related markets, and the resulting very large size of the merged entity —
several times that of any other publisher of professional information in the Community — was a
further source of concern. In the Commission’s view, such a market structure could prevent the
maintenance of competition in the supply of legal, fiscal and scientific information, with a consequent
adverse effect on prices. In addition, there could be a foreclosure effect, since the combination of the
parties’ financial resources and their ownership of copyrighted material would be likely to discourage
investment by existing and potential competitors. In the event, however, it was not necessary for the
Commission to reach a final view on these matters, as, following the opening of a phase II investigation
at the end of 1997, in March this year the parties announced that they had decided to abandon their
current merger plans.

Vertical links

155. The two, linked, German digital pay-TV cases — Bertelsmann/Kirch/Premiere and Deutsche
Telekom/Betaresearch — already referred to, gave rise to concerns over the creation of dominance
through vertical market links, rather than the traditional horizontal overlaps. In order to supply a
complete “package” of digital pay-TV services to consumers, various elements are needed — notably,
“set-top box” technology (to decode the programmes being sold and to record details for charging
purposes), broadcasting facilities, access to cable and/or satellite networks, and programming content.
The proposed operations would have brought together leading suppliers of all these elements to the

74 Case No IV/M.986.

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German market. They involved the development of Premiere as a joint digital pay-TV channel and
marketing platform. Premiere would use Kirch’s current digital TV activities and its “d-box”
technology (the set-top decoder box that is required for digital reception), together with the related
technical services (provided by Deutsche Telekom) and content (from an existing joint venture
involving Bertelsmann and Kirch CLT-UFA).

156. These concentrations would, it was considered, create or strengthen dominant market positions
in the key areas. Premiere would have achieved a dominant position on the market for pay-TV in
Germany (and the rest of the German-speaking area of Europe). Currently, it is one of only two
providers of pay-TV in Germany. The combination of this already strong position, giving access to a
large base of subscribers, plus the important programme resources of Kirch and CLT-UFA would, the
Commission found, have prevented the development of an alternative broadcasting and marketing
platform by other firms, since the merged entity would be able to determine the conditions on which
other broadcasters could enter the pay-TV market. Similarly, in regard to technical pay-TV services,
the parties would have become, permanently, the dominant supplier of these services for satellite TV,
and the only supplier of them for cable pay-TV. All digital pay-TV providers in the area currently use
the Betaresearch-access technology and the related d-box decoder, which employs a proprietary
encryption/decryption system. An alternative technology was not considered likely to be developed, so
other service providers would have to obtain a licence for it from Betaresearch; again creating the
ability for the merged entity to foreclose this market to competitors. As regards cable networks,
Deutsche Telekom already had the largest share of subscribers. The operation would have made it
harder for other cable network operators to compete, because they would have had to adopt Deutsche
Telekom’s transparent transmission model for digital pay-TV. Premiere would have been unlikely to
accept a different marketing model developed by the competitors, which they would need in order to
be able to finance the development of their own networks.

157. The merged entities would, accordingly, have been able to act independently of competitors in
all the major aspects of the supply of digital pay-TV and associated services, and in the absence of
agreement with the parties on remedies, prohibition was the only alternative.

Potential competition

158.
In assessing a merger’s effect, the Commission takes account of potential competition as well as
actual competition, and the former aspect can sometimes be decisive for the outcome. In ITS/Signode/
Titan 75 the Commission examined competition in the supply of steel and plastic strapping in western
Europe, and found possible grounds for concern in regard to the parties’ combined share in steel
strapping. In the course of a detailed investigation (phase II), the Commission found that — contrary
to indications in the initial investigation — plastic strapping could be substituted for steel effectively
and without cost penalty in many applications. On this basis the combined market share of the parties
in the relevant geographic market was of the order of 40%, most of it in the steel sector. Entry into
steel strapping was found to be difficult, but plastic strapping was considered relatively easy to produce
and market, and demand for it (by contrast with that for the steel variety) was growing. Consequently,
the likelihood of new entry into the plastic strapping sector in the event of an attempt by the parties to
raise prices for their products, and in particular for the steel variety, was considered to provide an
adequate safeguard to competition following the merger, given also that customers appeared to have at
least some countervailing power. Accordingly the Commission decided to clear the operation.

75 Case No IV/M.970.

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Countervailing buyer power

159. The issue of the ability of one or more powerful customers to effectively neutralise the position
of a potentially dominant supplier was also considered in detail in Enso/Stora in respect of the market
for liquid packaging board (used, e.g., for milk and fruit juice cartons). The effect of the merger would
be to reduce the number of suppliers in this specialised market in the EEA to three, with the merged
entity becoming by some way the leader in market share terms. Technical and commercial entry
barriers were found to be high and total demand growth modest, making new entry unlikely. However,
the market was also heavily concentrated on the demand side, with one firm in particular — Tetra
Pak — accounting for a very substantial share. The two other main buyers (Elopak and SIG
Combibloc) did not purchase such large quantities as Tetra Pak. However, they too appeared to
possess a measure of countervailing power, since they imported “strategic” quantities from the USA.
Overall, the Commission’s investigation suggested that these circumstances produced, exceptionally, a
situation of mutual dependence between buyers and sellers, which the merger was unlikely to disturb,
and the operation was cleared.

3. Remedies

Phase I

160. As has already been noted, there was a significant number of cases in which it proved possible
to use the Commission’s new powers to resolve possible issues of dominance at phase I by means of a
formal undertaking, without the need for the expense and delay of a phase II investigation. As
remarked above, this procedure is not suitable for all cases which raise competition problems. If the
problem, and a satisfactory solution for it, cannot be readily identified, if the remedy cannot be
speedily implemented, or if the parties are unwilling or unable to cooperate with the Commission in
achieving a solution within the short timescale allowed, then the normal process, i.e. a full phase II
investigation, will be appropriate. It is, of course, essential that parties wishing to offer an undertaking
at phase I do so within the prescribed time limit of three weeks from the date of notification. The time
limit also means that it is vital that the remedy proposed is a genuine attempt by the parties to clearly
resolve the competition problem as identified by the Commission, and thus remove the grounds for the
“serious doubts” about the operation’s compatibility with the common market which are the basis for
opening phase II proceedings, rather than some kind of “opening offer” which might be improved on
later if the Commission insists. There is very little scope for substantive revision of proposals under this
procedure. Where phase I undertakings are offered, the Commission needs, among other things, to
ensure that Member States have an opportunity to comment on the remedy and, if appropriate,
“market test” it with interested third parties before deciding whether or not to accept it. The
Commission is not obliged to accept any remedy at phase I, and it will not allow the process to be
abused by parties holding back from offering a fully effective remedy until the last moment, in the
hope that something less might prove sufficient.

161. Given the general framework laid down in the revised regulation, it was to be expected that the
remedies adopted in most cases where phase I undertakings were accepted would be relatively simple
and straightforward divestments of overlapping businesses, and such was the result. 76 The first case of
this kind — Owens-Illinois/BTR Packaging 77 — was in many respects typical. This large transaction

76 See, for example, the following cases: IV/M.931 Neste/Ivo; IV/M.1082 Allianz/AGF; IV/M.1182 Akzo Nobel/

Courtaulds; IV/M.1137 Exxon/Shell; IV/M.1339 ABB/Elsag Bailey.

77 Case No IV/M.1109.

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affected many sectors of the packaging industry. But the Commission found competition problems
likely in only one area — namely the glass container (bottles, jars, etc.) market in the UK and
Ireland — due to the significant overlap between the parties in this highly concentrated sector. The
remedy agreed upon was that BTR would divest the whole of its glass container business, carried on at
four plants operated by its subsidiary Rockware, together with its interest in an associated glass
recycling business, to an appropriate third party.

In Pakhoed/Van Ommeren, 78 by contrast, agreement could not be reached on satisfactory
162.
undertakings, and the parties abandoned their merger plans. Overlaps of concern were found in regard
to the supply of tank storage for various products in the harbours of Amsterdam, Rotterdam and
Antwerp (collectively known as the ARA area). Following discussion with the Commission,
satisfactory divestments were agreed for all these except petroleum products, where there would,
however, have been a combined share post-merger of some 90% at Rotterdam. Whether or not this
was the appropriate geographic market — as, in contrast to the parties, third parties considered it to
be — was in the Commission’s view a complex issue, which could only be properly clarified in the
course of a full phase II investigation. In the event, however, the parties decided, shortly before the
deadline for a phase I decision, to abandon the merger rather than offer further divestment to address
the Commission’s concerns.

Phase II

163. Of the nine phase II cases decided in 1998, five involved clearances subject to formal
undertakings regarding remedies, and in one other (Enso/Stora) the Commission took note, in clearing
the merger, of certain assurances offered by the parties. The remedies in Agfa Gevaert/Dupont and
Hoffmann–La Roche/Boehringer Mannheim have already been mentioned. In Veba/Degussa 79 the
competition problem arose in the market for fumed silica — a speciality chemical for which the market
was highly concentrated. Veba was active in this market on its own account, whereas Degussa’s activity
was carried out via a joint venture with one of only two other suppliers — Cabot Hu¨ ls AG. The remedy
adopted was for Veba to sell its stake in the joint venture to a third party independent of the merged
company, thereby ensuring that there would remain three independent competitors on this market, as
before.

164.
In Worldcom/MCI, the remedy adopted — divestment of the overlap in the market of
concern — was not itself a novel one. However, the undertaking also contained some additional
provisions, designed to ensure the effectiveness of the divestment and to coordinate the process with
the US authorities who were also examining the operation. It was important to ensure that the
divestment was made to a new entrant, rather than to an existing player; otherwise customer choice
would still be substantially reduced. In addition, there were requirements designed to prevent the
merging parties from setting up a new business which competed with the one divested (and which,
given the parties’ overall strength, could rapidly have neutralised it) and to provide the buyer of the
divested business with the services necessary to operate it effectively. These included servicing/
maintenance of the acquired network, and unrestricted access to the remaining Worldcom/MCI
network through so-called “peering” arrangements. The parties offered the same undertaking jointly to
the Commission and the US DoJ, and the means of enforcement had to reflect the differing procedures
of the two investigating authorities. Thus, although the Commission took, as usual, powers to appoint
an independent trustee to oversee and, if necessary, carry out the divestment, the powers were held in

78 Case No IV/M.1145.
79 Case No IV/M.942.

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reserve while the parties were given an opportunity to complete the divestment, under the supervision
of the DoJ, before closing the merger. This helped to ensure that the divestment was completed in a
matter of months — a short timescale for such a major divestment. The adoption of these provisions
also reflects the particularly close cooperation with the US authorities in this case, as regards remedies
and also other aspects. DoJ observers attended the hearing of the Commission case in Brussels, and
there were also joint Commission/DoJ meetings with the parties — the first time such meetings had
taken place.

In Skanska/Scancem, 80 the Commission’s investigation focused on the markets for cement and
165.
concrete (both dry and ready-mixed) and concrete products in Sweden, Finland and Norway. The
combined market shares produced by the merger in some markets were very high — as much as 90%
in cement. The merger also produced substantial vertical effects, however, since both parties also had
substantial activities at all three main levels of the construction industry — raw materials (cement and
aggregates), construction materials (concrete, concrete products) and, finally, construction itself. Most
of the parties’ competitors were not vertically integrated, further reducing their ability to compete
effectively after the merger. In order to remedy the dominant positions identified, Skanska undertook
to divest the whole of its shareholding in Scancem and furthermore to dispose of Scancem’s cement
business in Finland. The first part of the remedy is designed to end the vertical links which gave rise to
concern; the second, to create an independent source of supply of cement of suitably high quality.

166. As already mentioned, Enso/Stora was cleared without conditions or obligations. The
Commission took account of certain undertakings which had been offered by the parties (some of
them in the course of the first phase of the investigation) in order to address concerns about the
position of Elopak and Combibloc in the more concentrated market for liquid packaging that would
result from the merger. These were as follows. Enso would divest its shareholding in a joint conversion
operation with Elopak, since this vertical link could weaken Elopak’s countervailing power. The
merged company would offer Elopak and Combibloc a price protection arrangement. Broadly, under
this arrangement any changes in the prices charged to all three buyers will be the same unless justified
by objective cost data; a measure designed to ensure that the smaller customers are not subject to
unjustified price discrimination in comparison with Tetra Pak. Finally, the parties undertook not to
oppose an application for a duty-free quota for liquid packaging board from outside the Community.
The adoption of such a quota would make imports more competitive and thus encourage other
suppliers.

4. Referrals to Member States

167. Member States made four requests for a case falling under the Merger Regulation to be
referred back to their national competition jurisdiction (Article 9). All were granted.

In Vendex/KBB 81 the request was made by the Dutch authorities, on the basis that the
168.
operation threatened to lead to the creation of a dominant position in non-food retailing in the
Netherlands. The Commission accepted that consumer tastes and habits were important factors for
competition in retailing markets, and that they showed marked national, and possibly even regional or
local characteristics. Non-food retailing in the Netherlands could accordingly be considered a “distinct
market within a Member State” as required by Article 9. Both Vendex and KBB had major shares of
such a market; they were, for example, the only retailers in the Netherlands who owned department

80 Case No IV/M.1157.
81 Case No IV/M.1060.

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stores there. There was accordingly a risk that a dominant position or positions would be created or
strengthened by the merger. The precise boundaries of the geographic and product markets affected by
the merger, and the precise impact of the merger on competition in those markets, could only be
determined by a more detailed investigation, which, given the sector and area concerned, could best be
carried out by the relevant national competition authority rather than by the Commission. The merger
had no significant effects in other Member States. Accordingly the Commission concluded that the
criteria for reference back to a Member State under Article 9 of the Merger Regulation had been met,
and that there were no other factors which could make it appropriate for the Commission to retain it. It
therefore referred the case to the national authorities as regards the non-food retail sector in the
Netherlands, and cleared the remainder of the operation.

169.
In Krauss-Maffei/Wegmann, 82 the German authorities requested the referral of this joint
venture on the ground that it threatened to create a dominant position in the market for the supply of
armoured military vehicles in Germany. Mainly on the basis of purchasers’ behaviour, the Commission
found this to be an essentially national market, accessible to foreign competition only to a limited
extent. The parties’ activities were complementary; Krauss-Maffei was an important supplier of the
vehicle chassis, and Wegmann of turrets. Nevertheless, by combining major suppliers of these key
“subsystems”, the merger could give the parties a competitive advantage in providing a complete
vehicle “package” as a result of which they might be able to foreclose the vehicles market to other
suppliers. The Commission’s own investigations were unable to resolve these concerns. There were no
significant effects in other markets, and no other factors which would make it appropriate for the
Commission to retain the case. Accordingly the Commission decided to refer the case back to the
German authorities as regards the market for armoured military vehicles, and to clear the remainder of
the operation.

In Alliance Unichem/Unifarma, 83 the Italian authorities requested referral of this merger in the
170.
area of pharmaceutical wholesaling, because of the risk that it would create or strengthen a dominant
position in this market in certain parts of Italy, notably in the North-West. The Commission found
pharmaceutical wholesaling to be a market essentially regional or local in scope (as in previous cases in
the sector), although the precise boundaries in a given case could only be established after more
detailed analysis — which the Italian authority was better placed to undertake. The merger would
create the largest wholesaling group in the North-West of Italy, with a substantial share both in
absolute terms and relative to that of competitors. Moreover there were shareholding links between
the parties and some of their competitors. The nature of the market, with its requirements for a
substantial stock and frequent and regular delivery service to pharmacies even in remote areas, made
entry difficult, and there was no significant countervailing buyer power. Accordingly the Commission
decided to refer the whole of the operation to the Italian authorities.

82 Case No IV/M.1153.
83 Case No IV/M.1220.

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5. Rules and procedures

Several issues of interest in this area arose during the year.

Revised notices

171. As part of the Merger Regulation revisions, the Commission introduced a new Implementing
Regulation and a modified notification form (Form CO) 84 and published revised versions of its notices
on the concept of undertaking concerned, the concept of concentration, turnover calculation, and full-
function joint ventures. 85 For the most part the changes are technical or clarificatory and stem from the
changes to the regulation itself. Perhaps the main substantive change concerns the ending of the
distinction between “concentrative” and “cooperative” joint ventures as determinative for the
applicability of the Merger Regulation. Jurisdiction will now be determined by applying the criterion
of full functionality, on which the relevant notice gives some further guidance. It is intended that
guidance on the substantive issues concerning cooperative aspects of full-function joint ventures will be
issued in,e course, after the Commission has had sufficient experience in dealing with them.

Incomplete notifications

172. The total number of notifications concerning merger cases which have been declared
incomplete by the Commission (pursuant to Article 4 of the Implementing Regulation) remains
small, but has undergone a certain increase in recent years. The Commission is keen to find ways of
reducing the number of incomplete notifications. Accordingly it was pleased to enter into discussions
on this matter with representatives of the legal community, as a result of which some “Best Practice
Guidelines” have been drafted and published on the Directorate-General IV website on the
Internet. 86

173. The Commission found that in most cases where a notification was declared incomplete, there
had been no, or only very minimal, discussion of the case or the content of the notification with the
Commission before it was submitted. Absence of substantive pre-notification discussion (and/or
submission of an advance draft of the Form CO) inevitably increases the risk that a notification will be
found incomplete. There was a variety of reasons why it had been necessary to declare notifications
incomplete, but three main categories could be identified. Some notifications could not be accepted
because certain formal requirements were not met — for example, not all the relevant parties had been
included, or the notification was made before sufficiently clear agreements to bring about the
concentration were in existence. In others (possibly the largest single category) the information
provided with the notification was insufficient — for example, as regards the markets considered to be
affected by the merger and the parties’ and competitors’ shares in them — or insufficiently clearly
presented, to enable a proper competition assessment to be undertaken in the time available. The
latter point can be of particular importance in the — not uncommon — cases where the supporting
documentation is voluminous and the possible markets numerous or complex. The third category
comprised cases where the Commission’s investigation revealed the existence of potential affected
markets which had not been identified by the notifying parties — although, in some instances at least,

84 Commission Regulation (EC) No 447/98 of 1 March 1998.
85 OJ C 66, 2.3.1998.
86 Under “Mergers — Other documents” on the DG IV website — http://europa.eu.int/comm/dg04.

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they arguably could, and therefore should, have been — and on which further information was
required which could not be provided and/or properly assessed within the time remaining.

174. The Commission recognises that parties to mergers, and their advisers, will want to minimise the
amount of effort and delay required to comply with Community merger control procedures. At the
same time, however, the scale and complexity of many of the cases that it is required to decide on
means that the information that has to be submitted at the outset will need to be extensive and
detailed. It also needs to be relevant and focused on potential problem areas — even if the parties
consider that they can show that the potential problems will not in fact materialise. The guidelines
cover such aspects as prenotification, timing issues, the desirability of adopting a prudent approach to
market definition and identification (e.g. where there is scope for debate over geographic market
definition, providing market data on a national basis as well as a wider one such as the EU as a whole)
and the important contribution that can be made by the attendance at prenotification meetings of
representatives from the notifying parties who possess a detailed understanding of the commercial
activities and markets involved. If followed, they will minimise the chances that a notification is
declared incomplete, as well as the need for further information from the parties after the notification
is made; although the Commission of course remains free to proceed with such declarations where
appropriate.

Re-examination after annulment by the Court — Kali und Salz

In the light of the annulment of the original 1993 decision in this case — the first time a
175.
Commission decision in a merger case has been annulled — it was necessary for the Commission to re-
examine it. This unprecedented process, which culminated in a decision to clear the merger at the first
phase (Article 6(1)(b) of the Merger Regulation) gave rise to a number of procedural and substantive
issues, of which the following are perhaps of most general interest.

176. The regulation (Article 10(5)) provides that, where the Court of Justice makes a judgment
annulling a Commission decision in whole or in part, the time periods laid down in the regulation for
initial examination of the case and for taking a decision on it are to start again from the date of the
judgment. However, in the Commission’s view it did not follow that the timetable would restart
automatically. Article 10(1) provides that the initial examination period begins on the day after receipt
of the notification or, if the notification is incomplete, on the day after receipt of a complete one. If the
sole basis for that examination was the situation obtaining at the time of the original notification (so-
called ex tunc basis), then other things equal, no further information would be necessary for the
Commission to carry out its assessment and the original notification could be regarded as complete. If,
on the other hand, the current situation has to be examined (ex nunc basis), then — in view of the
passage of time and the possibility that relevant facts (e.g. market shares, number of competitors, etc.)
had changed meanwhile — the original notification would not necessarily contain all the information
that was likely to be required, and in that case it would be incomplete until the appropriate revised or
additional information was provided.

177.
In the case in point, the Commission considered a mixture of the two approaches to be
appropriate. The Commission’s jurisdiction to deal with the case under the regulation had not been
contested. Accordingly the Commission did not find it necessary to re-examine that issue, and to that
extent the approach may be regarded as ex tunc. The competitive assessment, on the other hand,
needed to reflect the present situation (i.e., ex nunc). In its decision the Commission was required, as in

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more normal cases, to declare that the operation was or was not compatible with the common
market — not whether it had been compatible at some time in the past. It was therefore necessary to
undertake a completely new competitive assessment based on facts pertaining to the current market
situation, including also those parts of the contested decision which had been upheld by the Court
(such as the market definitions). It followed that the original notification was, at the time of the
judgment, incomplete.

178.
It was, however, found necessary to make an exception to the ex nunc basis of the competitive
assessment in the case of the “failing company defence” originally advanced by the parties, since the
situation to which it related no longer obtained and could not be re-created. The acquired company
MdK was subsequently restructured and transformed into a limited company under German law, and it
would have been impossible to have separated this newly created economic entity into its former
component parts for assessment purposes — e.g. in order to decide whether or not there might be a
potential alternative acquirer.

179. On receipt of the complete notification, the Commission carried out an initial examination of
the case on the above basis, in the usual way. It found that in the present circumstances no dominant
position was likely to be created or reinforced in the relevant markets, which, as before, were those for
potash-based products for agricultural use in Germany, and in the rest of the EU, respectively. In
Germany, Kali und Salz GmbH remained a de facto monopolist. However, for the reasons outlined in
the Commission’s original decision and subsequently upheld by the Court (notably, the “failing firm
defence”, which — see above — had to be examined “ex tunc”) the proposed concentration would not
be responsible for a deterioration in the competitive structure of the market. Moreover, following the
ending of the commercial links between SCPA and Kali und Salz, SCPA was also now supplying
Germany. In the rest of the EU, the combined market share of the parties was now below 50%, and the
export cartel that was observed in the original investigation had been ended, as had the close
commercial links between Kali und Salz and the other main competitor, SCPA. Kali und Salz GmbH
was now established as an independent competitor in France. Accordingly the operation was cleared
(Article 6(1)(b) of the regulation).

Fine imposed for breach of the regulation

180. The Commission this year imposed the first fine on a company for failure to notify a
concentration under the regulation in time, and for putting it into effect without the Commission’s
authorisation. In February, the Korean company Samsung was fined a total of ECU 33 000 in respect of
the acquisition of AST Research Inc. (AST). 87 The operation was notified to the Commission in April
1997. According to information in the Commission’s possession, however, Samsung had already
acquired control of AST for the purposes of the Merger Regulation in, or before, January 1996. The
regulation (Article 4) requires that a notifiable concentration be notified not more than a week after
the event — such as the acquisition of a controlling interest — giving rise to the concentration.
Moreover it must not be implemented until it has been authorised, whereas this acquisition had been
completed and implemented for some time before it was notified. In setting the amount of the fine, the
Commission took into account, in mitigation, the fact that no damage to competition had resulted, that
the infringement had not been intentional and the parties had eventually notified the operation, and
that Samsung had recognised the breaches and cooperated with the Commission in its investigations.
Nevertheless the breaches had continued for a considerable period. Moreover, as an important
company with significant European activities, Samsung could be expected to be aware of the
Community’s merger control rules. The relatively small amount of the fines imposed took account of
these factors and also of the fact that this was the first time that the Commission had taken such action.

87 Case No IV/M.920.

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Insert 7: Implementation of the new Article 2(4) of the Merger Regulation

The new Merger Regulation came into force on 1 March 1998,
incorporating a number of
amendments which extended the regulation’s scope to include joint ventures known as full function
cooperative joint ventures. This amendment brings into the ambit of the Merger Regulation a
number of joint ventures which would formerly have been examined under Regulation 17/62.

Article 2(4) applies to all joint ventures constituting a concentration within the meaning of Article
3, albeit only “to the extent that [they have as their] object or effect the coordination of the
competitive behaviour of undertakings that remain independent”. In 1998, 13 of the 76 joint
venture cases decided under the amended Merger Regulation necessitated an analysis under
Article 2(4). The most in-depth analyses were made in cases within the telecommunications and
Internet areas. So far, remedies to settle Article 2(4) concerns have been included in only one case
(Case No IV/M.1327 — Canal+/CDPQ/BankAmerica of 3 December 1998, see below). A second-
phase examination was opened in one other case (Case No JV.15 — BT/AT&T, see below).

In the Canal+/CDPQ/BankAmerica case, the spill-over effects were found on a market upstream
from the joint venture, namely in the market for the wholesaling of TV rights in Spain (although the
notified transaction concerned the downstream market in France). On the Spanish market, Canal+
had strong or dominant positions on the pay-TV market and on the upstream market for content.
The notified transaction was found, through the balance of power in the joint venture, to give
Canal+ a strong incentive to favour Cableuropa (controlled by CDPQ and BankAmerica) in the
sale of Spanish pay-TV rights. The remedies accepted will eliminate the possibility of discrimination
against other competitors on the Spanish pay-TV market.

The Canal+/CDPQ/BankAmerica case shows the potential use of Article 2(4). Firstly, the notified
transaction did not create or strengthen the dominant position of Canal+; rather, it gave rise to a
situation where the company’s commercial incentives would change so that there would be an
increased risk of discrimination against other pay-TV operators in Spain. Secondly, the remedy
basically sets a benchmark for Canal+’s future behaviour on the Spanish market for pay-TV
content, but leaves the notified transaction structurally unchanged. In the absence of Article 2(4),
this remedy could have been more difficult to accept under the Merger Regulation.

The Commission dealt with four cases in the Internet field.

The Telia/Telenor/Schibsted case is worth describing in detail as it helped to establish the
Commission methodology in handling Article 2(4) issues under the Merger Regulation. Telia, the
incumbent telecoms operator in Sweden, Telenor the Norwegian incumbent and Schibsted, a
Norwegian publishing and broadcasting company, formed a joint venture to provide Internet
gateway services and offer web site production services. Internet gateway services are designed to
enable users of the Internet to access content more easily. This content may be provided by the
gateway service provider or other third parties and may be free of charge to the user (normally
financed by advertising) or content for which the user has to pay for access (“paid-for content”).

In its analysis of the case, the Commission found that the supply of gateway services in themselves
did not amount to a market as such, but that advertising on web pages and paid-for content could be
considered relevant markets. These two markets were relevant markets for the purposes of
dominance, as was the production of web sites. Web site production was also considered to be a

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candidate market for the analysis of coordination under Article 2(4) as the joint venture and two of
the parent companies (Telia and Telenor) were present on this market. The other candidate market
was the provision of dial-up Internet access where both Telia and Telenor (through its stake in the
Swedish telecommunications company Telenordia) were present.

In its analysis of the operation, the Commission had two distinct situations to assess under Article
2(4). First, the web site production market involved the presence of the joint venture and two of the
parent companies on the same market. The combined market share of the parent companies and
the joint venture was less than 10% on the narrowest possible and most unfavourable market
definition to the parties. Accordingly, the Commission concluded that, even if the parent companies
were to co-ordinate their activities on this market, it would not amount to an appreciable restriction
of competition. In the second part of its Article 2(4) reasoning, on the dial-up Internet access
market in Sweden, the Commission found that that market was characterised by high growth,
relatively low barriers to entry and low switching costs. The market shares which Telia and
Telenordia enjoyed on this market were 25-40% and 10-25% respectively, but the Commission
found that these market shares were of limited significance in such a growing market and, therefore,
the market structure is not conducive to the coordination of competitive behaviour. In addition, the
likelihood of coordination was reduced further by the relative size of the dial-up Internet access
market (which accounted for over 90% of Internet revenue in Sweden) compared with the size of
the other markets on which the joint venture would be active. The Commission therefore concluded
that there would be no likelihood of the parent companies coordinating their behaviour on this
market.

The Commission also considered eight cases in the field of telecommunications which involved an
investigation under Article 2(4).

The Commission decided to open a detailed enquiry into a proposed joint venture between British
Telecommunications and AT&T, two of the world’s largest telecommunications operators. The joint
venture will provide a broad range of telecommunications services to multinational corporate
customers and international carrier services to other carriers. The Commission decided to carry out
a second-phase inquiry into the effects of the venture on several global telecommunications
markets and also some in the UK. Subsequent to its preliminary inquiry, the Commission has
expressed concerns in the following areas: the parties’ combined market position on the markets for
the provision of global telecommunications services to large multinational companies and for
international carrier services, the effect of the creation of the joint venture being the possible
creation or strengthening of a dominant position for certain telecommunications services in the
UK; and the possible coordination effects of the proposed joint venture in the UK between ACC, a
wholly owned subsidiary of AT&T, and between BT and Telewest, in which AT&T through TCI will
have a jointly controlling stake. The final decision is expected in April 1999.

The Commission’s first cases to have included an examination of Article 2(4) effects have already
displayed some common themes. The relative size of the Article 2(4) market and the joint venture’s
market, which is assessed for dominance purposes, has been important in assessing the likelihood of
coordination. Normally, the commercial incentives, and hence the risk of coordination, are smaller
if the joint venture’s market is significantly smaller than the Article 2(4) market. However, this
cannot be considered a sufficient condition for the absence of coordination between the parent
companies. The nature of the markets themselves will also play a part in the Commission’s
assessment. The nature of existing links between the parent companies is also relevant for the
determination of causality between the notified operation and the Article 2(4) effects, though their
existence does not automatically imply that there is no effect. Again, other factors would have to be
taken into account before that analysis can be made.

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C — Statistics

Figure 4:
Number of final decisions adopted each year since 1992 and number of
notifications 1

Final decisions (R.4064/89)

Final decisions (Art. 66 ECSC Treaty - 1992-98)

Notifications (R. 4064/89)

10

238

235

12

7

172

10

142

7

131

125

10

6

95

91

109

110

61

60

57

58

250

200

150

100

50

0

1992

1993

1994

1995

1996

1997

1998

1

The Commission has modified the set of figures concerning final decisions (Regulation (EEC) No 4064/
89) to take account of decisions adopted under Article 9(3) (partial referral to Member States): +1
decision in 1992, +1 decision in 1994, +6 decisions in 1997.

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Figure 5:
Breakdown by type of operation (1992-98)

Others
6%

Takeover bid
8%

Joint venture/control
48%

Acquisition of majority
38%

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III — STATE AID

A — General policy

1. Improving the efficiency of state aid monitoring

181.
In 1998 the Commission continued with its initiative for the reorientation and modernisation of
state aid monitoring. The sixth Survey on state aid in the European Union, adopted by the Commission
in July, covers the period 1994-96. 88 Over this period an average of ECU 38 billion a year, or 3% of
value added and ECU 1 238 per job, was granted to the manufacturing sector in the Union of Fifteen.
The survey reveals that, after peaking in 1993 and 1994, state aid volumes are now showing a
downward trend. As with the previous survey, the most marked trend can be observed in the
continuing high volumes of aid granted on an ad hoc basis to individual enterprises and not covered by
schemes promoting cross-industry, sectoral or regional objectives. In the manufacturing, financial
services and air transport sectors taken together, a limited number of individual aid measures involving
large sums account for a disproportionate share of total aid granted. Ad hoc aid, which is granted
mainly for rescuing and restructuring companies, increased in volume from 6% of total aid to these
sectors in 1992 to 16% in 1996.

182. High levels of state aid continue to create distortions of competition. A tough state aid policy
and close monitoring remain important if Europe is to become more competitive on world markets. At
the European Council meeting in Cardiff, Member States emphasised the need to promote
competition and to reduce distortions such as state aid. Only thus can the continuing disparities
between the levels of aid granted by Member States be attenuated, lending support to the objective of
economic and social cohesion.

183. The aim of the modernisation drive is to improve transparency and legal certainty, to make the
state aid monitoring system more efficient, to reinforce vetting, in particular in cases involving large
volumes of ad hoc aid, and to simplify the monitoring system for more minor cases. In 1998 the
Commission focused its efforts on simplifying and clarifying the procedural rules and on concentrating
resources on closer monitoring of the most important cases. It used Article 89 for the first time since
the Treaty entered into force. This article provides that the Council, on a proposal from the
Commission, may make any appropriate regulations for reviewing state aid. The Commission
presented proposals for two such regulations: on 16 November the Council agreed a Commission
proposal for a procedural regulation, 89 and on 7 May it adopted the Commission proposal for a
regulation enabling the Commission to exempt certain categories of horizontal, or cross-industry, aid
from the notification requirement. 90

184.
In addition to these regulations, the Commission adopted a notice on the application of the state
aid rules to measures relating to direct business taxation on 11 November 91 and a framework on

88 COM(1998) 417 final.
89 Proposal for a Council Regulation (EC) laying down detailed rules for the application of Article 93 of the EC

Treaty (OJ C 116, 16.4.1998).

90 Council Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 92 and 93 of the Treaty to certain

categories of horizontal state aid (OJ L 142, 14.5.1998).

91 OJ C 384, 10.12.1998.

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training aid on 22 July. 92 In June the Council adopted a regulation laying down new rules on aid to
shipbuilding. 93 The multisectoral framework on regional aid for large investment projects is to apply
from 1 September for a period of three years. 94

2. Block exemptions for state aid

185. On 7 May the Council adopted a regulation which forms the legal basis on which the
Commission, by adopting regulations, may exempt en bloc certain types of horizontal state aid
measures from the notification requirement. 95 Aid for SMEs, R&D, environmental protection and
employment and training, together with regional aid schemes may thus be declared exempt. In
addition, the Commission may adopt a regulation in connection with the de minimis rule. The
Commission has started to prepare the block exemptions.

186. The reason for this regulation is that the Commission has to concentrate its efforts on the more
important cases and should be relieved of the task of assessing the compatibility of most standard
cases, where such assessment is a mere formality. The areas covered by the enabling regulation have
been subject to guidelines and frameworks for some time. Member States devise their aid schemes
according to these rules. It can therefore be assumed from experience that these horizontal aid
measures are usually compatible with the common market. However, the Commission retains the right
to monitor them and to assess whether a given aid measure complies with the Treaty. Member States
will have to keep a register of aid measures and send the Commission annual reports. Incorrect
application of the rules exempting aid from the notification requirement will not only be subject, as at
present, to the consequences of a decision finding aid to be unlawful under Commission proceedings
but may also be referred to a national court.

3. Procedural regulation

187. The most important legislative effort in the area of state aid policy in 1998 was the codification
of the rules on the Commission’s procedures for monitoring state aid. On 18 February the Commission
adopted, pursuant to Article 88 of the EC Treaty, a proposal for a regulation 96 which seeks to codify
the various aspects of the procedure for reviewing aid, while strengthening the Commission’s
monitoring powers where appropriate. On 16 November the Council meeting on industrial affairs
reached political agreement on the regulation. The Council will be able to adopt it formally at the
beginning of 1999, once Parliament has delivered its opinion. Thus for the first time, there will be a
basic instrument on Community monitoring of state aid which incorporates all procedural rules in a
single, coherent text.

188. The regulation is important for two reasons. First, it codifies the various procedures already in
use which are based on Commission practice and on the case-law of the Court of Justice. Thus, all these
fragmentary rules will from now on be replaced by a transparent, binding instrument. Codifying all the
procedural rules in one regulation will doubtless have an impact on state aid policy in the medium to
long term. In addition to providing legal certainty, the regulation will make the rules more accessible

92 OJ C 343, 11.11.1998.
93 OJ L 202, 18.7.1998.
94 OJ C 107, 7.4.1998.
95 Council Regulation (EC) No 994/98 of 7 May 1998, referred to above.
96 Proposal for a Council Regulation (EC) laying down detailed rules for the application of Article 93 of the

EC Treaty, referred to above.

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and give this area of policy a higher profile. This should result in all those concerned being more
familiar with the rules and becoming more involved. However, the regulation does more than simply
codify the procedures already in place. It will also enable the Commission to intensify its monitoring of
aid in certain respects; it gives the Commission new powers which should better equip it in its work to
combat unlawful aid and aid misuse.

189.
In certain circumstances, for example, the Commission will be able to require the immediate
provisional recovery of aid unlawfully granted until it has taken a decision on the compatibility of the
aid with the common market. The regulation also lays an obligation in principle on the Commission to
require the recovery of aid unlawfully granted which is not compatible with the common market. The
Member State must recover the aid without delay in accordance with its domestic-law procedures,
provided they allow the immediate and effective execution of the Commission’s decision. Furthermore,
it must take all necessary measures, including provisional ones, to obtain this result.

Another new principle established by the regulation is that the Commission may undertake on-site
monitoring visits in cases where it has serious doubts about whether decisions authorising aid are being
complied with. If required, Member States must afford the necessary assistance to the Commission
officials to enable them to carry out their inspection.

In order to ensure legal certainty in respect of unlawful aid granted some time ago, the regulation lays
down a ten-year limitation period: the Commission may no longer order recovery if ten years have
passed since the aid was granted.

190. Lastly, the regulation is also intended to speed up procedures. It therefore sets a time-limit on
the formal investigation procedure of eighteen months from the date on which proceedings are
initiated; at present there is no limit on the time it takes to complete the procedure. When this period is
up, the Member State may request the Commission to take a decision, which the Commission must do
within two months of receiving the request. With the same end in view (shortening the decision-making
process), the regulation provides that from now on the initiation of proceedings will be published in the
authentic language version only, accompanied by a summary notice in the other languages. Final
decisions, however, will continue to be published in full in all official languages.

4. State aid contained in tax systems

191. The Commission’s notice on the application of the state aid rules in the field of direct business
taxation 97 is in line with its commitment to strict control of state aid in all its forms. This commitment
complements the efforts of Member States within the Code of Conduct Group to put an end to harmful
tax competition. On the basis of this notice, the Commission will assess or reassess, case by case, all
specific tax schemes in the Member States. The notice sets out the circumstances in which tax measures
fall under the state aid rules and outlines the procedural consequences of their doing so.

192. The document indicates that, to fall under the state aid rules, a tax benefit must be specific in
the sense of benefiting certain enterprises or the production of certain goods. The tax benefit may be
provided in various forms, including lower rates of taxation, tax deductions, accelerated depreciation
and tax debt cancellation. Under the notice, a tax benefit will be regarded as specific where it derives
from an exception to the generally applicable tax rules, unless this exception is justified by the nature
of or rationale for the system, or from a discretionary practice on the part of the tax authorities. Tax

97 OJ C 384, 10.12.1998.

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rules that are, for example, aimed at a certain region, a certain sector or a certain function within an
enterprise (such as financial services) will be regarded as specific under the state aid rules. In the Irish
corporation tax cases, 98 the Commission made clear that it no longer considers the preferential
treatment of manufacturing over services to be a general measure. Developments in the concept of
state aid over time and a stricter interpretation of Article 87 of the EC Treaty may lead to a revision of
earlier Commission decisions, in which case the Commission will propose appropriate measures under
Article 88(1) of the EC Treaty.

B — Concept of aid

193. Any state aid that falls foul of all four tests in Article 87(1) of the EC Treaty is in principle
incompatible with the common market. More specifically, to be caught by Article 87(1), the aid must
(i) confer an economic advantage on the recipient, (ii) be granted by the State or through state
resources, (iii) be granted selectively to “certain undertakings” or to “the production of certain goods”
and thus distort competition, and (iv) affect trade between Member States. The form in which the aid is
provided (grant, interest rebate, tax relief, loan guarantee, etc.) is not relevant to the application of
Article 87.

194. The way in which measures are classed as state aid within the meaning of Article 87(1) is of
importance to national authorities, obliged as they are under Article 88(3) to notify the Commission of
any plans to grant aid or alter existing aid measures. The issue becomes relevant for countries in the
process of negotiating the incorporation of Community law into their own legal systems in order to
prepare for their accession to the EU. The definition is also important to national courts with
jurisdiction to rule on the existence and legality of state aid and to formulate and address requests for
preliminary rulings to the Court of Justice under Article 234 of the EC Treaty. Finally, guidance on the
definition of state aid is crucial to potential aid recipients inasmuch as they are required to examine
with diligence the legality of the aid they hope to receive.

In the course of 1998 the Commission took a number of decisions which are of interest as regards the
concept of state aid. These decisions are described below.

1. Advantage to a firm or firms

195. An economic advantage may be conferred through a variety of means and circumstances. The
Court of First Instance ruled in Ladbroke 99 that the decision of the French Minister for the Budget to
allow Pari Mutuel Urbain to defer payment of part of the State’s share of levies on bets taken on horse
races had the effect of conferring a financial advantage on that organisation and thus improved its
position on the market for bet taking, both at home and abroad.

In Istituto Poligrafico e Zecca dello Stato, 100 the Commission found that an economic advantage
196.
may be conferred on publicly controlled undertakings through the conclusion of exclusive contracts to
supply services or goods to the State where those contracts are remunerated above the normal market
rate. The contracts may simply help to ensure the recipients’ continued operation and enable them to
cross-subsidise their commercial activities. The recipient in the above case operates in the coinage

98 Cases E/1/98 and E/2/98 (OJ C 395, 18.12.1998).
99 Case T-67/94 Ladbroke Racing Ltd v Commission [1998] ECR II-1.
100 Case C 64/98 (ex NN 95/97), not yet published in the Official Journal.

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sector, which is not the subject of intra-Community trade. However, it won two contracts with non-EU
countries, and was suspected of having defeated its European competitors through cross-subsidisation.

197.
In its decision concerning rescue aid to Case di Cura Riunite, 101 the Commission considered
that the provision of a state guarantee to this Italian health institution did not confer an economic
advantage. Given that the recipient’s weak financial situation would not allow it to obtain credit on the
market, the Commission considered that the aid element equalled the entire amount of credit obtained
as a result of this guarantee mechanism. However, the State was Case di Cura’s main customer and
owed the company a significant amount derived from normal commercial transactions, exceeding by
more than four times the guaranteed credit. Since the State could not be subjected to liquidation
proceedings, as opposed to any other debtor in similar circumstances, Case di Cura was at a significant
disadvantage compared with its competitors selling services to private customers. The guarantee was
granted only until such time as the State should repay its outstanding debts. In this case, the State was
not granting any unjustified support to the undertaking but only reducing some of the financial
disadvantages which it itself had caused the undertaking by not repaying its outstanding debts.

198. An economic advantage may be gained as a result of the terms on which undertakings have
from an infrastructure
infrastructures. Undertakings allowed to benefit
access to or exploit
development, e.g. by moving to a business park, obtain a gratuitous advantage if they do not pay a
fee. In its decision to initiate proceedings under Article 88(2) in respect of a package of aid granted by
the Austrian authorities to Lenzing Lyocell, 102 the Commission noted that certain infrastructure
developments were made specifically for the benefit of this enterprise and questioned whether a
private investor operating a business park would provide company-specific development free of
charge.

199.
In particular with regard to site decontamination, the Commission takes into account the
polluter pays principle and, when applicable, the Community guidelines on state aid for environmental
protection. 103 In a case involving state funding provided to an Austrian company carrying out
decontamination work on a site, 104 the Commission decided that an economic advantage was
conferred on the site owner in the form of savings on decontamination costs. Under domestic law, the
landowner bears subsidiary liability after the polluter. In the case in point, the polluter was being
wound up and had ceased trading. It was thus possible to conclude that the polluter could no longer
derive any advantage from the decontamination.

200.
it was
In the wider context of the provision of state assistance to property developers,
considered in the case of the English Partnerships scheme 105 that funding provided in order to cover
the estimated gap between the value of the undeveloped asset plus the cost of its development and the
allegedly lower value of the finished project constituted state aid within the meaning of Article 87(1).
The funding made available under this scheme is meant to provide a quantifiable incentive to
investors/developers to carry out work on a site whose unattractive condition or location discourages
private investors.

101 Case N 461/97 (OJ C 149, 15.5.1998).
102 Case C 61/98 (ex NN 189/97), (OJ C 9, 13.1.1999).
103 OJ C 72, 10.3.1994.
104 Case C 24/98 (ex N 663/97) Kiener Deponie Bachmanning (OJ C 201, 27.6.1998).
105 Case E 2/97.

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201. The private investor principle has been applied regularly by the Commission. On the basis of
this criterion, the Commission assesses whether the State, when assisting public undertakings or private
undertakings partially owned by it, does so on more favourable terms than would a private investor
operating under normal market conditions. If so, the State’s action involves state aid within the
meaning of Article 87(1). The Court of First Instance delivered two rulings which refer to the
application of this criterion. In Cityflyer Express, 106 it held that, where the Commission concludes that
a private investor would not have acted on the terms on which the State has acted, it must further
examine which terms would have been satisfactory to the private investor. In BP Chemicals, 107 the
Court ruled that, even if the State has already twice acquired stakes in a company, thereby twice
granting state aid to that company, this should not automatically mean that a third capital injection
may not be considered on its own merits as an autonomous investment and be examined in the light of
the private investor criterion. In the case in question, however, considering that the first two capital
injections were not profitable, the Court asked the Commission to determine whether a private
investor would have made a third capital injection.

202. The Commission concluded in the Ponsal case 108 that no aid was involved in a waiver of public
debts on the occasion of this enterprise’s liquidation;
its conclusion was based on alternative
calculations submitted by the national authority confirming that other means of liquidation permitted
under national law would have entailed higher losses. The authorities also provided evidence that they
had complied fully with domestic insolvency law.

In assessing the selling price of a public steel company, 109 the Commission concluded, on the
203.
basis of a detailed examination of the two methods used by independent auditors, namely property
evaluation and future cash-flow evaluation, that the private investor criterion was met. Price levels
were calculated according to a pessimistic and an optimistic scenario; the actual price was deemed to
correspond to the market level because it fell within this range. The argument that added value was
obtained after the company’s flotation on the stock exchange serves to prove after the event that the
above analysis was valid, but is not sufficient evidence in itself that the private investor criterion was
met and therefore that the existence of aid could be ruled out.

204.
In deciding to initiate Article 88(2) proceedings in respect of the granting of preferential
electricity tariffs by the French public enterprise EDF to certain paper mills, 110 the Commission
examined, among other issues, whether there was any commercial logic in EDF’s behaviour. The
Commission doubted whether this discriminatory behaviour was justified by a commercial rationale,
i.e. vying with competitors for customers while at the same time managing to cover at least variable
and certain fixed costs.

205.
In two cases involving companies entrusted with the operation of a service of general economic
interest (the construction of the natural gas network and gas distribution in Denmark) 111 the
Commission concluded that a series of tax-relief measures granted to these companies constituted state
aid within the meaning of Article 87(1). The tax relief was offered to enterprises which had not been

106 Case T-16/96 Cityflyer Express Ltd v Commission [1998] ECR II-757.
107 Case T-11/95 BP Chemicals Ltd v Commission, not yet reported.
108 Case C 32/97 Porcelanas del Norte SAL (Ponsal)/Comercial Europa de Porcelanas SAL (Comepor), not yet

published in the Official Journal.

109 Case NN 83/98 Preussag Stahl AG, acquisition of the company by the German authorities, not yet published in the

Official Journal.

110 Case C 39/98 (ex NN 53/98), not yet published in the Official Journal.
111 Cases N 449a/97 and NN 50/98, not yet published in the Official Journal.

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chosen by a public tendering procedure, in order to offset their initial investment in the construction
and expansion of the natural gas system. However, the Commission decided to approve this aid on the
basis of Article 86(2) of the EC Treaty since it was demonstrated that application of the competition
rules would hinder performance of the particular tasks assigned to the recipients. In applying
Article 86(2), the Commission accepted that trade would not be affected to an extent contrary to the
Community interest, mainly because the measures in question would be renotified after 2000 in the
context of the implementation of the EU directive aimed at liberalising the internal gas market. 112

2. Origin of resources

206. On the topic of conferring an advantage through legislation, the Court of Justice examined a
number of joined cases in which an undertaking was exempted from compliance with the generally
applicable legislation on fixed-term employment contracts. 113 The Court concluded that
this
exemption did not transfer state resources directly or indirectly to the undertaking in question.

3. Specificity criterion

207.
It is important, especially in the case of taxation or social policy measures, to distinguish
between the situation whereby the beneficiaries are certain undertakings or the production of certain
goods, as specified in Article 87(1), and that whereby the measures in question have a cross-sectoral
impact and are intended to favour the whole of the economy. In the latter case, there is no state aid
within the meaning of Article 87(1), but a general measure.

In the Ladbroke judgment 114 the Court of First Instance had the opportunity to elaborate on
208.
the specificity criterion. The fact that aid awarded to an economic actor may indirectly benefit other
actors whose activities depend on the activity of the recipient does not suffice to conclude that the aid
is a general measure not caught by Article 87(1). It may possibly afford scope for allowing a derogation
on the basis of Article 87(3)(c) (aid to promote the development of certain economic activities). The
undertaking Pari Mutuel Urbain is exclusively competent to organise a specific type of betting on
horse racing in France and is subject to a tax regulation which is specific to the horse racing sector in
France. The Court agreed with the Commission that the special regulations which were being
examined in this case should not be regarded as a derogation from the general tax rules, but should be
viewed in the context of the tax system applied in the horse racing sector. Furthermore, it ruled that the
temporary or permanent nature of the measures was of no relevance to the interpretation of
Article 87(1). Also, the fact that the measures did not address an ad hoc operation was irrelevant in the
light of the established case-law that only the effects of aid matter in order to characterise it as state
aid, and not its causes or aims.

209.
Payments made to the redundant workers of an insolvent company after termination of their
employment contracts, in order to ensure more suitable unemployment cover for them constitute a
measure which gives them additional coverage going beyond the company’s legal obligations. The
Commission concluded in one case 115 that such a measure did not amount to state aid to the insolvent

112 Directive 98/30/EC of the European Parliament and of the Council of 22 June 1998 (OJ L 245, 4.9.1998).
113 Joined Cases C-52/97, C-53/97 and C-54/97 Viscido and Others v Ente Poste Italiane [1998] ECR I-2629.
114 Case T-67/94, referred to above.
115 Case C 44/97 (ex NN 78/97), aid in favour of the Spanish company Magefesa and its successors, not yet published

in the Official Journal.

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company, but to extraordinary assistance having a basic positive effect on the social protection position
of the workers.

210.
In July the Commission re-examined the preferential treatment of manufacturing over service
companies in the system of corporation tax in Ireland. In 1980, at a time when trade in services was less
liberalised than in the late 1990s, the Commission had considered that this treatment accorded to the
manufacturing sector, virtually the only sector open to competition, constituted a general measure. In
its decision of 22 July, 116 proposing appropriate measures under Article 88(1) of the EC Treaty, the
Commission decided that this preferential treatment constituted not only state aid but operating aid
which could no longer be authorised in the context of Ireland’s loss of 87(3)(a) assisted region status. It
therefore needed to be eliminated through the adoption of a unified tax rate for both the
manufacturing and the service sector of the economy.

4. Distortion of competition and effect on intra-community trade

211. As the Court of First Instance ruled in Flemish Region v Commission, 117 when the State confers
even a limited advantage on an undertaking which is active in a sector characterised by intense
competition, there is a distortion or risk of distortion of competition. In order to establish the impact
on trade between Member States it is sufficient to conclude that the beneficiary exercises, even
partially, activities involving significant trade between Member States.

212.
In the case of a British scheme concerning the extension of tax relief, namely the “non-fossil-
fuel obligation” in favour of electricity generators using renewables, 118 the Commission considered
that trade in electricity between Member States was likely to be affected, notably as regards trade
between the UK and France via the cross-Channel link.

213. Aid to enterprises in support of foreign direct investment may affect trade between Member
States. It is possible that competitors of the recipient may be trying to increase their market share in
the third country in question unaided. This position was confirmed in the Commission’s negative final
decision on the first notified case of foreign direct investment aid granted to a large enterprise. 119 The
Commission examined whether the derogation in Article 87(3)(c) could apply. It should be noted that
it is the Commission’s practice to authorise foreign direct investment aid to small and medium-sized
enterprises if it is granted within the terms of the guidelines on state aid to SMEs.

116 Cases E 1/98 and E 2/98 (OJ C 395, 18.12.1998).
117 Case T-214/95 [1998] ECR II-717.
118 Case N 153/98, not yet published in the Official Journal.
119 Case C 77/98 (ex 99/97), direct investment in China by the Austrian company LiftGmbH, not yet published in the

Official Journal; see Chapter C 3 below.

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C — Assessing the compatibility of aid with the common market

1. Horizontal aid

1.1. Research and development

214.
In applying the 1996 Community framework for state aid for research and development, 120 the
Commission is particularly concerned to ensure that the aid notified to it is actually granted to research
and development projects and acts as an incentive for these projects to be carried out. In 1998 the
Commission initiated Article 88(2) proceedings in several cases involving aid for research and
development where there were doubts about at least one of these conditions; these were in the fields of
electronics (Sican 121), paper (KNP Leykam 122), packaging (Biotec Biologische Naturverpackungen
GmbH 123) and printers (Oce´ NV 124).

215.
In the Sican case, the Commission, following complaints, found that aid of more than
ECU 100 million had been disbursed without having been notified by the German authorities.
Moreover, the information provided by those authorities was not such as to enable the Commission to
assess the aid’s compatibility with the Community framework on R&D aid. In the Oce´ case, the
Commission decided to launch a formal investigation as it had serious doubts about whether the work
which had been carried out could be defined as research and development: the information provided
to the Commission suggested that the aid planned by the,tch authorities was for work which was very
close to the market and which could not therefore be defined as research and development within the
meaning of the Community framework. The Austrian authorities decided to abandon their plans for
KNP Leykam. The German authorities also decided to withdraw their notification in the Biotec case,
finding that part of the aid came under a scheme previously approved by the Commission and deciding
to withdraw the rest of the aid.

216.
In numerous other cases, the Commission found that the notified aid met the criteria laid down
in the Community R&D framework (in particular as regards the research and development character
of the projects and the incentive effect of the aid) and was therefore compatible with the EC Treaty.
An example is the Commend case notified jointly by the Dutch 125 and French 126 authorities: this
Eureka project involves Austrian, Belgian, Dutch, French and German manufacturers and has as its
objective the acquisition of know-how which is largely upstream of the development of marketable
products. The project corresponds to industrial research within the meaning of the framework. The aid
granted by the, Dutch and French Governments should enable cooperation at Community level on an
ambitious technological project which will also allow widespread diffusion of its results. The
Commission therefore considered that the planned aid was an incentive to the recipients to step up
their R&D efforts and to cooperate on work which was more ambitious and involved higher risks than
the work they would otherwise have carried out.

120 OJ C 45, 17.2.1996.
121 Case C 20/98 (ex-NN 166/97, NN 169/97 and NN 170/97) (OJ C 307, 7.10.1998).
122 Case C 23/98 (ex-N 895/96) (OJ C 296, 24.9.1998).
123 Case C 8/98 (ex-N 237/97 and NN 151/97) (OJ C 219, 15.7.1998).
124 Case C 18/98 (ex N 939/96) (OJ C 270, 29.8.1998).
125 Case N 506/97 (OJ C 192, 19.6.1998).
126 Case N 664/97 (OJ C 192, 19.6.1998).

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1.2. Employment and training

217. One of the major challenges facing the Community is finding ways to improve the employment
situation. Promoting a “high level of employment” has become a matter of common concern to
Member States. The new Title on employment that is to be inserted in the EC Treaty requires Member
States to develop a coordinated strategy for employment and for promoting a skilled, trained and
adaptable workforce and labour markets responsive to economic change. The important part played by
training, both in enhancing the Community’s competitiveness and in creating and maintaining jobs, has
encouraged Member States to promote investment in training. The Commission has set up various
initiatives in the training sphere. It has endeavoured to integrate the training dimension and its
favourable approach thereto into other Community policies, including competition policy.

218. On 22 July the Commission adopted a framework on training aid. 127 This specifies in which
circumstances public financing provided to firms for the purpose of training their workers may fall
within the scope of the competition rules relating to state aid. Only a very small proportion of public
financing provided for training workers is actually covered by the framework. Most state measures in
this field do not constitute aid pursuant to Article 87(1), but rank as general measures. This applies to
measures directly targeted at workers irrespective of the firm in which they work or to measures which
are open to all firms without discriminating, for example, through tax incentives. This kind of measure
does not raise any competition concerns and is, on the contrary, encouraged by the Commission.

219. However, where state assistance benefits certain firms only by reducing the costs they would
normally have to bear in order to train their workers, this gives them an advantage over their
competitors and is therefore likely to distort competition. The framework sets out the criteria which
the Commission will use to assess the compatibility of such aid with the common market. The criteria
are intended to avoid distortions of competition between firms where such distortions cannot be
justified by the training objectives.

220. When assessing compatibility, the Commission takes a very favourable view of aid which
effectively benefits workers and improves their employability. Training providing workers with skills
that are readily transferable to other firms effectively increases their employability. Authorisable aid
amounts are therefore greater for this kind of measure than for company-specific training which is of
less benefit to the workers themselves.

The Commission also considers that lower levels of spending on training in small and medium-sized
enterprises and in the most disadvantaged areas, and the difficulties faced by certain categories of
worker on the labour market, may justify larger amounts of aid.

These principles are reflected in a range of intensity thresholds below which aid may be considered
compatible with the common market. The thresholds vary between 25% of expenditure by large firms
on specific training projects and 90% of expenditure on general training projects by SMEs in
Article 87(3)(a) areas whose workers are considered to be at a disadvantage on the labour market.

127 OJ C 343,11.11.1998.

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1.3. Environment

In 1998 the Commission had various opportunities to further clarify its interpretation of the
221.
guidelines on state aid for environmental protection. 128 On one occasion,
it stressed that
environmental considerations did not justify aid exceeding the intensity authorised for regional aid
where the recipient did no more than adapt its plant to the legal requirements, notwithstanding the fact
that those requirements were particularly strict because the plant was situated in a nature reserve. 129

222. The Commission authorised for limited periods of up to five years operating aid for the use of
renewable forms of energy. 130 Also, in several Dutch cases with regard to environmental taxes on
waste treatment, 131 the Commission applied its practice of approving under certain conditions
operating aid for environmental purposes.

1.4. Rescue and restructuring aid

223. Aid for rescuing and restructuring firms in difficulty accounts for a high proportion of the aid
given to individual recipients on an ad hoc basis. The sixth state aid survey, 132 published in July and
covering the period 1994-96, found that the high levels of ad hoc aid in the manufacturing, financial
services and air transport sectors reported in the fifth survey had continued. The Commission remains
concerned at this trend, given the particular distortions which can be caused by the maintenance in
existence of firms which would otherwise exit the market.

224. The Commission continued to work on tightening the guidelines on aid for rescuing and
restructuring firms in difficulty. Pending completion of this process the Commission extended the
validity of the existing guidelines 133 until March 1999. 134 In applying the guidelines the Commission
has in many cases made clear that aid for restructuring cannot be found compatible with the common
market if there is no viable restructuring plan.

2. Regional aid

225.
In December, in accordance with its decision taken in December 1997 when it set the ceiling for
regional aid coverage for the period from 2000 to 2006 at 42.7% of the Union’s population, the
Commission updated the national coverage ceilings on the basis of the most recent data (1994-96 for
per capita GDP and 1995-97 for unemployment). It has informed Member States of their respective
ceilings. They are now in possession of all the information they need to notify their regional aid maps,
which will be valid for the period from 2000 to 2006. They have been asked to do so before 31 March
1999, so that the exercise can be completed in good time, failing which no regional aid can be granted
after 31 December 1999.

128 OJ C 72, 10.3.1994.
129 Case C 41/96, Netherlands, aid in favour of the construction of a hydrogen peroxide factory (OJ L 171, 17.5.1998).
130 Cases N 752/97, green electricity, not yet published in the Official Journal, and N 153/98, non-fossil-fuel

obligation for renewables, not yet published in the Official Journal.

131 Cases N 513, 755 and 754/97 (OJ C 156, 21.5.1998) and Case N 813/97, not yet published in the Official Journal.
132 COM(1998) 417 final.
133 OJ C 368, 23.12.1994.
134 Act of extension published in OJ C 74, 10.3.1998.

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Following the adoption of the guidelines on national regional aid in December 1997, the
226.
Commission has been examining all schemes notified since then in the light of the new rules; however,
it has not applied the new intensities, which will enter into force on 1 January 2000. Moreover, with a
view to ensuring equal treatment and pursuant to Article 88(1) of the Treaty, it proposed appropriate
measures to the Member States in February with two objectives in mind: first, to set an expiry date of
31 December 1999 for the current maps of areas eligible for regional aid so that they would have a
uniform expiry date which also matched that of the Structural Funds, and second, to amend, if
necessary, all existing schemes due to remain in force after 31 December 1999 so as to ensure that they
are applied in a manner consistent with the new rules as from 1 January 2000. All the Member States
accepted these appropriate measures. In cooperation with them, the Commission is monitoring the
measures’ implementation.

227. This year the Commission took the last two decisions on regional maps in the Member States
drawn up under the previous regional aid guidelines. 135 The countries concerned are Sweden 136 and
Austria. 137 The maps in question will expire on 31 December 1999. The Commission also approved the
new regional aid scheme for Greece, concerning the granting of national regional aid throughout the
country. 138

3. Aid to outward foreign direct investment

228. Government support measures for foreign direct investment constitute state aid. Nevertheless,
they may be compatible with the common market if, apart from their effect on the competitiveness of
Community industry, they promote other Community objectives such as the development of SMEs.
When assessing aid to outward foreign direct investment by SMEs, the Commission therefore
continued to apply the guidelines on aid to SMEs.

229. Aid to large firms, however, is assessed on a case-by-case basis. In the LiftGmbH case 139 the
Commission took a negative decision on aid for an investment in China. It found that the aid might
affect the competitive situation of European competitors in the relevant market. In its decision to
initiate the proceedings the Commission had announced that it would check, among other criteria, the
necessity of the aid and its intensity in the light of the international competitiveness of the European
industry and/or the risks involved for an investment project in certain third countries. The Member
State failed to prove that, for a global player with a turnover of ECU 180.5 million, aid amounting to
ECU 0.13 million was a necessary precondition for establishing a factory in China, where the company
had already rented premises.

With this decision the Commission has no intention of prejudging its future policy on state aid in
support of foreign direct investment. It does not rule out the possibility that foreign direct investment
by large undertakings may be eligible for state aid where it can be established that the project in
question does not create an incompatible distortion of competition within the EEA. Furthermore, in
this context, any potential element of export subsidisation should be carefully examined in the light of
the Community’s international obligations and, in particular, the prohibition of export subsidies
contained in the WTO Agreement on Subsidies and Countervailing Measures (ASCM).

135 OJ C 212, 12.8.1988.
136 N 65/97 (OJ C 89, 25.3.1998).
137 N 482/98, not yet published in the Official Journal.
138 NN 59A/98, not yet published in the Official Journal.
139 C 77/98 (ex 99/97), referred to above.

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4. Sectoral aid

4.1. Sectors subject to specific rules

4.1.1. Shipbuilding

230. The Commission’s commitment to phasing out operating aid for shipbuilding was impeded by
the continued absence of ratification of the OECD shipbuilding agreement by the United States. In
June the Council therefore adopted a regulation establishing new rules on aid to shipbuilding 140 to
succeed the seventh Council Directive on aid to shipbuilding. It will enter into force on 1 January 1999
and will apply until 31 December 2003. It will lead to a shift away from operating aid (which will be
abolished at the end of 2000) to other forms of support such as closure aid, aid for research and
development and environmental protection, restructuring aid, regional investment aid for improving
the productivity of existing installations, and investment aid for innovation. The current ceilings for
operating aid of 9% (4.5% for smaller vessels and conversions) will be maintained until their abolition
on 31 December 2000. The regulation provides for the Commission to undertake a regular review of
the market situation.

231. On 21 January and on 29 July the Commission submitted its first two monitoring reports to the
Council on the restructuring of the publicly owned shipyards in Spain and of MTW-Schiffswerft and
Volkswerft Stralsund in Germany. 141 The reports provided information on the progress made in
implementing the restructuring plans and on compliance with the conditions attached to the
Commission’s approval of the associated aid such as capacity reductions and limitations on production.

With respect to compliance with capacity limitations the Commission found reason to initiate the
procedure provided for in Article 88(2) of the Treaty to examine the exceeding of new building
capacity limitations by the German yard Kvaerner Warnow Werft. 142

232. One of the few opportunities the Commission has had to address the misuse of previously
approved aid by the recipient was in the negative final decision concerning the misuse of ECU 400
million by Bremer Vulkan Group. 143 Bremer Vulkan had received the aid on condition that it be used
exclusively for the restructuring of its two East German shipyards MTW Schiffswerft Wismar and
Volkswerft Stralsund. In fact, the ECU 400 million was used for other purposes, mainly for the benefit
of other subsidiary companies of Bremer Vulkan Verbund AG that had become insolvent in the
meantime. The Commission decided that the German Government should recover the misused aid as
part of the insolvency proceedings. In addition, the German Government should take all suitable steps
to recover any partial amounts from companies previously belonging to the Bremer Vulkan Group.

233. The Commission also placed under scrutiny the control of development aid in shipbuilding,
where it is often not easy to verify whether the conditions are subsequently complied with. In February
the Commission partly terminated the procedure with a negative decision in a case in which Germany
had granted development aid in connection with the building of a dredger by Volkswerft Stralsund and

140 Council Regulation (EC) No 1540/98 of 29 June 1998 establishing new rules on aid to shipbuilding (OJ L 202,

18.7.1998).

141 SEC(1998) 71 final and SEC(1998) 1313 final.
142 Case C 66/98 (ex NN 113/98), not yet published in the Official Journal.
143 Case C 7/96.

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its sale to PT Rukindo in Indonesia. 144 The development project had been approved by the
Commission in 1994 on condition that the vessel be used only in Indonesia. However, since 1995 the
vessel had been employed in Malaysia for more than 300 days. The Commission considered that the aid
had been misused and that it was incompatible with Article 4(7) of the shipbuilding aid Directive. It
therefore requested that the development aid be repaid with interest.

234.
In May the Commission initiated proceedings under Article 88(2) in respect of a French
development aid project. 145 The aid was to be granted in connection with the sale of two cruise vessels
by Chantiers de l’Atlantique to Renaissance Financial, which employ the vessels in French Polynesia.
Renaissance Financial was domiciled in Paris and was a subsidiary of the American company
Renaissance Cruise Inc. When assessing development projects the Commission checks that the actual
shipowner is domiciled in the beneficiary developing country. Since in this case the owner was
domiciled in Paris, the Commission was not satisfied that the aid proposal complied with the
requirement. Also, the Commission was not convinced that the project had a genuine development
content, given that the immediate beneficiaries were the investors investing in the company in Paris. In
fact, it appeared that French Polynesia would benefit only in the sense that from time to time
passengers would visit the islands.

4.1.2. Steel

In 1998 the Commission continued to apply the sixth Steel Aid Code. 146 No use has yet been
235.
made of the new possibility to grant aid for partial closures; however, several companies have taken
advantage of the new provisions on environmental protection, which allow greater aid amounts for
companies whose investment results in a significantly higher level of environmental protection than
that required by mandatory standards. None the less, the Commission has taken negative decisions
where it has found that aid does not pursue the objectives laid down in the Code. This applies, for
example, to the ESF Feralpi case, 147 in which the Commission ordered that the aid be recovered,
considering that it was not possible to make a distinction between different types of activity within an
ECSC company and that aid approved by the Commission for a stated purpose could not be used for
other purposes.

4.1.3. Coal

236. On 3 June the Commission took three decisions concerning the coal industry in Spain. First, it
authorised 148 Spain to grant supplementary financial assistance for the 1994, 1995 and 1996 financial
years totalling ECU 416.7 million (ESP 67 053 million). Of this amount, ECU 127.1 million
(ESP 20 452 million) was linked to current production, while ECU 289.6 million (ESP 46 601 million)
went to cover inherited liabilities. Furthermore, the Commission authorised 149 the grant of financial
assistance for the 1997 financial year totalling ECU 1 068.3 million (ESP 177 234 million). Of this
amount, ECU 704.5 million (ESP 116 877 million) was linked to current production, while

144 Case C 22/97, German development aid to Indonesia, not yet published in the Official Journal.
145 Case C 37/98 (ex N 124/98) (OJ C 307, 7.10.1998).
146 Commission Decision 2496/96/ECSC establishing Community rules on state aid to the steel industry (OJ L 338,

28.12.1996).

147 Case C 75/97, not yet published in the Official Journal.
148 Decision 98/635/ECSC (OJ L 303, 13.11.1998); see also 1997 Competition Report, point 240.
149 Decision 98/636/ECSC (OJ L 303, 13.11.1998).

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ECU 363.8 million (ESP 60 357 million) went to cover inherited liabilities. Finally, it approved 150 aid
for 1998 totalling ECU 1 164.8 million (ESP 193 817 million). Of this amount, ECU 762.3 million
(ESP 126 855 million) is linked to current production, while ECU 402.4 million (ESP 66 962 million)
covers inherited liabilities.

237. On 20 July the British coal producer RJB Mining plc filed an action before the Court of First
Instance of the European Communities to obtain annulment of the decisions concerning Spain. 151

238. On 10 June the Commission authorised 152 Germany to grant financial assistance for the 1997
financial year totalling ECU 5 331.2 million (DEM 10 470.4 million). Of
this amount,
ECU 4 919.1 million (DEM 9 661.2 million) was linked to current production, while
ECU 412.1 million (DEM 809.2 million) went to cover inherited liabilities. On 20 July RJB Mining
filed an action against this decision also before the Court of First Instance to obtain its annulment. 153

239. On 29 July the Commission, following two complaints lodged by a British anthracite producer,
declared 154 illegal the use of ECU 7.1 million (DEM 13.55 million) in state aid granted by Germany
and originally authorised 155 for the 1996 financial year. ECU 3.5 million (DEM 6.8 million) in state aid
granted by Germany for the 1997 financial year before the relevant Commission decision had been
taken has also been declared illegal. The recipients (Preussag Anthrazit GmbH and Sophia Jacoba
GmbH) have been paying back the aid.

240. On 29 July the Commission authorised 156 the acquisition of Saarbergwerke GmbH and
Preussag Anthrazit GmbH by Ruhrkohle AG. The new company, Deutsche Kohle AG, will control all
German coal production. On 29 September RJB Mining brought a further action before the Court of
First Instance for annulment of this decision. 157

241. On 2 December the Commission, having examined the German coal industry restructuring plan
for the years 1998-2002, authorised 158 Germany to grant financial assistance for the 1998 financial year
totalling ECU 4 803.6 million (DEM 9 427 million). Of this amount ECU 4 288.4 million
(DEM 8 416 million) is linked to current production, while ECU 515.2 million (DEM 1 011 million)
covers inherited liabilities.

4.1.4. Motor vehicle industry

242.
In 1998 the Commission applied the new Community framework for state aid to the motor
vehicle industry. 159 Among the decisions taken in the course of 1998, the following may be mentioned.

150 Decision 98/637/ECSC (OJ L 303, 13.11.1998).
151 Case T-111/98 R.
152 Decision 98/687/ECSC, OJ L 324, 2.12.1998).
153 Case T-110/98 R.
154 Decision not yet published in the Official Journal; see also 1997 Competition Report, point 241.
155 Decision 96/560/ECSC (OJ L 244, 25.9.1996).
156 Decision not yet published in the Official Journal.
157 Case T-156/98 R.
158 Decision not yet published in the Official Journal.
159 OJ C 279, 15.9.1997.

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243. The Commission decided 160 not to raise any objections to training aid granted by the
Portuguese Government to AutoEuropa, a joint venture set up in 1991 by Ford and Volkswagen near
Setubal. The Commission had approved regional investment aid and training aid for the plant to be
built and brought into operation. The implementation of the 1991 decision approving this aid was
monitored and it was found that the company had continued to receive training aid after the launch of
production in 1995. With the cooperation of the Portuguese authorities and the company, the sums paid
out in excess of those allowed under the framework on training aid have been recovered.

244. The Commission approved regional aid totalling ECU 38 million to be granted to LDV Ltd for
an investment project involving the manufacture of a new range of vans in a joint venture with
Daewoo. 161 The investment will be made in an LDV plant in Birmingham, United Kingdom. This is
the first decision adopted under the current motor vehicle industry framework involving an alternative
site in a central or eastern European country. Instead of concentrating all its European production of
light commercial vehicles at its plant in Lublin, Poland, Daewoo has decided to use LDV’s existing
facilities in Birmingham to manufacture some of the vehicles.

245. The Commission continued to monitor the restructuring plans for Seat SA 162 and Santana
Motor SA 163 in Spain, together with major investment projects whose implementation is spread out
over several years, and payments made by the national authorities in the Fiat Mezzogiorno 164 case in
Italy.

4.1.5. Synthetic fibres industry

246.
In 1998 the Commission continued to be vigilant in applying the latest code on state aid to the
synthetic fibres industry, which came into force in 1996 for a period of three years. 165 The Commission
decided on 16 December to extend the validity of the code until August 2001, at which point a decision
could be taken on whether or not to bring the industry within the scope of the multisectoral framework
on regional aid to large investment projects. 166 Among the decisions taken this year the following may
be mentioned.

247. The Commission decided to terminate the Article 88(2) proceedings it had initiated in March
1997 in respect of the Portuguese Government’s proposal to award aid for investments by the rope and
cord producer Cordex SA. 167 In the course of the proceedings the Portuguese authorities agreed to
modify their original notification by omitting from the list of eligible costs those activities which came
within the scope of the code, including support for new capacity for the extrusion of polypropylene
filament yarn. Since the project fell within an approved scheme, the Commission was able to authorise
aid totalling ECU 2.69 million.

248. On 25 March the Commission decided to initiate Article 88(2) proceedings in respect of the
Spanish authorities’ proposal to award state aid amounting to ECU 1.2 million to the synthetic fibres

160 Case NN 36/97 (OJ C 208, 4.7.1998).
161 Case N 420/98, not yet published in the Official Journal.
162 Case C 34/95, 96/257/EC (OJ L 88, 5.4.1996).
163 Case C 1/95, 97/17/EC (OJ L 6, 10.1.1997).
164 Case C 45/91 (OJ L 117, 13.5.1993).
165 OJ C 94, 30.3.1996.
166 OJ C 24, 29.1.1999.
167 Case C 17/97(ex N 639/96) (OJ C 207, 3.7.1998).

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producer Brile´ n SA. 168 The investment project concerned the technological rationalisation and
upgrading of the company’s polyester yarn production plant. Since the project appeared to involve an
increase in capacity for one of the fibres covered by the code on aid to the synthetic fibres industry
(polyester filament yarn), the Commission had doubts about whether the proposed aid would fulfil the
authorisation criteria laid down in the code.

249. The Commission decided to initiate Article 88(2) proceedings in respect of the German
authorities’ proposal to award state aid for a greenfield investment by a newly created company
Saxonylon Textil GmbH, 169 a subsidiary of the Singaporean Toloram Group. The aid would support an
increase in capacity of polyamide, textile and industrial filament yarn. Furthermore, it was proposed to
award the maximum regional aid intensity permitted in the former East Germany and the aid did not
seem likely to contribute directly to the restructuring and reduction of capacity in the synthetic fibres
industry as a whole in that region.

250.
Finally, the Commission decided to terminate with a final partly negative decision Article 88(2)
proceedings initiated in October 1997 in respect of aid granted to the viscose and synthetic fibres
producer SNIACE SA. 170

4.1.6. Textiles and clothing

251.
In view of the specific nature of the textile and clothing industry, the multisectoral framework
on regional aid for large investment projects, 171 which entered into force on 1 September, provides for
specific treatment of this sector. An aid measure in support of new investment in the textile industry
must be notified individually if the overall project cost exceeds ECU 15 million (instead of the of
ECU 50 million project-cost threshold for other sectors), the intensity exceeds 50% of the eligible
ceiling in the region in question and the aid per job created or maintained exceeds ECU 30 000
(instead of ECU 40 000). 172

4.1.7. Transport

252.

In 1998 the Commission adopted 35 decisions on aid in the transport sector.

Air transport

In the air transport sector, the Commission continued to monitor compliance with the

253.
conditions laid down in decisions authorising restructuring aid to airlines:

254. On 3 June it decided not
the second instalment, worth
ECU 258.23 million (ITL 500 billion), of an increase in the capital of Alitalia. This decision followed
the positive decision adopted on 15 July 1997 with regard to a capital increase for the company
totalling ECU 1420,26 million (ITL 2 750 billion) payable in three instalments provided certain
that
conditions were met, ensuring in particular that

the restructuring plan was monitored,

to payment of

to object

168 Case C 25/98 (ex N 851/97) (OJ C 199, 25.6.1998).
169 Case C 63/98 (ex N 362/98), not yet published in the Official Journal.
170 Case C 68/97 (ex NN 118/97), not yet published in the Official Journal.
171 OJ C 107, 7.4.1998.
172 See 1997 Competition Report, point 210.

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arrangements for its implementation were transparent and that Alitalia’s problems were not passed on
to its competitors. While stressing the importance of making good the delays in cost reductions,
particularly with regard to crews, the Commission found that the restructuring plan had been
implemented satisfactorily and that Italy had given further undertakings intended both to ensure that
the aid would not be used to finance promotional campaigns and to enable competing airlines to
benefit from traffic rights to non-EEA countries.

255. On 14 August the Commission authorised restructuring aid to Olympic Airways comprising
loan guarantees, a reduction in the airline’s debt and a capital injection. This aid, initially authorised in
October 1994, had been partially frozen for more than two years owing to the Greek Government’s
failure to comply with certain conditions of the authorisation decision. The Commission was satisfied
that the Greek authorities were now acting in accordance with the undertakings given and that the aid,
which is part of a revised restructuring plan extended until 2002, was compatible with the competition
rules. However, it reduced the authorised capital injection from ECU 165 million (GRD 54 billion) to
ECU 125 million (GRD 40.8 billion), extended until 2002 the conditions initially laid down and made
its decision subject to compliance with further conditions.

256.
Following the annulment by the Court of First Instance of the Commission decision of
27 July 1994 173 authorising the recapitalisation of Air France to the tune of ECU 3.05 billion
(FRF 20 billion), owing to insufficient reasoning on two points, one relating to the purchase of new
aircraft and the other to the competitive position of Air France on routes outside the European
Economic Area, the Commission decided on 22 July to adopt a new decision authorising the same
amount and clarifying its position regarding the two points raised by the Court. It stressed first of all
that the aid was granted in the context of a restructuring plan considered convincing by the Court, that
the air transport sector was expanding rapidly, that there was no change in the number of seats offered
by Air France and that all the aid granted to the airline was intended to reduce its debt burden and not
to finance the purchase of new aircraft. Secondly, the Commission pointed out that the general
conditions laid down offered sufficient guarantees in themselves with regard to the non-EEA routes, in
particular since they involved a reduction in market share throughout the world, since the aid had a
much greater effect on the competitive situation for intra-EEA routes than for other routes, and since
too tight a restriction on Air France’s capacity on non-EEA routes would essentially benefit the
airlines of non-member countries.

257.

In cases other than those involving restructuring aid, the Commission authorised the following:

— on 29 July, pursuant to Article 87(2)(a), social aid to residents of the Canary and Balearic islands
for intra-archipelago flights; a similar decision was adopted on 27 August in respect of aid granted
to residents of Madeira for flights between the island and the rest of Portugal; and

— on 11 November, under the Community guidelines on state aid for environmental protection, a
grant of ECU 150 944 (NLG 332 637) awarded by the Netherlands to Martinair for the installation
of new equipment designed to reduce pollutant emissions.

258. However, on 21 January the Commission adopted a negative final decision in respect of two
grants of ECU 24 407 and 6 696 respectively (BEF 984 600 and 270 116) to be paid by the Flemish
Region to the airline Air Belgium and the tour operator Sunair in exchange for their using Ostend
airport. None the less, the Commission did not oppose the payment to Sunair of a sum of ECU 111 500

173 Joined Cases T-371/94 and T-394/94 British Airways and Others v Commission [1998] ECR II-2405.

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(BEF 4.5 million) corresponding to the financing by the Flemish Region of a campaign to promote
Ostend and Antwerp airports.

Sea transport

259.
In the maritime transport sector, the Commission authorised, pursuant to the Community
guidelines on state aid to maritime transport, 174 several aid schemes designed to reduce tax and social
security contribution burdens on shipping companies. Where tax relief schemes were applied to
companies part of whose fleet operated under a non-Community flag, the Commission asked the
Member States concerned, in accordance with the guidelines, to submit a report enabling it to assess
the effects of the aid scheme on the Community-registered fleet and on the employment of Community
seafarers.

By a decision adopted on 7 April the Commission initiated Article 88(2) proceedings in respect of
several aid measures connected with the restructuring of the French shipping company Brittany Ferries
owing, on the one hand, to serious doubts about the positive effect of the measures on the company’s
viability and, on the other, to the risk of distortion of competition between shipping companies from
different Member States. On 9 December the Commission decided to extend the proceedings to
include a plan to grant FRF 80 million more in aid to Brittany Ferries and any other additional aid
granted in connection with the company’s restructuring.

On 18 February the Commission also initiated Article 88(2) proceedings in respect of aid granted by
Spain to the shipping company Transmediterra´ nea under a public service contract which the company
had with the Spanish State. The Commission had doubts about the terms of the contract and the
circumstances in which it was awarded.

On 9 December the Commission initiated Article 88(2) proceedings in respect of various presumed aid
measures to the French company Corsica Marittima, a subsidiary of SNCM, a shipping company with
public service obligations to provide transport between Corsica and mainland France.

On the same day the Commission adopted a negative final decision in respect of measures planned by
the Irish Government to reduce the labour costs borne by shipowners as a consequence of employing
Community seafarers on board their ships. Contrary to the requirements of the Community guidelines
on state aid to maritime transport, ships other than only those registered in a Member State would
benefit from the measures and the Commission therefore considered them to be incompatible with
Article 87 of the Treaty.

Port sector

On 22 December the Commission initiated proceedings under Article 88(2) of the Treaty in respect of
aid measures to reduce operating costs for port companies in Italy. The Commission had serious doubts
about the compatibility of the measures, which supplement those intended for the restructuring of the
Italian port sector, themselves the subject of a parallel investigation under Article 88 (2).

174 OJ C 205, 5.7.1997.

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Rail transport

260.
In the rail transport sector, the Commission decided on 22 December not to object to a plan to
grant aid notified by the British authorities and involving additional measures to finance the
construction, maintenance and management of the CTRL, the rail infrastructure for high-speed trains
between London and the Channel Tunnel. In assessing the notified aid, the Commission drew a clear
distinction between aid to the infrastructure manager and aid to the train operator. Since the CTRL
forms part of the Paris-Brussels-Cologne-Amsterdam- London line, one of the 14 priority projects in
the context of the development of trans-European networks, the Commission considered that the
measures to assist the infrastructure manager were compatible with the common market pursuant to
Article 87(3)(b) of the Treaty. Regarding the aid for the train operator, the Commission took account
of the fact that the aid was intended to offset infrastructure utilisation charges, and it therefore
authorised the aid pursuant to Article 3(1)(b) of Regulation (EEC) No 1107/70.

Road transport

261.
In the road transport sector, the Commission decided on 4 February to initiate proceedings
under Article 88(2) of the Treaty in respect of a toll-relief system on the Tauern motorway in
Austria, 175 since the measures constituted operating aid. It also decided on 25 March to initiate
proceedings in respect of aid to road haulage and combined transport in Italy, 176 given its doubts about
the admissibility of the measures under Article 87(3)(c) of the Treaty.

262. On 1 July the Commission adopted a partly negative final decision on a Spanish aid scheme for
the purchase of industrial vehicles. It considered that the aid granted to public bodies and public
service providers at local level and to natural persons and SMEs in sectors other than transport which
conducted local or regional business only did not constitute aid within the meaning of Article 87(1) of
the Treaty. All other aid granted by the Spanish authorities was considered incompatible and the
Commission therefore ordered its recovery. On 28 October the Commission decided to initiate
proceedings in respect of the extension of the same scheme in 1997.

263. Lastly, in its White Paper Fair payment for infrastructure use 177 adopted on 22 July, the
Commission stressed the growing importance of the role played by state aid rules as Member States
turn more to private companies for the development and management of transport infrastructures. In
this context, the Commission intends to clarify and update its approach to aid in the inland transport
sector by proposing a revision of Council Regulation (EEC) No 1107/70. 178

175 OJ C 198, 24.6.1998.
176 OJ C 211, 7.7.1998.
177 COM(1998) 466 final.
178 OJ L 130, 15.6.1970 (Special Edition 1970 (II), p. 360).

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4.1.8. Agriculture

264.
In 1998 several new rules entered into force regarding state aid in the agricultural sector:
Community guidelines for rescuing and restructuring firms in difficulty, 179 and rules on aid for research
and development 180 and on subsidised short-term operating loans in agriculture. 181 Concerning aid for
rescue and restructuring, it is interesting to note that no Member State, when notifying these aid
measures, has so far requested the application of the special rules devised for the agricultural sector
(point 3.2.5. of the Community guidelines). The few notifications concerning this type of aid were
based on the general rules applicable to all sectors.

265. No particular problems were raised by the application of the new rules for research and
development, requiring compliance with the following criteria: 1) general interest of the project for the
specific sector concerned; 2) need to spread information in adequate publications at least of national
relevance and not restricted to members of specific organisations; 3) availability of the results of the
work to all interested parties; and 4) compliance with the conditions laid down in Annex II (“Domestic
support: the basis for exemption from the reduction commitments”) to the Agreement on agriculture
concluded in the course of the Uruguay Round of multilateral trade negotiations. 182

266. More problematic was the entry into force of the rules concerning subsidised short-term
operating loans. By letter dated 19 December 1997 183 the Commission informed the Member States
that, starting from 30 June 1998, the Commission communication on subsidised short-term loans in
agriculture, 184 as interpreted by Commission letter dated 19 December 1997, 185 would enter into force
again and that the procedure pursuant to Article 88(2) of the EC Treaty would be initiated in respect of
the aid which would come into or remain in force after 30 June 1998 and which did not comply with the
new rules. This, strictly speaking, meant that the new rules would be applicable to national
contributions to pay interest on short-term loans expiring after 30 June 1998. Notwithstanding the
request of a Member State, the Commission refused to postpone again the entry into force of the
communication, and initiated the procedure provided for in Article 88(3) of the EC Treaty against an
Italian regional aid scheme which did not seem to comply with the new rules, as interpreted by the
Commission. Other national regional draft schemes were notified, but their examination, for the time
being, is still pending.

4.1.9. Fisheries

267. The guidelines for the examination of state aid to fisheries and aquaculture form the basis on
which the Commission has been able to assess both planned aid and aid which has existed since 1985.
The guidelines were based to a large extent on the currently applicable structural legislation, Council
Regulation (EC) No 3699/93 of 21 December 1993 laying down the criteria and arrangements

179 OJ C 283, 19.9.1997.
180 Commission communication amending the Community framework for state aid for research and development

(OJ C 48, 13.2.1998).

181 Commission Communication on subsidised short-term loans in agriculture (OJ C 44, 16.2.1996, as interpreted by

Commission letter dated 19 December 1997 (SG(97)D/10801)).

182 OJ L 336, 23.12.1994.
183 SG(97)D/10801.
184 OJ C 44, 16.2.1996.
185 SG(97)D/10801.

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regarding Community structural assistance in the fisheries and aquaculture sector and the processing
and marketing of its products. 186

4.2. Specific sectors not subject to special rules

4.2.1. Financial sector

268.
Following a request by the Amsterdam European Council of June 1997, and on the basis of
answers to a questionnaire submitted to Member States, the Commission drew up a report on ‘services
of general economic interest in the banking sector’. The report was submitted to the Council meeting
on economic and financial affairs on 23 November.

269. The report examines whether, in the different Member States, credit institutions render services
of general economic interest and whether the provision of a comprehensive and efficient financial
infrastructure is deemed to constitute such a service. The report also examines the necessity of an
exception under Article 86(2) of the EC Treaty for any such tasks and the comparability of situations in
the different Member States.

The information received from the Member States suggests a distinction between three types of
activity, which are consequently discussed in the report:

(i)

(ii)

(iii)

The provision of a comprehensive, efficient financial infrastructure for the entirety of their
territories is considered by two Member States to be a service of general economic interest.
However, no Member State claimed that such overall territorial coverage entails extra costs
which would have to be compensated by the public authorities. Only Sweden compensates a
credit institution for the extra cost of operating branches in remote areas.

Aid granted to certain credit institutions in order to perform special tasks on behalf of the State,
e.g. granting social housing loans, might fall under Article 86(2) of the EC Treaty. An
examination will take place on a case-by-case basis.

Fund-raising activities of special institutions exclusively for non-commercial, non-competitive
public purposes should not pose problems under the competition rules of the Treaty if
repercussions on commercial activities are avoided.

On the basis of this report the Commission will examine in the future the application of Article 86(2)
of the EC Treaty to aid in the banking sector on a case-by-case basis.

270. Regarding specific cases of state aid to the banking sector, the Commission approved
supplementary restructuring aid, estimated at between ECU 8 billion and ECU 15 billion
(FRF 53 billion and FRF 98 billion), granted by France to Cre´dit Lyonnais 187 in addition to the aid
of ECU 6.8 billion (FRF 45 billion) and of some ECU 600 million (FRF 4 billion) already granted in
1995 and 1996. Such aid amounts are unique in the history of the Community. The aid was approved on
condition that Cre´ dit Lyonnais reduce its balance sheet by ECU 47.26 billion (FRF 310 billion) in

186 OJ L 346, 31.12.1993, replaced on 20 November 1998 by (codified) Council Regulation (EC) No 2468/98 of

3 November 1998 (OJ L 312, 20.11.1998).

187 C-47/96 (OJ L 221, 8.8.1998).

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Europe and worldwide, over and above the reductions imposed on the bank in 1995, which would
entail a total reduction in its balance sheet by more than a third since 31 December 1994. These
compensatory measures were considered all the more necessary since, in the banking sector, aid
corresponding to a capital injection relaxes the solvency constraints to which other banks making
losses and not receiving aid are subject, which constraints would normally oblige them, if their own
funds did not exceed the solvency requirement, to reduce their liabilities and their activity. Cre´ dit
Lyonnais will also have to reduce the number of its branches in France to 1 850 by the year 2000.
Lastly, the French Government has undertaken to privatise Cre´ dit Lyonnais by October 1999, by
means of an open, transparent and non-discriminatory procedure.

271. On 29 July the Commission approved aid granted to Banco di Napoli 188 by the Italian
Government for its restructuring and privatisation. The estimated net cost to the State of this aid is
somewhere between ECU 1.14 billion and ECU 6.14 billion (ITL 2 217 billion and ITL 11 895 billion)
(the maximum amount of the state guarantee). As a compensatory measure, the bank will have to sell
or close 18 branches in addition to the already completed sales of 59 branches and seven subsidiaries or
offices abroad which the Commission took into account in assessing the aid’s compatibility with the
common market.

4.2.2. Audiovisual sector

272. During 1998, the Commission’s departments attempted to set in place a framework within
which complaints concerning the public financing of certain broadcasters in different Member States
could be assessed. On 15 September the Court of First Instance found against the Commission under
the Article 232 procedure for failing to fulfil its obligation to act under the Treaty. 189 The court
proceedings were initiated in 1996 by Gestevision, a Spanish private broadcaster which lodged a
complaint against RTVE – the Spanish public broadcaster – and against the Spanish regional
broadcasters in 1992. According to the judgment, the Commission should not have prolonged its
preliminary investigation for such a long period without taking a position. The Commission is now
required to take a position within a reasonable period and with due diligence.

273. The attempt to develop a framework under which all pending cases could be assessed resulted
in the presentation of a discussion paper to the Member States on 20 October. The majority of Member
States were against the adoption of guidelines and expressed a preference for a case-by-case approach.
In parallel, the Commission departments held two public hearings with the private and public
operators concerned (on 4 and 18 December respectively) in order to obtain a more complete picture
from an economic point of view of the issues involved.

4.2.3. Cultural sector

274. The Commission had the opportunity to apply Article 87(3)(d) in three cases where it
concluded that the aid measure in question served the purpose of promoting culture and heritage
conservation in a reasonable way. In decisions of 3 June, 29 July and 25 November 190 it confirmed its
approach as already expressed in cases N 32/97 (Ireland) and N 917/96 (Denmark) to approve aid to
the film industry in applying Article 87(3)(d) of the EC Treaty to a French and Dutch scheme to
support the production of films. The level of aid is limited to 50% of production costs.

188 Case C-40/96, not yet published in the Official Journal.
189 Case T-95/96 Gestevision Telecinco SA v Commission, not yet reported.
190 Cases N 3/98 and N 486/97, not yet published in the Official Journal.

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275. The derogation under Article 87(3)(d) also gives room for supporting the export of books.
Unlike the film industry, book publishing and distribution in Europe is, in principle, not dependent on
in a case concerning aid to Coope´rative
public support. The Commission authorised in June,
d’Exportation, Livre Franc(cid:224)ais (CELF), 191 the granting of aid for the exporting of books to non-French-
speaking countries, provided it is intended to offset the extra cost involved in handling small orders. In
May 1993, the Commission did not raise any objections to the aid to CELF. This decision, however, was
partly annulled by the Court of First Instance on the ground that, given the competition in the book
market, the Commission had failed to fully analyse the impact of the aid on the common market. 192 In
its new decision, the Commission applied the cultural derogation. It concluded that this aid measure
only pursues a cultural objective and does not support the other, commercial, activities of CELF.

4.2.4. Energy sector

276. Differences in excise duties on fossil fuel for cars may lead to a competitive imbalance among
petrol stations close to state borders. In 1997, the Dutch Government introduced an aid scheme to
compensate for the disadvantage to the owners of 624 Dutch petrol stations on the border with
Germany resulting from the increase in excise duty on light oil. The aid consists of a subsidy, which is
based on the quantity of light oil supplied. It decreases in proportion to the distance to the German
border. The duration of the scheme is three years and a ceiling of ECU 100 000 per service station will
apply for this period. The Dutch Government therefore considers that the measure should fall under
the de minimis rule.

277. On 3 June, the Commission decided to initiate proceedings under Article 88(2) of the EC Treaty
in respect of this scheme. 193 It has doubts whether the de minimis rule is applicable in this case. 194
Even if each service station could be considered a separate undertaking for the purposes of the
de minimis rule, the rule may not apply if the aid has an effect on trade and competition between
Member States. In the present case, the possibility cannot be ruled out that the measure affects trade
and competition with at least one Member State (Germany).

D — Procedures

278. Case-law over the last year has been particularly rich as regards the procedural rules applicable
in the state aid field. The main developments have been in relation to the rights of third parties, the
recovery of unlawful aid and the consequences for the validity of the administrative procedure of a
judgment annulling a decision.

1. Rights of third parties

279. Given the essentially bilateral nature of the various procedures laid down in Article 93, which
are based principally on a dialogue between the Member State concerned and the Commission, the
rights which third parties are recognised as having in the state aid field are necessarily more restricted
than their rights under Articles 81 and 82 of the Treaty. Case-law has shown that third-party rights are
essentially relevant in the context of the procedure under Article 88(2).

191 Case C 39/96.
192 Case T-49/93 SIDE v Commission [1995] ECR II-2501.
193 Case C 43/98 (ex N 558/98) (OJ C 307, 7.10.1998).
194 See Chapter IV.B.4 above.

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In a judgment given on 2 April 195 the Court of Justice clarified the legal rules on complaints
280.
which denounce national measures as state aid and which are lodged with the Commission by third
parties; in particular, the Court set out the extent of the Commission’s obligations to investigate such
complaints.

First, the Court established the principle that the Commission is required, in the interests of sound
administration of the basic Treaty rules on state aid, to conduct a diligent and impartial examination of
the complaints it receives, which may make it necessary for it to examine matters not expressly raised
by the complainant. However, this principle does not imply that the Commission is under any
obligation to examine of its own motion objections which the complainant would certainly have raised
had it been aware of the information obtained by the Commission in the course of its investigation.

Second, the Court confirmed that the Commission is not under any obligation to hear complainants
during its initial investigation into aid pursuant to Article 88(3) of the Treaty.

281. Then, in joined Cases T-371/94 and T-394/94, 196 the Court of First Instance ruled that interested
third parties within the meaning of Article 88(2) of the Treaty cannot enjoy the same rights to a fair
hearing as those which individuals against whom proceedings have been instituted are recognised as
having. The former have only the right to be involved in the administrative procedure to the extent
appropriate in the light of the circumstances of the case. The extent of their rights to participate and be
informed may therefore be limited, in particular when the amount of information in the Commission’s
possession is already relatively extensive, leaving outstanding only a small number of doubts likely to
be dispelled by information supplied by the third parties concerned.

Where this is the case, the Commission, while providing such parties with general information on the
essentials of the planned aid, may confine itself to concentrating, in its notice initiating the adversarial
investigation procedure under Article 88(2), on those aspects of the planned aid concerning which it
still harbours doubts.

In a judgment given on 15 September 197 the Court of First Instance held that, once the
282.
Commission has terminated proceedings under Article 88(2) with a decision to approve aid subject to
conditions, it is not entitled to depart from the scope of that initial decision without reinitiating the
proceedings. It follows that, if one of the conditions to which approval of an aid measure was subject is
not satisfied, the Commission may not normally adopt a decision derogating from that condition
without reinitiating Article 88(2) proceedings and thus giving notice to the parties concerned to submit
their comments, unless it is a relatively minor deviation from the initial condition, leaving the
Commission in no doubt as to whether the aid at issue is still compatible with the common market.

283. The concept of party concerned within the meaning of Article 88(2) of the Treaty was defined
more closely. In an order of 18 February 198 the Court of First Instance recognised that organisations
representing the workers of an undertaking which is receiving aid might, as interested parties, submit
their comments on considerations of a social nature which could be taken into account if appropriate

195 Case C-367/95 P Commission v Sytraval and Brink’s France [1998] ECR I-1719.
196 British Airways plc and Others v Commission [1998] ECR II-2405.
197 Case T-140/95 Ryanair Limited v Commission, not yet reported.
198 Case T-189/97 Comite´ d’entreprise de la Socie´te´ franc(cid:224)aise de production and Others v Commission [1998] ECR II-

335.

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by the Commission in its assessment of whether or not aid within the meaning of Article 88(1) is
compatible with the common market.

284. As regards the admissibility of actions for annulment of Commission decisions brought by
interested third parties, the Court of First Instance held in Cases T-11/95 199 and T-189/97 200 that the
fact that a third party is concerned by a case is not sufficient in itself for that party to be regarded as
individually concerned in the same way as the addressee of the final decision. It follows from the
definition given by the Court of Justice in the Intermills judgment 201 that the concept of parties
concerned within the meaning of Article 88(2) of the Treaty covers an indeterminate group of natural
and legal persons such that a third party’s being concerned is not sufficient for it to be concluded that it
is individually concerned by a final decision within the meaning of the fourth paragraph of Article 230.

Consequently, in its order in Case T-189/97 202 the Court of First Instance held that organisations
representing the workers of an undertaking which is receiving aid cannot claim on that basis to be
individually concerned, within the meaning of the fourth paragraph of Article 230, by a negative final
decision.

In Case T-95/96 203 the Court of First Instance examined the conditions under which an action
285.
for failure to act brought by a third party is admissible. The Court ruled that an action for failure to act
brought by a complainant in respect of the Commission’s failure to adopt a decision in response to the
complaint is admissible if, the Commission having begun a preliminary investigation in accordance
with the procedure under Article 88(3) of the Treaty, the complainant is directly and individually
concerned by the institution’s failure to take any decision terminating that procedure.

286. The implications for the rights of interested third parties of the requirement to provide a
statement of reasons laid down in Article 253 of the Treaty were also spelled out. In joined Cases T-
371/94 and T-394/94, 204 the Court of First Instance found that, where the Commission authorises aid,
the requirement to provide reasons is not determined solely on the basis of the interest which the
Member State to which that decision is addressed may have in obtaining information. Thus, even
though it is not required in its statement of reasons to discuss all the issues of fact and law raised by
interested parties during the administrative procedure, the Commission must none the less take
account of all the circumstances and all the relevant aspects of the case so as to make clear both to the
Member States and to the persons concerned the circumstances in which it has applied the Treaty.

2. Recovery of aid

287. At 20% of all cases dealt with by the Commission, the number of state aid measures that have
not been notified to the Commission is still too high. It is therefore significant that the Community
courts have confirmed the Commission’s policy of consistently ordering the recovery of aid that has
been granted in breach of the notification obligation and is incompatible with the common market.

199 BP Chemicals Ltd v Commission, not yet reported.
200 Referred to above.
201 Case 323/82 Intermills v Commission [1984] ECR 3809.
202 Referred to above.
203 Gestevision Telecinco SA v Commission, not yet reported.
204 Referred to above.

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The Commission also examines, in line with the Deggendorf decision of the Court of Justice, 205 the
cumulative effect of former unlawful aid and new aid, if the unlawful aid has not yet been repaid. 206

288.
In a judgment given on 29 January 207 the Court of Justice ruled that the authorities of a
Member State may not plead that it is absolutely impossible for them properly to implement a
Commission decision ordering them to recover unlawful aid without taking any step whatsoever to
recover the aid from the undertakings in question and without proposing to the Commission any
alternative arrangements for implementing the decision which would enable the difficulties to be
overcome. Although insuperable difficulties may prevent a Member State from complying with its
obligations under Community law, mere apprehension of such difficulties cannot justify a failure by a
Member State to apply Community law correctly.

In Case T-67/94 208 the Court of First Instance confirmed that it is not for the Member State
289.
in the context of proceedings before the public
concerned, but for the recipient undertaking,
authorities or before the national courts, to plead the existence of exceptional circumstances on the
basis of which it had entertained legitimate expectations leading it to decline to repay the unlawful aid.
Consequently, the Commission may not give as a reason for limiting in time a Member State’s
obligation to recover unlawful aid the fact that the contents of a national court’s ruling were such as to
give rise to a legitimate expectation on the part of the recipient of the aid that the latter was lawful.

3. Consequences of a judgment annulling a decision

290. Lastly, in a judgment of 12 November 209 the Court of Justice clarified the consequences of one
of its judgments partially annulling a final decision on the ground that the Commission had wrongly
dispensed with examining the compatibility of an aid measure in the light of Article 87(3). Since the
investigation measures taken by the Commission as part of the procedure laid down in Article 88(2) of
the Treaty allowed an exhaustive analysis to be made of the compatibility of the aid having regard to
Article 87(3), the procedure for replacing the annulled decision could be resumed at that point with a
fresh analysis of the investigation measures, the reliability of which had not been challenged.

4. Application of the state aid rules by national courts

291. Although the Commission has primary responsibility in the state aid field, national courts may,
under various circumstances, also be called upon to rule on aid-related matters. The Commission has
already drawn attention to the scope for action at national level, particularly as regards unlawful
aid. 210

292. The main conclusion reached by a study on the practice of national courts commissioned by the
Commission was that the number of state aid cases referred to national courts is very small. In some
countries there has not been a single case yet. Moreover, most (76%) of the 115 cases covered by the
study did not involve actions brought by competitors; of those which were brought by competitors,

205 Case C 355/95 P Germany and Textilwerke Deggendorf GmbH v Commission [1997] ECR I-2549.
206 Case C 44/97 Aid in favour of Magefesa, not yet published in the Official Journal.
207 Case C-280/95 Commission v Italy [1998] ECR I-259.
208 Ladbroke Racing v Commission [1998] ECR II-1.
209 Case C-415/96 Spain v Commission, not yet reported.
210 Commission notice on cooperation between national courts and the Commission in the state aid field (OJ C 312,

23.11.1995).

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only three yielded the result desired by the competitor. This state of affairs would appear to be due in
particular, to a lack of transparency as regards the rules of state aid law and thus a limited knowledge
of them among national judges and lawyers. Since legal instruments exist at national level, better use
should therefore be made of them.

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E — Statistics

Figure 6:
Trend in the number of aid cases registered (other than in agriculture,
fisheries, transport and coal) between 1994 and 1998

900

800

700

600

500

400

300

200

100

0

10
113

680

16
6

510

3
91

1

140

550

515

(cid:238) Existing aid

(cid:238) Unnotified aid

(cid:238) Notified aid

5
97

342

1994

1995

1996

1997

1998

Figure 7:
Trend in the number of decisions taken by the Commission
(other than in agriculture, fisheries, transport and coal)
between 1994 and 1998

619

527

700

600

500

400

300

200

100

474

502

460

0
1994

1995

1996

1997

1998

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Figure 8:
Number of decisions by Member State (other than in agriculture, fisheries,
transport and coal)

460

European Union

Belgium
Denmark
Germany
Greece
Spain
France
Ireland
Italy
Luxembourg
Netherlands
Austria
Portugal
Finland
Sweden
United Kingdom

9

9

2

3

22

36

27

38

28

15

8

14

18

154

77

0

100

200

300

400

500

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IV — INTERNATIONAL ACTIVITIES

A — Enlargement

1. Pre-accession

1.1. Implementing rules

293. With a view to further completing the legal framework for relations between the Community
and the ten associated countries of central and eastern Europe (CEECs) in the field of competition,
two sets of Implementing Rules have been negotiated with the CEECs. The first concerns the
implementation of the competition provisions of the Europe Agreements applicable to undertakings.
The second relates to the rules concerning state aid.

294.
Implementing Rules for the competition provisions applicable to undertakings have already
been adopted for five CEECs, namely the Czech Republic, 211 Poland, 212 the Slovak Republic, 213
Hungary 214 and Bulgaria. 215 The Commission has presented its proposal
for
Implementing Rules for the three Baltic States and Romania. These are expected to be adopted in
early 1999. The wording of the Implementing Rules is basically the same for all of the associated
countries. They contain mainly procedural-type rules, i.e. rules regarding competence to deal with
cases, procedures for notification of cases to the other party, consultation, comity and the exchange of
information.

to the Council

295. On 24 June the EU-Czech Association Council approved Implementing Rules for state aid in
the Czech Republic. It is the first associated country where such rules are now formally in force in the
field of state aid. The Implementing Rules constitute a two-pillar system of state aid control. On the
Community side, the Commission assesses the compatibility of state aid granted by EU Member States
on the basis of the Community state aid rules. On the side of the Czech Republic, the Czech national
monitoring authority is to monitor and review existing and new public aid granted by its country, on
the basis of the same criteria as arise from the application of the Community state aid rules. The
Implementing Rules include procedures for consultation and problem solving, rules on transparency
(i.e. the Czech Republic is to draw up and thereafter update an inventory of its aid programmes and
individual aid awards), and rules on mutual exchange of information.

296. Generally, the adoption and proper application of implementing rules for state aid is, apart from
wider policy considerations, also seen as an important step towards reducing any trade friction between
the Community and the third country in question as it may, if properly implemented, eliminate the
need for either party to have recourse to action under the WTO Agreement on Subsidies and
Countevailing Measures (ASCM) to deal with subsidisation issues, e.g. the imposition of countervailing
measures.

211 Decision No 1/96 of the Association Council of 30 January 1996 (OJ L 31, 9.2.1996).
212 Decision No 1/96 of the Association Council of 16 July 1996 (OJ L 208, 17.8.1996).
213 Decision No 1/96 of the Association Council of 15 August 1996 (OJ L 295, 20.11.1996).
214 Decision No 2/96 of the Association Council of 6 November 1996 (OJ L 295, 20.11.1996).
215 Decision No 2/97 of the Association Council of 7 October 1997 (OJ L 15, 21.1.1998).

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1.2. Enhanced pre-accession strategy

297. A major element of the enlargement process is the so-called enhanced pre-accession strategy
which centres on Accession Partnerships and increased pre-accession aid. The Accession Partnership
serves as a new single framework which covers in detail for each applicant the priorities to be observed
in adopting the Union acquis, or existing body of rules, and also the financial resources available for
that purpose, in particular the PHARE programme. Legislative alignment, enforcement and institution
building in the field of competition are among the most important short-term (1998) and medium-term
priorities which the Commission has identified in the different Accession Partnerships. The same
applies to the so-called National Programmes for the Adoption of the Acquis which were adopted by
each associated country on the basis of the Accession Partnerships.

1.3. Progress in alignment of competition rules

298. The Commission agreed to report regularly to the European Council on progress made by each
of the candidate countries towards accession. The first progress reports for the ten CEECs, Cyprus and
Turkey were submitted at the end of 1998. The reports take into consideration progress since the
delivery of the Commission Opinions of 1997. 216

299.
In the past year, most of the CEECs have taken decisive steps to adopt or prepare new
legislation, or amendments to existing legislation, in order to further align their legislation with
Community law. This is certainly the case in the field of antitrust. For example, new competition acts
came into force in Hungary, Bulgaria, Estonia and Latvia. The competition authorities of the CEECs
have also now gained some experience in the enforcement of the law. However, on several occasions
the Commission has emphasised the need to further strengthen the CEEC competition authorities, in
particular with regard to their investigative and fining powers, their independence and their resources.

300.
In contrast to antitrust policy, the introduction of state aid control in the CEECs has proven to
be much more controversial and difficult to bring about. While a number of countries have started
introducing or preparing rules on the control of state aid, a lot of work remains to be done. The most
urgent priority is to create transparency in the granting of state aid by establishing a state aid inventory
of all existing direct and indirect aid. While,ring 1998 some CEECs provided reports to the
Commission on their respective state aid schemes, the Commission has generally been critical of the
lack of a comprehensive picture of the state aid situation in most CEECs.

301. A second priority is the setting-up or strengthening of an independent state aid monitoring
authority, and of a system for implementing this monitoring. Most of the CEECs have now established
such a monitoring authority. However, legal procedures and the necessary powers to ensure genuine
control of new and existing state aid in these countries are still lacking.

302.
Finally, with respect to approximation of legislation, while certain countries have taken steps to
lay down or prepare substantive and procedural rules in this field, the Commission has noted that they
are generally lagging behind the level that is required for this stage in the run-up to accession.

216 1997 Competition Report, point 323.

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1.4. Technical assistance

303.
In view of these remaining shortcomings, technical assistance in the field of competition remains
an essential tool to prepare the candidate countries for accession. While it is for the candidate
countries themselves to devote the necessary resources to focused and cost-efficient implementation of
competition law, Community assistance serves as a catalyst. Along with specific actions in the
framework of the national PHARE programmes, DG IV has pursued a proactive policy of further
intensifying its contacts with the competition authorities of the CEECs and between those authorities.

intensify mutual exchange of
304. New electronic information links are in place which will
information. Cooperation includes consultation on new policy developments. For example, the CEECs
were consulted on the Commission’s Green Paper on vertical restraints (both in writing and at an oral
hearing).

305. DG IV continued with PHARE support for the organisation of multi-country technical
assistance programmes in the field of competition. In particular, joint training sessions for experienced
and non-experienced competition officials from the candidate countries took place in December 1997-
January 1998 and in November-December 1998. These programmes include lectures by Commission
experts and discussion on practical cases presented by the participants.

306. Most of the candidate countries have established some form of working group structure with
DG IV which facilitates informal and technical discussions at expert
level on competition
approximation, institution building and enforcement. These informal meetings, but also the numerous
personal contacts between officials, have contributed to the enhancement of both the legal framework
and the enforcement practice of the candidates’ competition authorities. In view of the problems
regarding state aid described above, assistance will in the future be focused on the establishment of a
state aid inventory, regional aid maps and a proper framework for aid to sensitive sectors, and on the
assessment of individual cases.

307. The fourth Competition Conference of the CEECs and the European Commission took place
on 25-26 May in Bratislava. The delegations included high-level officials from the competition and
state aid authorities of the CEECs and the Commission. The annual conference serves as a forum for
the exchange of views and experience in the field of approximation of legislation and enforcement. It
also served to establish and strengthen professional contacts between officials responsible for
competition in the Community and in the CEECs.

2. Accession negotiations

308.
Following the opening of the Intergovernmental Conference on 30 March the screening exercise
started on 3 April with the first multilateral meeting involving all of the candidate countries. On 9-19
October, six candidate countries, namely the Czech Republic, Estonia, Hungary, Poland, Slovenia and
Cyprus, participated in the screening of the competition chapter, i.e. the analytical examination of the
acquis in the competition field. The objective of the exercise was to inform -,ring a day of multilateral
screening — the applicants fully about the Community acquis and — at subsequent bilateral
meetings — to identify, within each applicant country, possible substantive problems that could
arise,ring the accession negotiations proper.

309. On 11 May a multilateral screening meeting on competition policy took place with five other
countries, namely Bulgaria, Latvia, Lithuania, Romania and Slovakia. The screening of the Article 86

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Directives, in particular in the field of telecommunications, took place on 28 April-7 May for the first
six countries, and on 23 June for the other five countries, as part of the screening of the entire
telecommunications chapter.

B — Bilateral cooperation

1. North America

1.1. United States

1.1.1. Implementation of the 1991 Cooperation Agreement 217

310. The Commission adopts each year a report to the Council and the European Parliament on its
cooperation activities with the US under the 1991 Agreement. There have been three such reports up
to now:

— the first covered the period from 10 April 1995 (date of entry into force of the 1991 Agreement) to

30 June 1996; 218

— the second covered the period from 1 July 1996 to 31 December 1996; 219

— and the third covered the period from 1 January 1997 to 31 December 1997. 220

During 1998 the Commission cooperated with the US DoJ and the US FTC in a substantial number of
cases. Beyond the specific case-related benefits arising out of this intensive cooperation for both
competition authorities and private parties involved (in terms of a more rapid and coherent
management of the case on both sides of the Atlantic), the close daily contact between case teams in
the Commission (DG IV) and the US DoJ and FTC is conducive to mutual confidence building and
trust, accrued knowledge of the substantive and procedural rules of the partner, convergence by
example and, finally, the development of ‘best practices’ in all phases of the procedure.

311. One of the most interesting transatlantic cooperation cases so far involved the WorldCom/MCI
merger, which received clearance in July 1998. The notified merger plan did not raise concerns about
transatlantic cable capacity holding in the same acute form as the proposed BT/MCI merger
(scrutinised by the Commission in 1996 and finally abandoned by the parties), but it did raise issues
regarding competition among providers of Internet access and connectivity. The Commission’s
investigations, and negotiations of remedies, were undertaken in parallel with the examination of the
case by the US DoJ. The process was marked by a considerable level of cooperation between the two
authorities, including exchanges of views on the analytical method to be used, coordination of
information gathering and joint meetings and negotiations with the parties. The timetable for
divestiture afforded the parties the opportunity, subject to clearance from the US DoJ and the
Commission, to agree a sale in advance of, but conditional on, the merger. Under the terms of their

217 Agreement between the European Communities and the Government of the United States of America regarding

the application of their competition laws (OJ L 95, 27.4.1995, as corrected by OJ L 131, 15.6.1995).

218 Adopted on 8 October 1996, COM(96) 479 final; see 1996 Competition Report, pp. 299 to 311.
219 Adopted on 4 July1997, COM(97) 346 final; see 1996 Competition Report, pp. 312 to 318.
220 Adopted on 3 September 1998, COM(1998) 510 final; see 1997 Competition Report, pp. 317 to 327.

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undertakings submitted the parties sought the consent of the two competition authorities to the
proposed buyer of the divested activities. The two authorities continued to cooperate until the
undertakings were fully implemented and exchanged formal letters to this effect in accordance with
the 1991 EC/US Agreement. Remedies included the possibility for the Commission, in appropriate
circumstances, to appoint a trustee to oversee compliance with the undertakings and, if necessary, to
ultimately take control of the sale process (i.e. finding a buyer and drawing up an agreement).

312. Another example of successful EU/US cooperation was the Dresser/Haliburton merger cleared
by the Commission in July. The merger involved two US-based companies. Halliburton is one of the
largest energy services companies in the world. Dresser, which is active in the same range of activities,
is smaller in size and more specialised. The parties had overlapping activities in the oilfield services
industry, in particular in drilling fluids, directional drilling services and completion products and
services. Within the latter two segments the combined market shares were not substantial, whereas
there are a number of competitors with comparable strength and a number of customers with effective
countervailing buyer power. As far as the market for drilling fluids was concerned, however, the
concentration would result in significant market shares. The parties had already negotiated a
divestiture plan with the US DoJ, as a result of which the market overlap would be removed. On this
basis, the Commission did not have any further concerns about the drilling fluids market. In this
respect the case is an interesting example of coordinated merger review procedures in the EU and the
US and, to some extent, of work allocation between the two authorities.

313. Other cases where close transatlantic cooperation occurred were Price Waterhouse/Coopers &
Lybrand, Exxon/Shell, Daimler-Benz/Chrysler, Seagram/Polygram, Hercules/Betz Dearborn, Marsh Mc
Lennan/Sedgwick and BP/Amoco. Details on the substance of these cases are given in Part II of the
Report. (Case-related EC/US cooperation is further discussed in detail in the 4th Report to the
Council and the European Parliament for 1998 221).

1.1.2. Adoption of the 1998 EC/US Positive Comity Agreement 222

314. On the basis of a mandate from the Council, the Commission negotiated with the United States
an agreement which strengthens the relevant provisions of the 1991 Agreement as regards the exercise
of positive comity. The product of these negotiations, the 1998 EU-US Positive Comity Agreement,
was signed in Washington and entered into force on 4 June. It spells out more clearly the circumstances
in which a request for positive comity will normally be made and the manner in which such requests
should be treated. In contrast to the 1991 Agreement, the EU rules on merger control are in principle
not within the scope of the 1998 Agreement,e to EC and US merger legislation, which would not allow
a deferral or suspension of action as envisaged by the Agreement.

1.2. Canada

Following negotiations, the draft Competition Cooperation Agreement between the European
315.
Communities and the Canadian Government was finalised in May of this year. On 4 June the
Commission adopted a proposal for the joint adoption by the Council of Ministers and the Commission
of a decision to conclude the agreement. The European Parliament has now approved the Commission
proposal. It is expected that the agreement will shortly be adopted by the Council and Commission,

221 COM(1998)...final.
222 Agreement between the European Communities and the Government of the United States of America on the
application of positive comity principles in the enforcement of their competition laws (OJ L 173, 18.6.1998).

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and that it will be signed and come into effect,ring 1999. In the meantime, the Commission and the
Canadian Competition Bureau will discuss bilaterally the practical logistics of future cooperation
between the authorities within the framework of the agreement.

316. The proposed agreement is designed to facilitate increased cooperation between the European
Communities and Canada with respect to the enforcement of their respective competition rules. An
increasing number of cases are being examined by both competition authorities, and there is
consequently a growing recognition of the importance, on the one hand, of avoiding conflicting
decisions and, on the other, of coordinating enforcement activities to the extent that this is considered
mutually beneficial by both parties.

In substance, the proposed agreement is very similar to the one entered into between the EU
317.
it provides for (i) the reciprocal notification of cases under
and the US in 1991. Essentially,
investigation by either authority, where they may affect the important interests of the other party; (ii)
the possibility of coordination by the two authorities of their enforcement activities, and of rendering
assistance to each other; (iii) the possibility for one party to request the other to take enforcement
action (positive comity), and for one party to take into account the important interests of the other
party in the course of its enforcement activities (traditional comity); and (iv) the exchange of
information between the parties, while not affecting either party’s confidentiality obligations with
respect to such information.

2. Other countries

2.1. Japan

318. The Commission finalised a new list of proposals for further deregulation in Japan. The list
included a series of proposals for deregulation in the area of competition. The new package was given
to Japan on 12 October,ring an EU-Japan ministerial meeting in Tokyo. The proposals were also
discussed with Japan at a high-level mission to Tokyo on 3-6 November.

319. During the annual bilateral meeting between the Commission and the Japanese Fair Trade
Commission (JFTC) in Brussels on 24 November, positive developments in the area of deregulation of
competition policy were acknowledged (elimination of most exemptions and exceptions from Japanese
competition rules, increased budgetary resources and staff for the JFTC).

320. However, the Commission repeated its main proposals to the Japanese Government for:

— competition advocacy by the JFTC in government measures,

— JFTC review of existing and new administrativ guidance,

— tougher investigative action by the JFTC, particularly in the distribution area,

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— deterrent sanctions for antitrust infringements, and

— better chances for victims to seek injunctive judicial relief and damages in court.

321. The OECD Recommendation, issued in 1986 and last revised in 1995, 223 establishes so far the
basic framework for cooperation between the Commission and the JFTC. In the period from 1993 to
1998 the Commission made 30 notifications to the JFTC and received from the JFTC 7 notifications in
return. This would indicate that the Commission deals with more cases involving Japanese companies
or other Japanese interests, whereas the JFTC deals with fewer cases involving European companies or
other European interests. In turn this could be explained by the fact that European firms have more
difficulties penetrating the Japanese market, than Japanese firms the EU market.

In the Nordion case, the Commission cooperated with the JFTC. Following Nordion’s undertaking to
abandon the exclusivity clauses contained in its sales contracts with European customers, the
Commission decided to suspend a proceeding under Article 82 of the EC Treaty against Nordion for
abuse of a dominant position in the market for the production and sale of molybdenum 99 (Mo-99), a
base product for radiopharmaceuticals used in nuclear medicine. The enquiry carried out in Japan by
the JFTC led to identical results for the Japanese market. The JFTC adopted a Recommendation
requesting Nordion to put an end to the exclusivity clauses tying Japanese customers. Nordion
accepted the JFTC recommendation and, thus, the Japanese competition authority issued the formal
decision on this case in September 1998. The final decision has the same content as the
recommendation.

2.3. Mediterranean countries

322. Agreements have already been concluded with Tunisia, Israel, Jordan and the Palestinian
Authority. Others are being negotiated with Algeria, Lebanon, Egypt and Syria. The provisions on
competition contain clear commitments aimed at bringing the competition policies of the countries
concerned into line with the Community arrangements. A first conference bringing together
representatives of the Community and of the national competition authorities of the Member States
and of the Mediterranean countries was held this year in Tunis. Only Tunisia and Algeria have asked
for technical assistance. As regards Tunisia, a preliminary report identifying a technical assistance
programme was drawn up in September. It is being studied by the Tunisian authorities.

323. A Commission communication on “the Euro-Mediterranean partnership and the single market”
(COM(1998) 538 final of 23 September 1998) proposes, among other things, cross-sector action in the
competition field to promote cooperation and technical assistance.

2.4. Latin America

324. Ever since there has been a comprehensive framework of agreements with the countries of
Latin America, the Commission’s strategy has been one of strengthening relations with groups of
countries (Mercosur, the Andean Community and the Central American isthmus). In this connection,
specific cooperation actions have been initiated, namely compilation of the competition laws of the
countries of Latin America and the Caribbean, the drawing-up of a list of competition authorities and
institutions to facilitate contact between those responsible for implementing competition policy and

223 Revised Recommendation of the Council concerning Cooperation between Member Countries on Antic-

ompetitive Practices affecting International Trade, 27 and 28 July 1995, C(95)130/FINAL.

COMPETITION REPORT 1998

118 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

the business community, and publication of a Boletı´n Latinoamericano de Competencia, which is
distributed through the Internet. 224

325. The Commission has started negotiations with Mexico with a view to introducing free trade
arrangements. In the interim agreements of 1997 it is stipulated that the European Community and
Mexico will have cooperation machinery at their disposal which will extend to technical cooperation.

326.
In recent years there has been a strengthening of relations between DG IV and the competition
authorities of the Mercosur countries — Argentina and Brazil in particular — and of Chile, which has
an association agreement with Mercosur. A comparative study has been made of the laws of Mercosur,
Chile and the European Community, and it has proved very useful as a means of gaining an insight into
the position of, and problems facing, these countries when it comes to developing a comprehensive
legal framework in the competition sphere.

327. The prospect of the possible opening of liberalisation negotiations with Mercosur and Chile is
another major factor militating in favour of establishing a cooperation framework. In principle, the
development and effective application of competition rules in Mercosur ought to afford firms
operating in this market greater legal certainty. In a recent communication to the Council, the
Commission indicates that the negotiations will also cover competition rules, including machinery for
cooperation and coordination between the authorities responsible for their implementation.

2.5. Russia, Ukraine and the other NIS

328. The Partnership and Cooperation Agreements (PCAs) which the EU has concluded with
Russia, Ukraine, Moldova and most of the other former Soviet Republics contain — to a greater or
lesser extent — a commitment by these countries to move towards an approximation of their
competition and state aid legislation with that of the Community. Although progress is slow, the joint
Committees established under the PCAs with Russia and Ukraine are expected to set up
subcommittees,ring the first half of 1999 to deal with competition and state aid. A number of TACIS
projects, with the task of providing relevant expertise, are also being undertaken.

In the wake of the economic turmoil experienced by Russia this year, the State Anti-monopoly
329.
Committee was integrated into a new ministry incorporating a range of diverse competencies. It is not
yet clear what implications this will have for competition law enforcement in the Russian Federation.

C — Multilateral cooperation

1. WTO: Trade and competition policy

330. The European Community has taken the initiative of putting competition on the international
agenda. The Commission communication of June 1996 inspired the Singapore ministerial meeting to
set up a WTO working group on the interaction between trade and competition policy.

331. Under the guidance of its chairman, Professor Jenny, the group has attracted a remarkably high
degree of interest and participation. This is reflected in the large number of submissions presented by

224 These documents are available on the Internet at the following address: http://europa.eu.int/comm/dg04/interna/

other.htm.

COMPETITION REPORT 1998

XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 119

WTO members and in the quality and openness of the discussions held on the different items on its
agenda. Particularly noteworthy has been the active participation of developing countries, many of
which have made presentations on their experiences relating to the introduction and enforcement of
competition law. The group has been remarkably free of ideological controversies or North/South
divisions. Differences of opinion about the scope of the group’s mandate have not prevented a
substantive discussion of the various issues raised by members.

332. The discussions have been essentially analytical in nature. The points on which there appears to
be a large degree of consensus include:

— the need to proceed in parallel with a process of trade liberalisation, elimination of unnecessary

regulations and a strengthening of competition law and policy;

— the importance, from the development point of view, of adopting a competition policy as part of the

process of market-oriented reform;

— the increasing importance of international cooperation to address effectively the interaction

between trade and competition policies.

333. The group has also made considerable progress in identifying those elements of competition law
and policy which may be of particular relevance for the multilateral trading system. These include (a)
the type of anticompetitive practices subject to competition law disciplines; (b) the extent of sectoral
or regulatory derogations from the application of competition law; and (c) mechanisms for
enforcement, including the role of administrative authorities and the courts.

334. There is a general recognition that certain types of anticompetitive practices by business can
create barriers to entry or otherwise upset the equality of competitive opportunities. It is also generally
acknowledged that competition and trade can be significantly affected by regulatory policies, the
activities of enterprises with exclusive or special rights, and by a wide array of trade policy measures.

335. The work in the group was confined to an educational process and the group will continue this
exploratory work into 1999. The WTO will also have to answer the question whether there is a political
will among its members to go ahead and open negotiations in 1999 on the establishment of a
multilateral framework of competition rules.

336.
In April the WTO Dispute Settlement Body adopted the final report of the GATT panel
regarding access to the Japanese market for photographic film and paper. The panel ruling dismissed
the US claims as they had failed to establish a causal link between measures adopted by the Japanese
Government and an upsetting of the competitive relationship between domestic and imported
products. The Kodak/Fuji panel was established at the request of the United States. The EU intervened
as a third party in view of its economic interest in the case.

337. The issue of whether anticompetitive practices have a negative impact on trade falls outside the
scope of current WTO rules. Accordingly the Panel did not pass judgment on this and focused
exclusively on whether nullification of trade benefits could be attributed to measures taken by the
Japanese Government, but in this case there were many competition issues which would have been
addressed in a more satisfactory way within a competition law framework.

COMPETITION REPORT 1998

120 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

In this connection, Sir Leon Brittan, European Commission Vice-President, and Mr Karel Van
338.
Miert, Commissioner responsible for competition, said that “The adoption of the report clearly
illustrates the need to supplement the current framework of WTO rules with a WTO framework of
competition rules”.

2. OECD, Unctad

339. The Commission played an active part in the work of the Committee of Competition Law and
Policy of the OECD, especially in the round tables organised in 1998 (positive comity, insurance,
procurement markets, relationship between regulators and competition authorities, boycott, broad-
casting and buying power). The recommendation on hard-core cartels, adopted by the Committee in
May, is also of particular interest. This document seeks to strengthen the effectiveness and efficiency of
members’ law enforcement against hard-core cartels by eliminating or reducing statutory exceptions
that create gaps in the coverage of competition law, and by removing the legal restrictions that deny
competition agencies the authorisation to provide investigative assistance to foreign competition
agencies.

340. The Commission also played an active part in the work of Unctad in the area of competition
policy and in particular in the Expert Meeting on Competition Law and Policy which met from 29 to 31
July.

COMPETITION REPORT 1998

XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 121

V — OUTLOOK FOR 1999

1. Legislative and regulatory activities

341. The coming year will see the Commission giving further thought to refocusing its departments’
efforts on cases of manifest interest to the Community. Despite the hopes founded on the new
provisions on vertical restraints, the ineffectiveness of the first refocusing measures adopted in 1997
will induce the Commission to take fresh steps to ensure that its legal instruments and resources are
geared more closely to present needs and the challenges ahead.

342. The Commission will have to implement the new arrangements regarding vertical restraints of
competition. Regulation No 19/65 and Article 4(2) of Regulation No 17 should be amended in 1999.
The Commission will then get down to drafting the new exemption regulation and guidelines on
vertical restraints, which will probably not be ready for adoption before 2000.

The Commission is also likely to adopt a new notice on commercial agents.

343. The process of modernising Community competition law is set to continue and the Commission
is considering proposing a review of Regulation No 17, which lays down detailed rules for the
application of Articles 81 and 82 of the Treaty. The proposal should be the high point of the
modernisation exercise.

344. After a record year for fines, the Commission is considering reviewing in the light of the
experience gained some of the provisions of the guidelines on setting fines so as to correct certain
aspects deemed not to accord with the objectives pursued.

345.
In the merger control field, the Commission is contemplating adopting a new notice on ancillary
restraints inasmuch as the existing one dates back to 1990 and is no longer entirely consistent with
current practice. A notice on remedies making it possible to remove the Commission’s doubts about
the compatibility of a notified operation with the common market is also to be adopted next year.

346. The Commission will continue its work on drawing up Community instruments in the state aid
field, in particular notices designed to increase transparency and simplify the monitoring of cases of
minor importance. It thus intends to adopt two block exemption regulations, one on small and
medium-sized enterprises and the other on training aid. The guidelines on employment aid are to be
reviewed in 1999. 1999 should also see the formal adoption of the procedural regulation following the
reaching of agreement on it in principle at the Council meeting of industry ministers on 16 November.

2. International field

In the international field the Commission will continue its policy of bilateral and multilateral

347.
cooperation with competition authorities.

With a view to enlargement of the Union the Commission will concentrate on fostering a competition
culture in the countries of central and eastern Europe. It will be especially vigilant regarding the
effective application of competition rules in these countries. It will renew its call for an efficient
supervisory system for state aid to be set up as quickly as possible. In this connection it will continue its

COMPETITION REPORT 1998

122 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

work on drawing up guidelines for state aid in these regions which will take account of the special
circumstances of economies in transition.

As part of its bilateral cooperation with the countries of north America, the Commission will apply
itself to implementing the EU-US positive comity agreement, and it will support adoption of the draft
cooperation agreement with Canada.

In the multilateral cooperation sphere it will continue to participate actively in the work of the WTO
on the interaction between trade and competition.

3. Supervisory activities

348. The Commission intends to redouble its efforts in 1999 to promote competition in the European
Community so as to ensure the successful introduction of the euro. This will involve, among other
things, waging a ruthless campaign against the emergence of cartelisation phenomena which might be
seen in some old-established industries as a means of putting off the evil day when cost cutting and
restructuring have to be carried out following the inevitable boost to competition caused by the euro’s
introduction. The Commission will therefore attach particular importance to the formation and
operation of its anti-cartel unit, which already has a number of cases in its in-tray. It will nevertheless
remain vigilant in its other areas of activity, including that of the monitoring of abuses of dominant
positions. It even intends adding to its corpus of decisions in such new sectors as the environment, sport
and the professions, where major cases are in the pipeline. Important decisions are awaited in the
financial, data processing and air transport sectors.

349. As far as merger control is concerned, the Commission does not expect the number of cases
notified to stabilise in view of, firstly, the worldwide restructuring drives that are taking place in a
number of industries and, secondly, the impact of the introduction of the single currency in Europe on
1 January 1999. It expects to receive between 230 and 250 notifications in 1999.

350. The success of the liberalisation policy will depend on a strict application of Community
competition law. The Commission will have to ensure that the liberalisation directives are duly
transposed into national law and that their provisions are applied by Member States in accordance with
Article 86. It will pay particular attention to monitoring the implementation of full competition in
telecommunications markets, acting in conjunction with national regulatory authorities and,
if
necessary, national competition authorities. It will also closely monitor implementation of the postal
services directive. Lastly, after the adoption of the liberalisation directives in the energy sector (first
stage for electricity markets in February 1999), it will apply itself to rendering effective the application
of the competition rules to this sector, which is to be gradually opened up to competition.

351. Energy sector liberalisation will also have an impact on the number of state aid cases
investigated by the Commission.

352. An important step in the field of aid policy will be the implementation of the procedural
regulation. This instrument, which makes the procedural rules more transparent, should improve
compliance with them. It also provides the Commission with new weapons in its fight against unlawful
aid measures and the misuse of aid.

COMPETITION REPORT 1998

XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 123

The fall in the number of new aid cases in 1998 was probably temporary and cyclical. 1999 should see
numerous notifications of aid measures linked to the new regional maps or to training aid.

Lastly, the Commission intends to continue pursuing its policy of firmness towards unlawful aid, as
attested to in 1998 by the record number of negative decisions.

COMPETITION REPORT 1998

XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 125

ANNEX — CASES DISCUSSED IN THE REPORT

1. Articles 81, 82 and 86

Case

ACEA

Stainless steel

Brussels Airport

Cologne/Bonn Airport

Du¨ sseldorf Airport

Frankfurt/Main Airport

Hamburg Airport

Stuttgart Airport

Publication

OJ L 100, 1 4 1998

OJ L 216, 1995

OJ L 173, 14 1 1998

OJ L 72, 11 3 1998

30 10 1998

30 10 1998

Alpha Flight Services/Ae´ roports de
Paris (ADP)

Amministrazione Autonoma dei
Monopoli dello Stato (AAMS)

OJ L 230, 18 8 1998

OJ L 252, 12 9 1998

Atlas/Global One

Automec

British Interactive Broadcasting
(BIB)

British Airways and American Air-
lines

British Sugar, Tate & Lyle, Napier
Brown and James Budgett

OJ C 322, 21 10 1998

OJ L 239, 30 7 1998

OJ L 284, 19 10 1998

Cartonboard

Cement

Pre-insulated pipes

OJ L 24, 30 1 1999

EACEM

EUCAR

Inmarsat

IRE/Nordion

KLM and Northwest

Kodak

OJ C 185, 18 5 1997

Lufthansa, SAS and United Air-
lines

OJ L C 239, 30 7 1998

P&I Clubs

Beams

Reductions in piloting tariffs

OJ L 301, 1997

REIMS II

OJ C 371, 1 12 1998

Sabena/Austrian Airlines/Swissair
and Delta Air Lines

SNCF/Ce´ ge´tel

OJ C 293, 22 9 1998

Te´ le´vision Par Satellite (TPS)

Trans-Atlantic Conference Agree-
ment (TACA)

COMPETITION REPORT 1998

Point

131

3,65, insert 3

110

Insert 4

Insert 4

72

Insert 4

Insert 4

72

70

Insert 5

28

96, 98, 99

101-103

Insert 3

Insert 3

165

Insert 3

103

132

90

74

104

336

101

116-119

Insert 3

110

93

104

88

96

73, 105

126 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

Ferry services between Greece and
Italy

Uniworld

Valpak

Van den Bergh Foods

Verba¨ndevereinbarung

Volkswagen

2. Merger control

OJ L 246, 4 9 1998

OJ L 124, 23 4 1998

Case

Agfa-Gevaert/Du Pont

Allianz/AGF

Publication

IP/98/148

IP/98/419

Anglo American Corporation/
Lonrho

Bertelsmann, Kirch and Premiere

IP/98/477

Boeing/MDD

BP/Amoco

BT/AT&T

Canal+/CDPQ/BankAmerica

Daimler-Benz/Chrysler

IP/98/1106

IP/98/1062

IP/98/696

Deutsche Telekom/BetaResearch

IP/98/103

Dresser/Haliburton

Enso/Stora

Exxon/Shell

Gencor/Lonrho

PRES/98/381

IP/98/1022

IP/98/648

Hercules/Betz Dearborn

Hoffmann-La Roche/Boehringer
Mannheim

IP/98/870

IP/98/121

ITS/Signode/Titan

Kali und Salz

KPMG/Ernst & Young

Krauss-Maffei/Wegmann

LHZ/Carl Zeiss

Marsh Mc Lennan/Sedgwick

Owens-Illinois/BTR Packaging

Pakhoed/Van Ommeren

IP/98/132

IP/98/555

IP/98/933

IP/98/931

Price Waterhouse/Coopers & Ly-
brand

IP/98/454

Saint-Gobain/Wacker-Chemie/NO-
M

Samsung/AST Research Inc. (AST)

IP/98/166

Seagram/Polygram

Skanska/Scancem

Telia/Telenor/Schibsted

IP/98/824

IP/98/982

65

Insert 5

133

74

127

69

Point

153

146

Insert 5

96, 142, 155

Insert 5

313

138

Insert 7

313

96, 141, 155

312

148, 159, 163

313

Insert 5, 149

313

152, 163

158

140, 147, 149, 175, 179

138, 145, 150

169

138

313

161

162

145, 149, 313

Insert 5

180

313

165

Insert 7

COMPETITION REPORT 1998

XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 127

Unichem/Unifarma

Veba/Degussa

Vendex/KBB

IP/98/742

IP/97/1076

IP/98/494

Wienerberger/Cremer und Breuer

IP/98/51

Wolters Kluwer/Reed Elsevier

Worldcom/MCI

IP/98/230

IP/98/213

170

163

168

138

138, 154

142, 164, 311

Publication

OJ L 171, 17 5 1998

Point

221

3. State aid

Case

Aid for the construction of a hydro-
gen peroxide factory

Air Belgium

Air France

Alitalia

Annulment of a final decision,
Spain

Not yet published

AutoEuropa

OJ C 208, 4 7 1998

Tauern motorway in Austria

OJ C 198, 24 6 1998

Banco di Napoli

Biotec Biologische

Naturverpackungen GmbH

Brile´ n SA

Brittany Ferries

British Airways

BP Chemicals

Not yet published

OJ C 219, 15 7 1998

OJ C 199, 25 5 1998

Not yet published

Case di Cura Riunite

OJ C 149, 15 5 1998

Chambre syndicale des entreprises
de transport de fonds et valeurs
(Sytraval) and Brink’s

Channel Tunnel rail link

Chantiers de l’Atlantique/Renais-
sance Financial

Cityflyer Express

Coal industry in Germany (1997)

OJ L 324, 2 12 1998

Coal industry in Germany (1998)

Not yet published

Coal industry in Spain

OJ L 303, 3 6 1998

Comite´ d’entreprise de la Socie´ te´
franc(cid:224)aise de production and others

Commend

Coope´ rative d’Exportation, Livre
Franc(cid:224)ais (CELF)

Cordex SA

Cre´ dit Lyonnais

CTRL

COMPETITION REPORT 1998

OJ C 207, 3 7 1998

OJ L 221, 8 8 1998

258

256

254

237

243

261

271

214

248

259

256

201

197

280

3, 260

234

201

240, 241

240, 241

236

283

216

275

247

3, 270

260

128 XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL

Dutch petrol stations on the border
with Germany

OJ C 307, 7 10 1998

EDF

Not yet published

English Partnerships scheme

Fiat Mezzogiorno

OJ L 117, 13 5 1993

French and Dutch film industry

Not yet published

ESF Feralpi

Not yet published

Gas distribution in Denmark

Not yet published

German development aid to Indo-
nesia

Germany and Textilwerke Deggen-
dorf GmbH

Gestevision Telecinco SA

Green electricity

Istituto Poligrafico e Zecca dello
Stato

Intermills

Not yet published

Not yet published

Not yet published

Not yet published

276

204

200

245

274

235

205

233

287

272

222

196

284

Irish corporation tax

OJ C 395, 18 12 1998

192, 210

Italian regional aid scheme

Kiener Deponie Bachmanning,
Austria

OJ C 201, 27 6 1998

266

199

KNP Leykam

OJ C 296, 24 9 1998

80, 214

Kvaerner Warnow Werft

Not yet published

Ladbroke Racing Ltd

LDV Ltd

Lenzing Lyocell

LiftGmbH

Magefesa

Martinair

Not yet published

OJ C 9, 13 1 1999

Not yet published

Not yet published

231

208

244

198

229

209

257

MTW-Schiffswerft and Volkswerft
Stralsund

SEC(1998) 71 final and SEC
(1998) 1313 final

231-233

Non-fossil fuel obligation for re-
newables (NFFO)

Not yet published

Oce´ NV

Olympic Airways

Ponsal

Preussag Stahl AG

OJ C 270, 29 8 1998

Not yet published

Not yet published

Publicly owned shipyards in Spain

Recovery of aid

Spanish scheme to assist the pur-
chase of industrial vehicles

Flemish Region

Residents of the Canary and Balea-
ric islands

RTVE

Ryanair Ltd

Not yet published

Not yet published

212

214

255

202

203

231

189, 287

262

211

257

272

202

COMPETITION REPORT 1998

XXVIIITH REPORT ON COMPETITION POLICY 1998 — SEC (99) 743 FINAL 129

Acquisition of Saarbergwerke
GmbH and Preussag Anthrazit
GmbH by Ruhrkohle AG

Not yet published

Santana Motor SA

Saxonylon Textil GmbH

Seat SA

Sican

SNIACE SA

Sunair

OJ L 6, 10 1 1997

Not yet published

OJ L 88, 9 4 1996

OJ C 307, 7 10 1998

Not yet published

Road haulage and intermodality in
Italy

OJ C 211, 7 7 1998

Transmediterra´ nea

Viscido and others v Ente Poste
Italiane

240

245

249

245

215

250

258

261

259

206

COMPETITION REPORT 1998

Part Two

Report on the application of the
competition rules in the
European Union

(Report prepared under the sole
responsibility of DG IV in conjunction with
the Twenty-eighth Report on Competition
Policy 1998 — SEC (99)743 final)

Contents

I — Antitrust: Articles 81 and 82 of the EC Treaty — Articles 65 and 66

of the ECSC Treaty

A — Case summaries
1. Prohibitions
2. Authorisations
3. Rejections of complaints
4. Rejection of application for interim measures
5. Settlement

B — New legislative provisions and notices adopted or proposed by the Commission

C — Formal decisions pursuant to Articles 81, 82 and 86 of the EC Treaty

1. Published decisions
2. Other formal decisions

D — Cases closed by comfort letter in 1998

E — Notices pursuant to Articles 81 and 82 of the EC Treaty

1. Publication pursuant to Article 19(3) of Council Regulation No 17
2. Notices inviting interested third parties to submit observations on proposed transac-

tions

3. “Carlsberg” notices concerning structural cooperative joint ventures

F — Press releases

G — Judgments and orders of the Community courts

1. Court of First Instance
2. Court of Justice

II — Merger control: Council Regulation (EEC) No 4064/89 and Article

66 of the ECSC Treaty

A — Summaries of decisions taken under Article 6(1)(b) of Council Regulation (EEC) No

4064/89
1. Merger proposals where undertakings have been given by the firms involved

B — Summaries of decisions taken under Article 8 of Council Regulation (EEC) No 4064/

89
1. Merger proposals where undertakings pursuant to Article 8(2) of the ECMR have

been given by the firms involved

2. Merger proposals approved without undertakings
3. Merger proposals declared incompatible with the common market under

Article 8(3) of the ECMR

C — Decisions pursuant to Article 2(4) of the ECMR (joint venture cases)

D — Commission decisions

1. Decisions under Articles 6 and 8 of Council Regulation (EEC) No 4064/89
2. Decisions pursuant to Article 66 of the ECSC Treaty

COMPETITION REPORT 1998

137

137
137
146
162
168
169

171

172
172
172

173

178
178

179
179

179

181
181
182

185

185
185

190

190
194

196

196

198
198
205

134 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

E — Press releases

1. Decisions under Articles 6 and 8 of Council Regulation (EEC) No 4064/89

F — Judgments of the Community courts

1. Court of First Instance
2. Court of Justice

III — State aid

A — Overview of cases

1. Regional aid
2. Aid to specific industries
3. Cross-industry schemes

B — New legislative provisions and notices adopted or proposed by the Commission

C — List of state aid cases in sectors other than agriculture, fisheries, transport and the coal

industry
1. Measures which the Commission considered compatible with the common market

without opening a formal investigation under Article 88(2) of the EC Treaty or Ar-
ticle 6(5) of Decision 2496/96/ECSC

2. Cases in which the Commission found, without opening a formal investigation, that
there was no aid element within the meaning of Article 87(1) of the EC Treaty or
Article 1(2) of Decision 2496/96/ECSC

3. Aid cases in which the Commission initiated proceedings under Article 88(2) of the

EC Treaty in respect of all or part of the measure

4. Aid cases in which the Commission initiated proceedings under Article 6(5) of De-

cision 2496/96/ECSC in respect of all or part of the measure

5. Aid cases in which the Commission initiated, in respect of all or part of the mea-

sure, proceedings under Article 84 of the ECSC Treaty for failure by a
Member State to fulfil its obligations

6. Aid cases in which the Commission extended Article 88 (2) proceedings in respect

of all or part of the measure

7. Interim decisions requiring the Member State to supply the information needed by

the Commission

8. Cases in which the Commission considered that the aid was compatible with the

common market and terminated proceedings under Article 88(2) of the EC Treaty
by way of a positive final decision

9. Cases in which the Commission considered that the aid was compatible with the

common market and terminated proceedings under Article 6(5) of Decision 2496/
96/ECSC by way of a positive final decision

10. Cases in which the Commission considered, subject to certain reservations, that

the aid was compatible with the common market and terminated proceedings un-
der Article 88(2) of the EC Treaty by way of a conditional final decision

11. Cases in which the Commission considered that the aid was incompatible with the
common market and terminated proceedings under Article 88(2) of the EC Treaty
by way of a negative or partly negative decision

12. Cases in which the Commission considered that the aid was incompatible with the
common market and terminated proceedings under Article 6(4) of Decision 3855/
91/ECSC or Article 6(5) of Decision 2496/96/ECSC by way of a negative decision

205
205

213
213
213

215

215
215
220
254

273

274

274

283

284

286

287

287

287

288

289

289

290

291

COMPETITION REPORT 1998

CONTENTS 135

13. Aid cases in which the Commission terminated proceedings under Article 88(2) of

the EC Treaty after the Member State withdrew the proposed measure

14. Aid cases in which the Commission terminated proceedings under Article 6(5) of
Decision 2496/96/ECSC after the Member State withdrew the proposed measure

15. Aid cases in which the Commission proposed appropriate measures under Article

88(1) of the EC Treaty

16. Cases in which the Commission noted the Member State’s agreement to ensuring
the compliance of existing aid awards following the proposal of appropriate mea-
sures under Article 88(1) of the EC Treaty

17. Aid cases which the Commission decided to refer to the Court of Justice under

the second subparagraph of Article 88(2) of the EC Treaty

18. Other Commission decisions

D — List of state aid cases in other sectors

1. In the agriculture sector
2. In the fisheries sector
3. In the transport sector

E — Judgments of the Community courts

1. Court of First Instance
2. Court of Justice

F — Enforcement of Commission decisions ordering the recovery of aid

1. Commission decisions (DG IV) ordering the recovery of aid (1983-1997) not yet

implemented

2. Commission decisions (DG IV) taken in 1998 ordering reimbursement

IV — International

Commission Report to the Council and the European Parliament on the application
of the Agreement between the European Communities and the Government of the
United States of America regarding the application of their competition laws, 1 Janu-
ary 1998 to 31 December 1998

1. INTRODUCTION
2. EC/US COOPERATION: THE RECORD SO FAR
3. THE 1998 EC/US AGREEMENT ON POSITIVE COMITY
4. CASE SPECIFIC COOPERATION WITHIN 1998
5. CONCLUSIONS

V — The application of competition rules in the Member States

A — Legislative developments

B — Application of the Community competition rules by national authorities

C — Application of the Community competition rules by courts in the Member States

D — Application of the 1993 notice on cooperation between the Commission and national

courts

Annex: Application of Articles 81 and 82 by national competition authorities

COMPETITION REPORT 1998

291

292

292

292

292
293

294
294
301
303

304
304
304

305

305
309

313

313

313
313
316
318
322

329

329

337

349

357

361

136 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

VI — Statistics

A — Articles 81, 82 and 86 of the EC Treaty + Article 65 of the ECSC Treaty

1. Activities in 1998
2. Four-year overview

B — Merger Regulation

1. Notifications received
2. Article 6 decisions
3. Article 8 decisions
4. Referral decisions
5. Procedural decisions

C — State aid

1. New cases registered in 1998
2. Cases being examined as at 31 December 1998
3. Cases dealt with in 1998 according to the register in which they were recorded
4. Decisions taken by the Commission in 1998
5. Evolution over the period 1989-98
6. Decisions broken down by Member State

VII — Studies

VIII — Reactions to the Twenty-seventh Report

A — European Parliament

1. Resolution on the XXVII report by the Commission on Competition Pol-

icy — 1997 (SEC(98)0636 — C4-0379/98)

2. Reply by the Commission to Parliament’s Resolution on the XXVIIth Report on

Competition Policy

B — Economic and Social Committee

1. Opinion of the Economic and Social Committee on the XXVIIth Report on Com-

petition Policy (1997) (SEC (1998) 636 final)

2. Reply by the Commission to the opinion on the XXVIIth Report on Competition

Policy

363

363
363
363

364
364
364
364
365
365

365
365
365
366
366
367
367

369

373

373

373

379

390

390

396

COMPETITION REPORT 1998

I — ANTITRUST: ARTICLES 81 AND 82 OF THE EC TREATY —

ARTICLES 65 AND 66 OF THE ECSC TREATY

ANTITRUST 137

A — Case summaries

1. Prohibitions

1.1. Horizontal agreements

Price cartel in the stainless steel sector

On 21 January the Commission adopted a decision prohibiting an agreement between, and imposing
fines on, six producers of stainless-steel flat products: Acerinox SA, ALZ NV, Acciai Speciali
Terni SpA, Avesta Sheffield AB, Krupp Thyssen Nirosta GmbH and Usinor SA. 1 These firms account
for more than 80% of European production of stainless-steel finished products.

At a meeting in Madrid on 16 December 1993 the parties decided on a concerted increase in prices, to
be achieved by changing the method for calculating a price supplement known as the ‘alloy surcharge’,
a surcharge based on the alloying elements used in stainless steel.

Some of the firms involved claimed that the transparency requirements of Article 60 of the ECSC
Treaty forced suppliers to provide general information on their pricing intentions. Whilst it is true that
that article requires undertakings to make public ‘the price lists and conditions of sale applied by
undertakings within the common market’, prices and conditions must be determined independently by
each firm. They should not in any case be communicated to interested parties before being notified to
the Commission.

The Commission decided that this price agreement constituted a serious infringement of Article 65 of
the ECSC Treaty and fined the firms a total of ECU 27.3 million.

This decision, like the earlier ‘Beams’ decision 2 of 1994, forms part of efforts to combat illegal
agreements in the steel sector.

It marked the first time that the Commission had applied the guidelines for the calculation of fines 3
and the Commission notice on the waiving or reduction of fines in cartel cases (‘leniency notice’). 4

The fines were thus calculated on the basis of an absolute amount determined according to the gravity
of the infringement and weighted according to the duration of the infringement for each of the firms
involved. This basic amount was increased or reduced to take account of the aggravating or attenuating
circumstances specific to each firm. Finally, the above-mentioned leniency notice was applied.

1 OJ L 100, 1.4.1998.
2 OJ L 116, 6.5.1994.
3 OJ C 9, 14.1.1998.
4 OJ C 207, 18.7.1996, p. 4.

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138 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

This decision shows how the objective of transparency targeted by the guidelines can be achieved, an
aspect which is particularly important as far as the cooperation of firms is concerned. In this case, all
the firms invoked the notice, dealing as it does with cooperation, but only two of them actually
cooperated, one of them by bringing the infringement to an end and the other by supplying important
information to the Commission in the course of the investigation. By dint of the detailed calculation
presented in the published decision, the firms have been able to appreciate the difference in treatment
afforded by the Commission between those which genuinely cooperated and those which merely
declared their intention to do so.

British Sugar + Tate & Lyle + Napier Brown + James Budgett 5

On 14 October the Commission adopted a decision fining sugar producers British Sugar and Tate &
Lyle and sugar merchants Napier Brown and James Budgett for an infringement of Article 81(1) of the
EC Treaty. The Commission found that the companies had sought to restrict competition by
coordinating their pricing policy on the white granulated sugar market in the United Kingdom. The
Commission therefore imposed fines of ECU 39.6 million on British Sugar, ECU 7 million on Tate &
Lyle, ECU 1.8 million on Napier Brown and ECU 1.8 million on James Budgett.

The decision concerns the collaborative strategy of higher pricing by British Sugar, Tate & Lyle, Napier
Brown and James Budgett on the industrial white granulated sugar market in the United Kingdom and
a similar strategy pursued by British Sugar and Tate & Lyle on the retail white granulated sugar market
in the United Kingdom.

These infringements took place from 20 June 1986 to 2 July 1990 with respect to British Sugar and Tate
& Lyle, and from late 1986 to 2 July 1990 with respect to Napier Brown and James Budgett. During this
period, the four companies accounted for some 90% of the entire white granulated sugar market in the
United Kingdom.

The Commission found evidence of numerous meetings between the parties, which took place at
regular intervals throughout the relevant period. In an initial meeting between British Sugar and Tate
& Lyle on 20 June 1986, the principles of the future anticompetitive conduct were established. The
merchants Napier Brown and James Budgett became involved in this conduct before the end of 1986.

A total of eighteen further meetings about industrial white granulated sugar took place between all
four parties. During these meetings, British Sugar informed Tate & Lyle, Napier Brown and
James Budgett of target prices it intended to obtain with respect to industrial sugar. Concerning retail
sugar, a further eight meetings took place between British Sugar and Tate & Lyle, in which British
Sugar revealed to Tate & Lyle its pricing policy and in which the two companies discussed their
respective discount policies towards large retail customers.

While the Commission did not have sufficient evidence that prices to be charged to individual buyers
of industrial or retail sugar were jointly fixed, the systematic participation of all four parties in regular
meetings concerning industrial sugar, and of British Sugar and Tate & Lyle concerning retail sugar, led
to an atmosphere of mutual certainty as to the participants’ intentions concerning their future pricing
behaviour. Each of them could rely, if not on the precise price levels of the other participants, then at
least on their intentional pursuit of the collaborative strategy of higher pricing.

5

IV/33.708/F3, IV/33.709/F3, IV/33.710/F3, IV/33.711/F3.

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ANTITRUST 139

For all the participants this mutual assurance was of interest particularly — though not exclusively —
in the price range above the break-even point, for which price competition was possible while
remaining profitable.

The fines were calculated on the basis of the Commission’s published guidelines for the calculation of
fines. 6 The Commission took account of the fact that the infringements were serious and of medium
duration. Considerable differentiations with regard to the individual contributions of the four parties
to the infringement were made:

— the participation of British Sugar, on account of its high share of the relevant markets for industrial
and retail sugar and its position as price leader on those markets, was an essential element in the
operation of the cartel;

— Tate & Lyle, on account of its share on the relevant markets, was the second most important

member of the cartel;

— the merchants Napier Brown and James Budgett did not participate in the key meeting of
20 June 1986; they joined the cartel only several months later and from then onwards only
participated in the infringements concerning industrial sugar.

Because they were dependent on supplies from the two domestic sugar producers — British Sugar and
Tate & Lyle — for a significant part of the sugar they sold in their capacity as merchants, their
influence on the relevant market and their scope for exercising power on that market were limited.

Moreover, with regard to British Sugar, several aggravating factors were found:

— British Sugar was the instigator of the infringements and, throughout the relevant period, remained
the driving force. In fact, after having waged a price war against its competitors, it took the
initiative, by arranging the meeting of 20 June 1986, of replacing this price war with a collaborative
strategy of higher pricing with its competitors.

— British Sugar acted in a manner contrary to the clear wording of the comprehensive compliance
programme it presented to the Commission in October 1986 in the course of a proceeding brought
in response to a complaint by Napier Brown, and which the Commission took into account as a
mitigating factor when setting the fine in the Napier Brown decision. 7

— Back in July 1988, in its Napier Brown decision, the Commission had already fined British Sugar for
attempting to squeeze a merchant out of the retail market on the white granulated sugar market in
the United Kingdom. On the same relevant market, British Sugar pursued the collaborative
strategy of higher pricing at issue in the present decision for two years in parallel with the
Commission proceeding leading up to the Napier Brown decision.

As for Tate & Lyle, the Commission substantially reduced the fine under its notice on the waiving or
reduction of fines in cartel cases, 8 in order to take account of the fact that Tate & Lyle cooperated with

6 OJ C 9, 14.1.1998.
7 OJ L 284, 19.10.1998.
8 OJ C 207, 18.7.1997.

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140 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

the Commission, in particular by submitting two self-incriminating letters to it. Indeed, these two
letters provided decisive evidence of the cartel’s existence and allowed the Commission to intervene in
this case.

Greek ferries

By decision of 9 December the Commission fined seven ferry operators for entering into price-fixing
collusion in relation to roll-on/roll-off services on routes between Greece and Italy.

Six of these companies — Minoan, Anek, Strintzis, Ventouris, Karageorgis and Marlines — are based
in Greece. One company — Adriatica — is established in Italy.

Following receipt of a letter from a member of the public, the Commission carried out investigations
without prior warning at the offices of six ferry operators, five in Greece and one in Italy, in July 1994.
Strong evidence of an infringement of Article 81 was discovered. The Commission concluded that
these ferry companies had participated in a price-fixing cartel for several years. This was an ongoing
agreement described by the companies as “the usual practice”. The cartel operated in the form of
regular meetings and an exchange of correspondence involving the collective readjustment of prices
for passengers and vehicles.

The relevant market is limited both geographically and in size. It concerns three out of five routes on
the Adriatic. This is a relatively small seasonal market compared with other markets in the EU.

The Commission would normally regard such an infringement as very serious, Nevertheless, the
infringement had a fairly limited actual impact on the market. The parties did not apply in full all the
specific price agreements, and fares were kept at a low level compared with other routes within the
common market for maritime transport from one Member State to another. In the light of these
considerations, the Commission concluded that the infringement should be qualified as serious.

The Commission imposed fines totalling ECU 9.1 million.

Almost all the firms in question cooperated with the Commission and benefited from reductions in
fines. The Commission believes that, after its intervention, normal conditions of undistorted
competition have been re-established on this market.

Price-fixing, market-sharing and bid-rigging cartel in pre-insulated pipes

On 21 October 9 the Commission decided to impose fines totalling more than ECU 92 million on ten
companies which had been engaged in a clandestine market-sharing, bid-rigging and price-fixing cartel
covering the whole European market for pre-insulated pipes used in district heating systems. The
ringleader of the cartel, ABB Asea Brown Boveri Ltd, the Swiss-Swedish engineering group, was fined
ECU 70 million.

The Commission investigations were carried out in June 1995 following a complaint from Powerpipe of
Sweden, the only producer not involved in the cartel, that it had been the object of systematic reprisals
from the others as a result of its refusing to join their unlawful enterprise. Tangible evidence of the

9 OJ L 24, 30.1.1999.

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ANTITRUST 141

cartel was discovered on the premises of virtually all the producers, and nine months later the majority
of them admitted to the Commission that they had infringed the competition rules.

The cartel began in Denmark, where most of the producers are located or have their headquarters, in
late 1990 and was gradually extended to other markets, particularly Germany, the largest individual
national market for district heating. From 1994 onwards, the cartel covered the entire west European
market, worth more than ECU 400 million annually. Managing directors or chief executives
determined the joint policy and allocated market quotas to each participant. In each national market
‘contact groups’ of sales managers carried out the decisions and monitored the cartel’s implementation.
Most contracts for district heating are awarded by competitive bidding and public tendering and, for
the larger projects, EU rules on public procurement apply. In Germany and Denmark, where the most
sophisticated arrangements were in place, each new project announced was secretly allocated by the
cartel to a ‘favourite’ which decided the price it would bid; the other producers then put in higher
offers to ensure it was awarded the contract.

When Powerpipe won a large contract in Germany against the cartel, the other producers decided to
force it out of business by organising a boycott and ensuring that its supplies were cut off.

The fact that the ten producers involved deliberately continued the cartel for almost a year after the
investigations constitutes a particularly aggravating feature of this infringement. When determining the
fines, the Commission applied its guidelines, which provide for a minimum fine of ECU 20 million for
very serious cases. Even though the infringement was prolonged, the Commission reduced the fines
imposed on most participants to take account of the fact that they had cooperated.

In the case of ABB, the fine reflects the fact that senior group management was involved in the cartel.

1.2. Vertical agreements

Volkswagen — Audi

The Commission imposed a fine of ECU 102 million on Volkswagen AG — Europe’s largest motor-
manufacturing group — for an infringement of Article 81(1) of the Treaty. In particular, it found that
Volkswagen had systematically forced its authorised dealers in Italy to refuse to sell Volkswagen and
Audi cars to foreign buyers, mainly from Germany and Austria. Since 1995 the Commission had been
receiving a large number of complaints from consumers who had had difficulty buying new cars in
Italy. In its decision of 28 January, 10 the Commission found that Volkswagen AG, its Italian subsidiary
Autogerma SpA and Audi AG had devised, in concert with their Italian dealers, a strategy aimed at
preventing, or at least substantially restricting, sales from Italy to other Member States, especially
Germany and Austria. Volkswagen was given two months to take the steps required by the
Commission in order to put an end to the practices involved.

In October 1995 the Commission had carried out inspections at Volkswagen’s offices in Wolfsburg, at
Audi’s offices in Ingolstadt, at Autogerma’s offices in Verona (Autogerma is a wholly owned subsidiary
of Volkswagen, and the official importer for both makes in Italy) and at the offices of a number of
VAG dealers in the north of Italy. Papers found in the course of those inspections provided clear
evidence of a market-partitioning policy pursued by Volkswagen, Audi and Autogerma.

10 Commission Decision 98/273/EC of 28 January 1998 (IV/35.733 — VW) (OJ L 124, 23.4.1998).

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142 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

In its decision, the Commission found that the conduct of Volkswagen/Audi was a threat to the proper
functioning of the single market and a very serious infringement of Community competition law. On
the basis of the measures it took, Volkswagen successfully sought to impose an export prohibition/
restriction. The measures in question, whether viewed as a whole or individually, were liable
significantly to restrict competition. Trade between Member States was affected in that the export
prohibition/restriction imposed by Volkswagen restricted cross-border trading. This resulted in trade
between Member States being affected significantly.

In setting the fine, the Commission took account of the duration of the infringement — more than ten
years — and of the fact that, among other things, the companies in the Volkswagen group set up the
system of restrictive practices by exploiting the economic strength they enjoyed in their relationship
with their networks of authorised dealers in Italy. It also held that the infringement was aggravated by
the fact that Volkswagen did not take the appropriate action when told by the Commission to put an
end to what was a serious infringement.

This decision marks an important step in the Commission’s practice in this field in that the fine
involved is the highest it has ever imposed on a single firm. The size of the fine is an indication that the
Commission will not tolerate practices of this kind and will act with similar determination against other
manufacturers who set out to partition the market. This case should also be seen in the context of the
monitoring of the block exemption Regulation for car distribution. 11 Article 11 of this Regulation
requires the Commission to evaluate the application of the Regulation, particularly as regards the
impact of the exempted system of distribution on price differentials and on the quality of service to
final users.

The Regulation allows the industry to establish a number of competition-restricting clauses and
practices within the contractual relationships with their dealers. In return, manufacturers are required
to comply with a number of rules laid down in the Regulation, for instance not to restrict the freedom
of final consumers and other network dealers to acquire cars in the Member State of their choice. Non-
compliance with this condition is considered by the Commission to be a very serious infringement of
the competition rules, and is punished accordingly. The Commission is aware that obstacles to parallel
trade still exist in some Member States and it will consequently not hesitate to take measures against
manufacturers who break the rules.

Van den Bergh Foods

On 11 March the Commission adopted a decision, based on an assessment under Articles 81 and 82 of
the Treaty, condemning Unilever’s practice of “freezer exclusivity” in Ireland with a view to facilitating
access by other suppliers to the “impulse” ice cream market. A Unilever subsidiary, Van den Bergh
Foods Limited, is the leading supplier of ice cream in Ireland, with a market share in excess of 85%.
The company has an extensive network of freezer cabinets which are placed at the disposal of retailers
free of any direct charge but on condition that they are used exclusively for the storage of Unilever’s
products.

The Commission found that, in the circumstances of the Irish market, the provision of cabinets on
exclusive terms results in many of the recipient outlets only being in a position to offer for sale the ice
cream products of Unilever. Market research relied on by the Commission demonstrates that retailers
are very unlikely either to replace incumbent cabinets, in particular those installed by Unilever, or to

11 Commission Regulation (EC) No 1475/95 of 28 June 1995 (OJ L 145, 29.6.1995).

COMPETITION REPORT 1998

ANTITRUST 143

install additional ones, particularly alongside Unilever cabinets. Unilever’s competitors are
consequently denied access to these outlets, with the result that their products are not offered for
sale from some 40% of retail outlets in Ireland. The outlets foreclosed in this way account for roughly
the same proportion of total sales in the relevant market.

The Commission therefore found that the exclusivity condition, as applied in relation to outlets whose
only ice cream cabinets have been provided by Unilever, infringed Article 81 of the EC Treaty. It held,
moreover, that Unilever was abusing its position of market dominance in Ireland, in breach of Article
82 of the EC Treaty, by inducing retailers to enter into exclusive arrangements of this sort.

Competition concerns arising from the distribution of ice cream products were first brought to the
Commission’s attention in 1991 with a complaint by Mars. In 1992 the Commission took a decision
outlawing the use of so-called “outlet exclusivity” by the two market leaders on the German ice cream
market, before turning to the more widespread problem of “freezer exclusivity”. In the light of
objections first made by the Commission in 1993, Unilever made a number of modifications to its
distribution arrangements in Ireland. In particular, a scheme allowing retailers to buy freezer cabinets
from Unilever on a hire-purchase basis was introduced in 1995 as an optional alternative to the
traditional method of cabinet provision. It was expected that these changes would render Unilever’s
distribution arrangements compatible with the competition rules by facilitating a trend towards wider
freezer cabinet ownership by retailers. This would have enabled retail outlets to offer for sale the
products of any supplier, thereby contributing to a real opening-up of the Irish impulse ice cream
market. The changes did not, however, succeed in bringing about such a trend, a failure confirmed by a
comprehensive market survey carried out on behalf of the Commission in the summer of 1996, and a
new set of objections was accordingly put to Unilever in 1997.

Unilever has appealed against the Commission decision before the Court of First Instance. Pending the
Court’s ruling on this appeal, the President of the Court decided, upon application by Unilever, to
suspend the effects of the Commission decision. The principal reason cited by the President for
granting the application was the existence of parallel proceedings before the Irish Supreme Court
concerning Unilever’s use of freezer exclusivity. The suspension seeks to avoid any legal uncertainty
arising from the possibility of conflicting rulings by the two courts.

1.3. Abuse of dominant position

Amministrazione Autonoma dei Monopoli dello Stato

On 17 June the Commission adopted a decision 12 finding that the Amministrazione Autonoma dei
Monopoli dello Stato (AAMS), which had a dominant position on the Italian market for the wholesale
distribution of cigarettes, had infringed Article 82 of the EC Treaty by engaging in abusive practices
aimed at protecting its cigarettes to the detriment of those manufactured in other Member States. The
Commission fined the AAMS ECU 6 million.

The AAMS is a body answering directly to the Italian Ministry of Finance which performs the
functions of a firm (production, import/export and wholesale distribution of tobacco products) and of a
public authority (exercise of powers to ensure compliance with the Italian rules governing the tobacco
products sector). The AAMS has the exclusive right to produce tobacco products in Italy and has a

12 Commission Decision 98/538/EC of 17 June 1998 (OJ L 252,12.9.1998).

COMPETITION REPORT 1998

144 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

de facto monopoly on the Italian tobacco products wholesale market, being at present the only
company to carry on this activity in Italy.

The decision stated that the AAMS had abused its dominant position by imposing, for many years, on
foreign producers (which manufactured their cigarettes in other Member States) wholesale distribution
contracts containing numerous restrictive clauses which seriously limited the access of foreign
cigarettes to the Italian market. Firstly, those contracts limited the opportunities for launching new
foreign cigarettes in the Italian market. Secondly, they restricted the scope for expanding sales of
foreign cigarettes already present in the market. And finally, they imposed on foreign cigarettes a
number of unjustified control and presentation requirements.

The AAMS also abused its dominant position by taking unilateral measures to promote its cigarettes at
the expense of foreign ones. These measures affected both foreign producers and Italian retailers.

The decision ordered the AAMS to put an immediate end to infringements still ongoing and to refrain
from continuing or from repeating the abusive conduct. The size of the fine reflected the fact that the
conduct constituted a serious, long-standing infringement.

AFS/ADP

This case concerned a complaint by AFS (Alpha Flight Services), an in-flight caterer, about
commercial fees at Paris airports (Orly and Roissy Charles-de-Gaulle). AFS and OAT, a subsidiary of
the Air France group, compete for the supply of catering services at Orly. ADP (Ae´ roports de Paris)
charged different levels of commercial and occupancy fees respectively. Had AFS been charged on the
same basis as OAT, its fee would have been smaller by some FRF 3.5 million. The fee for airlines
providing their own groundhandling services was either zero or less than that charged to third-party
suppliers. There was no objective justification for the differences, which discriminatorily reduced the
net cost of providing the services for certain suppliers. Competition was distorted not only between
groundhandling service suppliers but between air carriers, as some enjoyed cost advantages either
through distortions between third-party suppliers or through the unfairly favourable treatment of self-
handling.

Article 82 provides that a firm in a dominant position in a substantial part of the common market may
not apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing
them at a competitive disadvantage. The Commission decision of 11 June found that ADP had
infringed that article by using its dominant position as the Paris airports operator to impose
discriminatory commercial fees at the Paris airports of Orly and Roissy-Charles de Gaulle on service
providers or airlines providing groundhandling or self-handling services such as catering, cleaning and
freight handling.

This fees system mainly benefited the carriers with the best sites within the airport. Less well-located
carriers, mainly those from other Member States, were therefore abusively discriminated against by the
airport operator, which was in a dominant position. The decision sought to put an end to the system,
which impaired the smooth functioning of the single air transport market.

COMPETITION REPORT 1998

Groundhandling at Frankfurt/Main Airport

ANTITRUST 145

On 14 January the Commission adopted a decision under Article 82 finding that the groundhandling
monopoly held by the operator of Frankfurt/Main Airport (Flughafen Frankfurt/Main AG — FAG)
was the result of an abuse of a dominant position and ordering the firm to bring it to an end. 13

FAG made use of its position as airport operator to deny runway access to any independent providers
of groundhandling services and to prohibit airlines using the airport from providing their own
groundhandling services. After having rejected the technical arguments put forward by FAG (in
particular those relating to space constraints), the Commission found that FAG’s decision to grant
itself a monopoly of the activities in question constituted an abuse of a dominant position and asked
the firm to submit a detailed plan for opening up the market.

There was a risk, however, that this Commission decision might be circumvented by FAG’s offering
long-term contracts to its best customers for periods of three to ten years. This would have had the
effect of cornering the groundhandling-services market and preserving the substance of FAG’s
monopoly. Thus, alongside the formal proceedings against FAG, the Commission also informed the
firm that the contracts in question were contrary to Community law.

FAG finally agreed to comply with the Commission’s wishes. It refrained from appealing against the
decision, submitted a plan to open up the market as from 1 January 1999 and announced that it would
be making substantial changes to its policy on long-term contracts. On 28 July the Commission
informed FAG that these measures brought the infringement to an end.

Trans-Atlantic Conference Agreement

On 5 July 1994 the parties to the Trans-Atlantic Conference Agreement (TACA) submitted an
application to the Commission for exemption under Article 81(3) of the EC Treaty. The TACA is a
revised version of the Trans-Atlantic Agreement (TAA), of which the Commission was originally
notified on 28 August 1992. The Commission adopted a decision prohibiting the TAA on
19 October 1994. The liner shipping companies comprising the TAA were all parties to the TACA,
with the addition of Hanjin Shipping Co. Ltd and Hyndai Merchant Marine Co. Ltd, two Korean
shipping lines which had previously been absent from the transatlantic trade.

On 16 September 1998 the Commission adopted a decision finding that the TACA comprised the
following elements, which had the object or effect or preventing, restricting or distorting competition
within the meaning of Article 81(1) of the EC Treaty and Article 53(1) of the EEA Agreement:

(a)

the price agreements between the parties to the TACA relating to maritime transport;

(b)

the price agreement between the parties to the TACA relating to inland transport services
supplied within the territory of the Community to shippers in combination with other services as
part of a multimodal transport operation for the carriage of containerised cargo (‘carrier
haulage services’) between northern Europe and the United States of America;

13 Commission Decision 98/190/EC of 14 January 1998 (OJ L 72, 11.3.1998).

COMPETITION REPORT 1998

146 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

(c)

(d)

the agreement between the parties to the TACA as to the terms and conditions under which
they could enter into service contracts with shippers; and

the agreement between the parties to the TACA relating to the fixing of maximum levels of
freight forwarder compensation.

Only the first of those agreements falls within the scope of the block exemption for liner shipping
conferences contained in Article 3 of Regulation 4056/86, and in the decision the Commission refused
to grant individual exemption for the remaining three agreements.

The Commission also found that the TACA parties were in a joint dominant position and that they had
abused that position in two ways. First, by imposing two kinds of restriction on the availability of
service contracts. Individual service contracts were openly banned by the TACA parties in 1995 and
highly restrictive conditions applied to other service contracts after that date.

Second, the TACA parties abused their joint dominant position by inducing potential competitors to
join the conference, thereby altering the competitive structure of the market. The TACA parties did
this in a number of ways, in particular by agreeing that shipping lines which were not traditionally
conference members should be allowed to charge a lower price in service contracts than the traditional
members. The purpose and effect of the TACA’s agreement to enter into dual-rate service contracts
was to limit competition from independent shipowners by bringing them within the fold of the
conference.

In addition, the traditional conference members abstained from competing for certain contracts,
thereby leaving that part of the market to shipping lines which were not traditional conference
members.

Fines totalling ECU 273 million were imposed on the TACA parties for the two breaches of Article 82.
The seriousness of the second infringement was partly related to the significance of the potential
competition in liner shipping markets. The fines were calculated using the Commission’s published
guidelines on the imposition of fines.

The Commission decided on 26 November 1996 to lift immunity from fines in respect of inland rate-
fixing which the TACA parties may have enjoyed by virtue of the agreement having been formally
notified, and may decide to impose fines at a later date in respect of this infringement.

2. Authorisations

2.1. Horizontal agreements

a) Strategic alliances

Finnair/Maersk Air

The Commission has decided not to raise any serious doubts about the joint venture set up between the
Finnish carrier Finnair and the Danish-based carrier Maersk Air with a view to offering air-transport
services between Stockholm and Copenhagen. In practice, this decision means that the Commission
has authorised Finnair and Maersk Air to continue their joint operations on this route for a period of

COMPETITION REPORT 1998

six years. The joint venture was authorised because it enhances competition on this route, which was
previously dominated by one carrier.

ANTITRUST 147

Finnair and Maersk Air started to offer regular scheduled flights between Copenhagen and Stockholm
in April 1997. At that time the market was suffering from a lack of competition: despite the fact that
traffic on the route exceeded a million passengers a year, one carrier in practice enjoyed a virtual
monopoly and prices were high.

The Commission recognised that the cooperation between Finnair and Maersk Air had brought the
monopoly situation on the Stockholm-Copenhagen route to an end. It considered that this positive
effect of the agreement between Finnair and Maersk Air largely outweighed the restrictive effects of a
number of its provisions (such as code-sharing and coordination of fares), and that consumers would
take full advantage of the new market situation. In this respect, the Commission also noted that the
level of prices had decreased significantly since the entry of the second operator.

b) Joint ventures and other forms of cooperation

Canon/Kodak

This case related to cooperation between five manufacturers of photographic equipment with a view to
developing and exploiting under licence a new advanced photographic system (APS) as an alternative
to previous systems and electronic imagery. The project involved the production of new types of
cameras, films and photo-finishing equipment.

Back in 1991, Kodak (with Fuji, one of the world’s leading film manufacturers), Canon, Minolta and
Nikon had concluded an agreement on the development of a system of this nature. Difficulties in
perfecting the system made it necessary to link up with Fuji.

In 1993, the parties notified to the Commission the agreements which had been concluded; although
these were not all entirely complete, the cooperation between the parties continued both on a technical
level and on that of finalising the legal documents governing their relations.

Following lengthy negotiations, the parties supplemented their notification at the beginning of 1997, in
so doing taking account of the Commission’s desire for certain aspects it considered unacceptable from
a competition point of view to be eliminated.

The Commission therefore published an Article 19(3) notice in the Official Journal, 14 which did not
give rise to any comments from third parties. The procedure was then completed by consulting the
Advisory Committee and sending a comfort letter of the exemption type on 24 March.

As for the merits of the case, it was, from the outset, clear to the notifying parties that, if the APS were
to be successful or indeed become a new standard, they would have to ensure that it became widely
available not only on the basis of their own products but by granting licences to competitors.

14 OJ C 330, 1.11.1997.

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148 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

The notifying parties therefore took great pains to conclude licensing agreements with their
competitors by holding information meetings and seminars. The result was that a large number of such
agreements were concluded well before the APS was first marketed in Europe in April 1996.

The Commission’s aim was to ensure that, once licences had been granted, third parties could arrive on
the market with licensed products in time to compete with the five firms involved.

Following the Commission’s intervention, licensing policy was liberalised somewhat. More technical
know-how and assistance were offered to licensees than originally proposed, either for a fee or
free of charge. Moreover, clauses limiting the licensees’ industrial freedom were to be phased out in
such a way that cooperation between licensees would be completely unrestricted by 2004.

Accordingly, after various technical meetings with the Commission departments, it was felt that the
five firms had shown their readiness to take whatever measures were necessary to afford licensees
access to the market in good time and on terms which no longer gave rise to competition concerns.

Pripps/Tuborg

On 26 June the Commission approved a licensing agreement between Tuborg International A/S
(“Tuborg”) and AB Pripps Bryggerier (“Pripps”) for Tuborg beer in Sweden, but only after the licence
had been made non-exclusive and a second licensee had been appointed.

Pripps belongs to the Norwegian Orkla group and is the leading brewer on the Swedish market. Tuborg
is part of the Danish Carlsberg group, which is Denmark’s leading brewer and is also present on the
Swedish market through its holdings in Falcon Bryggerier AB (“Falcon”). The Carlsberg group’s
leading brands are Carlsberg and Tuborg. Pripps has held an exclusive licence for Tuborg beer in
Sweden since 1975, while the licence for Carlsberg beer is held by Falcon.

The Tuborg licensing agreement was notified to the Commission following Sweden’s accession to the
EU. The Commission informed the parties that this long-term exclusive cooperation between
competitors, with its likely foreclosure effects, gave rise to serious concern regarding compatibility with
Article 81 of the EC Treaty. Other restrictions on Pripps (including inter alia an obligation not to
cooperate with certain foreign brewers and a guarantee that Tuborg would be the largest foreign brand
in Pripps’s portfolio) had already been withdrawn by the parties following their initial discussions with
the Commission.

The parties have since restructured arrangements for the Tuborg brand in Sweden. Their continued
cooperation is based on a non-exclusive right (from 1998 to 2002) for Pripps to manufacture, sell and
distribute Tuborg beer in Sweden. In order to avoid an abrupt negative impact on Pripps’s production
capacity utilisation, Tuborg has agreed, under certain conditions, to purchase a steadily decreasing
quantity of Tuborg class III beer from Pripps in the event of the latter failing to sell this minimum
volume on the market.

Following these changes to the agreement, and the appointment of a second licensee (Falcon), the
parties have obtained a comfort letter.

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P&O Stena Line

On 26 February the Commission approved a joint venture between P&O and Stena, which operate
cross-Channel ferry services. The two companies have merged their ferry interests on the short sea
routes on the English Channel to form the joint venture, P&O Stena Line. The Commission’s decision
exempts the joint venture under Article 81(3) of the EC Treaty until 9 March 2001.

On 31 October 1996, P&O and Stena notified their proposal to the Commission with a request for
exemption under Article 81 of the EC Treaty. Following the publication of a summary of the
application on 13 March 1997 in the Official Journal, the Commission sent the parties on 10 June of
that year a letter expressing serious doubts and explaining why it would continue its investigations. On
6 February 1998 the Commission published a notice in the Official Journal stating its intention to
exempt the joint venture, which started operating on 10 March 1998.

In its letter the Commission expressed concern that the creation of the joint venture could lead to a
duopolistic market structure conducive to parallel behaviour by the joint venture and Eurotunnel on
the short sea route tourist market. After further investigations, the Commission concluded that the
characteristics of the market were such that the joint venture and Eurotunnel could be expected to
compete with each other rather than acting in parallel to raise prices.

The case also posed difficulties because of uncertainties as to future developments in the cross-
Channel ferry services market, including the impact of the ending of duty-free concessions in mid-1999.
As a result of those uncertainties, the Commission, acting on a proposal from Mr Van Miert, has
decided to limit the duration of the exemption to three years, starting from the date of implementation
of the agreement, namely until 9 March 2001. This will enable the Commission to re-examine the
impact of the joint venture on the cross-Channel ferry market after the 2000 summer season.

The joint venture has also been approved under national merger control rules in France and in the
United Kingdom.

British Digital Broadcasting (BDB)

BDB, now operating under the trade name of ON Digital, is a joint venture between Granada and
Carlton, two UK broadcasting companies. The joint venture established and operates a platform for
digital terrestrial television in the UK.

BDB won an open competition for a 12-year licence to operate 3 pay-TV terrestrial digital multiplexes,
giving it a minimum capacity of 15 channels or, potentially, interactive services. All the existing UK
free-to-air terrestrial broadcasters have their own multiplexes. Reception for both these channels and
BDB’s channels is via a set-top box. The cost of this was subsidised to promote rapid growth of the
customer base and to compete with the BSkyB digital satellite set-top box, which was also subsidised.

The parties had originally been in partnership for the operation of the platform with BSkyB, the joint
venture’s main competitor. Action by the national regulatory authority resulted in BSkyB selling its
shareholding and entering into a seven-year programme supply agreement with BDB. Of the 16
channels initially offered by BDB, BSkyB would guarantee the supply of at least three premium and
one basic channel. These agreements were notified to the Commission.

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150 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Given the position in the pay-television market of both BDB and BSkyB, the programme agreement
was considered very carefully and several alterations were made. These included reducing the length of
the agreement to five years. Attention was also paid to the fact that Granada had a shareholding in
BSkyB. Safeguards were necessary to ensure that this was not a restraint on BDB competing with
BSkyB in the digital platform market and in the acquisition of programme rights to produce new,
competing channels.

The programme agreement with BSkyB was also the subject of a complaint from DTN, a rival joint
venture which lost out to BDB in the open competition for the licence. The complaint was rejected by
Commission decision on 30 April. 15 This was then followed by an exemption by comfort letter for the
joint venture agreements on 25 May.

c) Other horizontal agreements

EUCAR 16

On 17 September the Commission sent a comfort letter approving R&D agreements in the European
motor industry.

This case related to the EUCAR — European Council for Automotive Research and Development —
Agreement between Europe’s leading motor manufacturers (Fiat, Peugeot, Renault, VW, BMW,
Mercedes, Porsche, Volvo, Opel and Ford).

fields through projects aimed at

The remit of EUCAR is to step up the European motor industry’s joint research effort in the
economic, technical and ecological
improving the industry’s
competitiveness and promoting long-term protection of the environment. The Agreement concerns
the choice of projects relating to activities in the automotive sector and the terms and means of
implementing them. Most of these projects involve experimental research rather than the development
of a specific type of product. Research must be at the pre-competitive stage, which means that the
products obtained from it may not be directly usable in a specific type of vehicle. Examples of
acceptable research projects would be those relating to the use of ceramics in engines or aimed at
limiting noise or emission pollution caused by motor vehicles.

A project will be adopted by EUCAR only if at least two members from different European countries
are involved. The individual members otherwise remain free to undertake their own research
programmes.

The EUCAR Agreement is part of a master plan drawn up by the association involving motor
manufacturers, component producers, laboratories and universities. This plan identifies three areas of
technological cooperation for 2000 and beyond:

i.

the product: for example, electric motors, hybrid vehicles, the environmental impact of the motor
car and consumer interests;

15 The decision was not published in the Official Journal.
16 Notice pursuant to Article 19(3) of Council Regulation No 17 (OJ C 185, 18.6.1997) and IP/98/832.

COMPETITION REPORT 1998

ii. vehicle construction: manufacturing processes, work organisation, stock efficiency and throughput,

the social situation of workers;

ANTITRUST 151

iii. transport as a whole: the acceptability of the private car, public transport, multimodal transport,

etc.

EUCAR has undertaken to supply the Commission at regular intervals with information on the
current research programme.

The Commission’s attitude in this matter confirms its favourable stance on cooperation between firms
in the area of research, provided the limits imposed by the Community competition rules are
respected.

ACEA 17

On 11 September the Association of European Automobile Manufacturers (ACEA) notified to the
Commission, on behalf of its members, a commitment to reduce carbon dioxide (CO2) emissions from
passenger cars. This collective effort by the European automotive industry will enable a significant
reduction in CO2 emissions to be achieved in line with the objective of the European Union. The
Commission stated in a communication of 29 July 1998 to the Council and the European Parliament
entitled ‘Implementing the Community strategy to reduce CO2 emissions from cars: An environmental
agreement with the European automobile industry’, that the ACEA commitment was consistent with
the Community’s strategy on CO2 emissions from cars.

Under the terms of its commitment, ACEA undertakes to make a significant reduction in CO2
emissions from new passenger cars sold in the EU. On behalf of its members, ACEA undertakes to
attain an average target of 140g CO2/km for new passenger cars by 2008. This represents a reduction of
25% compared to 1995. The commitment will be jointly monitored by the Member States and the
Commission. Member States will provide the Commission with publicly available data on trends in the
average CO2 emissions of new passenger cars. On the basis of this data, the Commission will be able to
determine whether the average target has been met. The Commission has announced that it will
consider introducing binding legislation if the target is not reached.

The commitment does not impose a target on individual manufacturers but an overall average target
for all ACEA members. Individual ACEA members are free to apply more stringent or less stringent
levels of CO2 emissions provided the average target is met. Under the commitment, car manufacturers
will develop and introduce new CO2-efficient technologies independently and in competition with one
another.

The Commission took the view that the commitment did not restrict competition within the meaning of
Article 81(1) and sent a comfort letter of the negative clearance type to ACEA on 1 October.

17

IP/98/865.

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152 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

EACEM

Sixteen major manufacturers of television sets and video cassette recorders making up the European
Association of Consumer Electronics Manufacturers (EACEM) have made a voluntary commitment
to reduce the electricity consumption of televisions and video recorders when they are in “standby”
mode.

The vast majority of televisions and video recorders in use are operated using a remote control and are
typically turned off using such a control rather than disconnected totally from their power supply.
Turning a television or video recorder off using a remote control switches it to a standby mode where it
continues to consume electricity at a rate that can exceed 10W. The consumer electronics industry was
aware that televisions and video recorders are typically left in this standby mode for long periods of
time and that their design could be improved to reduce this standby power use. A report prepared for
the Commission’s DG XVII (Energy) quantified this power use and found that, simply by reducing
average standby power use to 6W, total power use could be reduced by 3.2 TWh 18 a year by 2005 and
by 4.9 TWh a year by 2010. The maximum cost per unit of reducing the standby power use of a
television or video recorder was estimated at ECU 3.

No individual firm in the industry felt able to introduce lower power use in its products. Margins are
low in the industry and the firms feared that consumers would not be prepared to pay in advance for
power savings, although they would save money in the long term. The consumer electronics industry
therefore devised the voluntary scheme in consultation with Commission departments. The
manufacturers who entered the scheme — and membership is open to additional firms — have
undertaken to meet certain targets on power use. In order to avoid any exchange of confidential
information between the member firms, which could have a negative effect on competition, an
independent consultant will gather information from the firms on their sales and the power use of units
sold, and simply report the names of manufacturers not meeting their commitment.

Under the scheme, the manufacturers have undertaken that, by 1 January 2000, the TVs and VCRs
they sell will consume no more than 10W of power when in standby mode and that the average power
consumption of all the TVs and VCRs they sell will be no more than 6W in standby mode.

Such an agreement to act in a coordinated way is a restriction of competition and falls under the
prohibition of Article 81(1) of the EC Treaty. However, the Commission felt that the energy saving and
environmental benefits of the scheme clearly represented technical and economic progress and, by
their nature, would be passed on to consumers. Moreover, competition would not be eliminated in the
affected markets, and the restrictive effect of the scheme was essential to achieving its full benefits.
Accordingly, the case was closed by means of a comfort letter.

Valpak

On 26 January the Commission approved, by means of a comfort letter, the membership agreements of
Valpak, a non-profit-making industry-led compliance scheme operating in the UK which has been set
up to discharge the packaging waste-recovery and recycling obligations of its members. Those
obligations were introduced in March 1997 by government regulations implementing the requirements
of the EU directive on packaging and packaging waste (94/62/EC).

18 TWh = terawatt/hour = 1 000 000 000 000 watts/hour.

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ANTITRUST 153

The legal framework set up in the UK to implement the directive provides scope for competition in the
market for compliance-scheme services which seek to fulfil recovery and recycling obligations on a
business’s behalf. While Valpak is currently the largest compliance scheme operating in the UK, other
competing schemes exist and have notified the Commission of their arrangements.

Following its examination of Valpak’s membership agreements, the Commission concluded that the
agreements restricted competition within the meaning of Article 81(1) because they obliged businesses
wishing to join the scheme to transfer the totality of their obligations in respect of all packaging
materials. This ‘all or nothing’ approach, which reflects the requirements of UK legislation, restricts
the extent to which Valpak and other schemes will be able to compete against one another on a
material-specific basis.

The Commission went on to consider whether the notified arrangements could benefit from exemption
under Article 81(3). In view of the emerging nature of the market and the likelihood that Valpak and
other schemes would be obliged to invest in the UK’s collection and/or reprocessing infrastructure in
order to meet their members’ obligations in future, the Commission concluded that an ‘all or nothing’
approach was necessary, at least in the short term, if schemes such as Valpak were to succeed in
securing sufficient funding to allow the necessary investment to take place.

The Commission was therefore able to provide Valpak with a comfort letter informing it that the
conditions laid down in Article 81(3) had been fulfilled. Given that the restrictive effects of the ‘all or
nothing’ approach may, in the medium to long term, outweigh its benefits, however, the Commission
informed Valpak at the same time that it reserved the right to re-examine the case after a period of
three years.

Stack

A number of European, North American and Japanese companies in the information technology
sector have created or joined Stack International, a non-profit company registered in the
United Kingdom. Its activities consist in:

— defining a generic specification for components such as integrated circuit (IC) memory circuits,
memory modules, logic circuits and the like, which has been recognised as a de facto industry
standard throughout the world;

— certifying compliance with that specification by individual products;

— defining a standard, “S/0001”, for manufacturers of such components;

— certifying compliance by individual manufacturers with that standard, based on audits with the

emphasis on quality and reliability testing; and

— monitoring prices paid by member companies for such components and reporting the resulting

benchmark prices to them.

Stack’s members are major purchasers of the products concerned, which they incorporate into a vast
range of IT or telecom products that they sell. The object of the operation is to promote quality,

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154 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

reliability and price transparency while reducing transaction costs in the merchant market for these
widely used components.

An earlier version of the agreement was concluded and notified to the Commission in 1976. Updated
agreements, and a wider membership list, were notified in 1997.

Salient features of the system are that:

— it involves no restriction on the competitive choices of member companies as to what components
they will buy, or from which suppliers; suppliers in turn are free to seek certification or not, and are
not required to give any particular consideration to Stack member companies;

— it does not involve any exchange of commercially sensitive information (a point on which the

Commission’s departments were particularly attentive when examining the case):

firstly, Stack’s activities concern only basic components, the nature of which cannot reveal the
product plans of the members purchasing them;

secondly, the agreement requires individual members’ price information to be kept strictly
confidential by Stack;

— it is not exclusive: associate membership of Stack is open to any interested company that is willing
to observe appropriate rules, and indeed even non-member companies can benefit from the
existence of generic specifications and certified suppliers.

The assessment by Directorate-General IV was that the Stack organisation is likely to improve the
production and distribution of goods that are vital to today’s markets, without bringing about any
restriction of competition. In particular, the agreement does not provide for any exchange of
commercially sensitive information between competitors. The case was accordingly closed by means of
a negative clearance-type comfort letter.

Inmarsat

The Commission has approved restructuring proposals presented by Inmarsat, the major international
mobile satellite operator, which is currently an intergovernmental treaty organisation. Restructuring
will transform the operating parts of Inmarsat into a public company. As part of its restructuring
proposals, Inmarsat envisages a public offering of shares (IPO). The Commission regards this public
offering as very important and has indicated to Inmarsat that it should take place within three years.
The approval of this model of conversion to a public company followed by an IPO within a short
period of time should be seen in the light of the ongoing restructuring plans of the other
intergovernmental satellite organisations.

Inmarsat, established in 1979, has over 80 member countries (parties). Each country has a signatory
(normally the incumbent national telecom provider) which owns a share in the organisation
proportional to its usage of the Inmarsat system. The signatories also act as distributors of the Inmarsat
services to users or to sub-distributors. Following the restructuring, Inmarsat will be constituted as a
public company, and the signatories will become shareholders in the new company. It is envisaged that

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ANTITRUST 155

there will be an IPO within two years of the restructuring. The IPO will dilute the shareholdings of the
signatories and will reduce the possible conflict of interest between their role as shareholders and as
distributors of Inmarsat’s services respectively.

The Commission has closed the case by means of a negative clearance-type comfort letter. The letter
specifies, however, that its view of the case is based on the assumption that an IPO will take place
within three years. Any delay could lead to the file being reopened.

The Commission regards this case as a model for the reform of the other intergovernmental satellite
organisations. In particular, the organisations should not be in a privileged position on the market, and
the easiest way of achieving this is to create a public company, which clearly has no immunities from
competition law. The position of the current signatories in the other intergovernmental organisations
should not be preserved longer than is absolutely necessary and therefore the shareholding should be
diluted, such as via an IPO, as soon as possible after the restructuring.

DHLI

This case concerned an application to renew the exemption granted by the Commission in 1990 for the
arrangements between Lufthansa, Japan Airlines and Nissho Iwai relating to the international courier
company DHL International, whereby Lufthansa, Japan Airlines and Nissho Iwai each acquired
shareholdings in DHLI from its US parent, DHL.

DHLI’s new and original shareholders agreed, for a maximum duration of ten years, that they would
neither engage in international door-to-door collection and delivery of documents and packages nor
acquire any new interest in any entity engaged in those activities using its own ground transport and
courier network. This was without prejudice to any of their existing activities. Lufthansa and JAL
agreed to grant DHLI most preferred customer status and vice versa.

On 19 September 1996 the parties applied to the Commission for the exemption to be renewed. On
30 October 1997 the Commission published a notice 19 pursuant to the procedure established by Article
5(2) of Regulation No 3975/87 and Article 12(2) of Regulation No 1017/68 summarising the application
for renewal of the exemption and inviting interested parties to submit their comments within thirty
days of publication. No comments from third parties were received within that deadline.

On 21 January 1998 the Commission informed the parties that it had decided not to object to renewal
of the exemption. The arrangements are therefore exempt for a period of six years for those activities
falling within Regulation 3975/87 and for a period of three years for those activities falling within
Regulation 1017/68. These periods started to run as from 30 October 1997.

The Commission took the view that the reasons underpinning its decision not to oppose exemption in
1990 remained valid and that several factors indicated that competition on the market was as strong as
in 1990, if not stronger.

First, the express delivery market has grown rapidly for more than two decades and there are few signs
of this development slowing in the foreseeable future. DHLI faces competition from three large global
operators: TNT, Federal Express and United Parcel Service (UPS). There is also competition from

19 OJ C 328, 30.10.1997.

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156 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

local courier companies, which remain significant in many countries. Demand for express services is
growing due to increasing globalisation of manufacturing activities and ever-tightening supply-chain
schedules, and there is therefore likely to be even more competition from other express delivery
operators in future.

Furthermore, the abolition of customs duties on intra-Community freight movements has made road
transport a more competitive option for the delivery of packages, even where next-day delivery is
required. Technical improvements in, and the greater availability of, telecopying and electronic mail
have also strengthened these forms of communication as competitive alternatives to courier delivery of
documents.Moreover, the market on which DHLI operates, i.e. the market for express delivery
services, is increasingly defined as international if not global. In Case No IV/M.843 PTT Post/TNT/GD
Express Worldwide, 20 the Commission found that international express delivery, international express
freight, domestic express delivery, domestic express freight and logistics, which had previously been
considered separate markets, had now been largely integrated into one. 21 Furthermore, the markets
for the provision of these services have become international as a consequence of the single market
and of the fact that courier companies often have global accounts.

Verba¨ ndevereinbarung

The legislation transposing the electricity directive into German law provides for the electricity market
to be opened up immediately and without restriction. To that end, it envisages a system of negotiated
access to transmission and distribution networks while allowing the government to regulate access
where required.

Following the decision to opt for negotiated access to networks in Germany, where the market is
shared between several hundred network operators, the German Government encouraged the bodies
representing the main interested parties to conclude a framework agreement setting out joint
principles for the calculation of tariffs. The Directorate-General for Competition examined this
agreement (known as the ‘Verba¨ ndevereinbarung’ or ‘VV’) on an ex officio basis in 1998. A letter
along the following lines was sent to the parties:

Substance of the Verba¨ndevereinbarung

The VV was concluded on 22 May 1998 between representatives of the electricity industry
(Vereinigung Deutscher Elektrizita¨ tswerke eV — VDEW) and of industrial consumers/producers of
electricity (Verband der Industriellen Energie- und Kraftwirtschaft eV — VIK and Bundesverband der
Deutschen Industrie eV — BDI). It is due to expire on 30 September 1999.

The agreement lays down the different tariffs applicable depending on the characteristics of each
transmission scenario. Tariffs reflect the cost of using the network for each voltage level, the cost of
conversion from one voltage level to another and the cost of ‘system maintenance’ services (voltage
control, frequency control, etc.). A system of flat-rate billing is used for these tariffs (‘stamp’ principle),
adjusted in accordance with a factor linked to the time for which installations are used.

The prices corresponding to flat-rate tariffs are not set on a joint basis but are determined by each
network operator on the basis of the costs specific to it, with reference to joint criteria. Where

20 Decision of 8 November 1996.
21 Paragraph 25.

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transmission involves a number of networks belonging to different operators, 22 billing is restricted to
an average price for each tariff and so the prices for each network are not added together.

ANTITRUST 157

The VV also sets the price of an additional component indexed by distance and billed in cases of high-
voltage transmission over a distance of more than 100 km. In that case, an amount of DEM 12.50/
kW*100km*per annum must be added to the cost of transmission.

DG IV’s analysis

The VV is an agreement between associations of companies which has the object and effect of
establishing common principles for calculating tariffs and — as regards high-voltage transmission over
more than 100 km — a common price. The agreement has a horizontal component (sellers of the
transmission service within the VDEW) and a vertical component (sellers and some of their buyers).

In its analysis, the Directorate-General for Competition took the view that the sellers of the
transmission service were engaging in competition and that any restrictions of competition were likely
to affect trade between Member States in so far as they covered the whole of Germany.

The Directorate-General for Competition — following the example of the Bundeskartellamt (Federal
Cartel Office), which also investigated the VV — notified the parties of its positive assessment in
principle while also expressing a number of reservations concerning certain elements examined below.
It should be noted that the investigations took place before the VV had been implemented in practice
and that a prudent approach was called for in the light of the complexity of the rules laid down in the
agreement and the incalculable impact of their implementation on a market in the process of opening
up to competition. The short duration for which the VV was concluded would seem to indicate that the
parties themselves regarded it as part of an ongoing process rather than a definitive agreement.

A positive agreement ...

First, the agreement is a tangible move to bring together network operators and some users in a bid to
organise the practical arrangements for access. Discussions were based on the assumption that
electricity transmission is a service like any other provided on a market. This is in itself a large step
forward compared with the previous situation, when access by third parties to the network was
disputed.

In addition, coordination between network operators in establishing joint principles for calculating
tariffs should benefit users. The basic principles underlying coordination are as follows:

— negotiations between users and network operators are to be restricted in number. Operators are to
resolve between themselves the problems associated with electricity transmission via more than
one network. This means that users will not have to negotiate with several network operators, thus
promoting the development of competition;

22 Only the feed-in and extraction networks (i.e. two networks) are taken into account; transit networks are

disregarded.

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158 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

— flat-rate tariffs are to be shared between the feed-in network and the extraction network for
transmission via more than one network. In this way, the individual costs of each network involved
in transmission are not simply added together;

— only the tariffs applicable to the extraction phase are taken into account. This also avoids the

addition of costs.

Lastly, the principles governing the calculation of tariffs selected by the associations are clear, cost-
based and easily identifiable.

...which gives rise to a number of reservations

These reservations can be divided into three main categories:

(a)

the fact that competitors are setting a joint price (distance over 100 km)

Price-fixing agreements are one of the restrictions specifically referred to in Article 81(1) and are not
exempted in principle pursuant to Article 81(3). However, in the case in point, the Directorate-
General for Competition took the following facts into account:

— the exceptionally high transmission costs which would result from individual negotiations between
transmission service users and each of the sellers they would be obliged to deal with if there were
no VV;

— the wording of the electricity Directive, which specifically provides for the German Government to
regulate transmission tariffs, and which would give rise to a comparable situation to that resulting
from the VV, i.e. a uniform tariff method for the whole country.

(b) principles underpinning tariff calculation methods

The aspects likely to give rise to doubts as regards compatibility with Articles 81 and 82 of the Treaty
are as follows:

— indexation of tariffs on high-voltage transmission over distances in excess of 100 km might prove
dissuasive. As such, it could have a negative impact not just on the German electricity market but
also on cross-border trade;

— the use of a weighted minimum distance in cases of multiple network feed-in and extraction points.
This might give an edge to electricity producers with access to a large market spread over a wide
geographical area (e.g. major producers already present on the market). Equally, a distance-based
weighting could result in the market being partitioned into geographical areas which it would not
be viable for non-local producers to enter. In addition, electricity traders who had built up a
diversified portfolio of production contracts might use the method to reduce their transmission
costs.

These two aspects should be seen in the context of the German situation, in which most network
operators are also electricity producers and therefore potentially sensitive to developments on the
electricity market.

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(c) the price levels resulting from implementation of these principles

The simulations presented by the parties point to price levels which are a priori higher than those
charged in other Member States for comparable transmissions. This is thought to be due to the chosen
method of determining costs.

ANTITRUST 159

Conclusion

The Directorate-General for Competition has conveyed its reservations to the parties to the VV but
has not launched proceedings to have the agreement declared illegal. It has decided to observe the
agreement’s practical impact before deciding whether its reservations — which are theoretical at this
stage — prove founded, in which case it would be obliged to take action.

TU¨ V/Cenelec

Cenelec (Comite´ Europe´ en de Normalisation E´ lectrotechnique - European Committee for
Electrotechnical Standardisation) is a private association for the harmonisation of technical standards
for electrical equipment within the Community. Cenelec created a commonly agreed mark of
conformity for household and similar electrical appliances (in short “Keymark”). Under the rules and
regulations, only one member per country was admitted, which excluded the complainant (TU¨ V —
Technischer U¨ berwachungsverein), a body empowered by the German authorities to issue certificates
of compliance. In a series of negotiations and exchanges of letters, an agreement with Cenelec was
reached whereby access to the “Keymark” was opened up to all qualified certifiers who might apply
and ensuring that their applications could be dealt with in an open and transparent manner. These fair
proceedings will serve as a model for application procedures in related fields. The TU¨ V has withdrawn
its complaint.

2.2. Vertical agreements

Sony

As in previous years, the Commission has paid close attention to the licensing schemes and distribution
systems existing in the video games area. Thus in 1998 it completed its investigation of the licensing
agreements used by Sony Computer Entertainment Europe, a leading supplier of video game consoles
and compatible games.

In order to allow independent software companies to develop and publish games compatible with its
console systems, Sony set up a licensing scheme granting independent software companies access to
certain of its intellectual property rights. Under the original agreements in question, developers and
publishers were obliged to obtain Sony’s prior approval of the project before they were allowed to
develop or launch their games. Licensed developers and publishers were not allowed to have their
games developed or published by a company not authorised by Sony. Sony’s licensees were also
obliged to have their games manufactured by Sony.

The Commission found that the agreements restricted competition and had an appreciable effect on
trade between Member States. It therefore notified its objections to Sony. Following consultations with
the Commission, Sony decided to modify its licensing agreements.

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160 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Sony’s new licensing policy does not restrict the development, marketing and manufacturing activities
of the licensees. The approval rights imposed on publishers before the commercial release are non-
restrictive, and all game software will be tested either by an independent testing service or by Sony’s
testing service, and only for compliance with clear, non-objectionable specifications and well-defined
criteria.

On the basis of the above, the Commission terminated the proceedings.

With the closure of this case and of the previous cases concerning Sega and Nintendo, 23 the
Commission has satisfied itself that all three significant video game console suppliers license their
technology in accordance with the competition rules. As a result, competitive structures across the
market have been significantly improved, to the benefit of independent developers of video games and
of European consumers.

Danish Tennis Federation (DTF)

The Commission has approved the sponsorship agreements between the Danish Tennis Federation and
its tennis ball suppliers.

On 26 March the Commission informed the DTF that its sponsorship agreements with tennis ball
suppliers no longer raised competition problems. 24 This is the first time the Commission has come to a
formal conclusion on the contents of a sponsorship contract for sports goods.

Approval follows agreement by the DTF to amend its contracts along the lines suggested by the
Commission. An Article 19(3) notice was published in the Official Journal on 9 May 1996 (OJ C 138),
in which the Commission announced that it intended to grant negative clearance.

The DTF has agreed to call for tenders every two years to choose a sponsor. Selection will be
transparent, open and non-discriminatory. The selected sponsor will be granted the denomination
“sponsor of the DTF” (but not “official”) and will be the only tennis ball supplier of the DTF for a two-
year period. In exchange, it will supply a quantity of balls at a preferential price.

In the past, exclusivity contracts were granted unilaterally by the DTF and balls obtained outside the
official network — by means of parallel imports — could not be used. This is no longer the case. In
addition, denominations such as ‘official ball’ or ‘official sponsor’, which may mislead consumers, have
been abolished.

SICASOV

On 14 December the Commission adopted a decision 25 exempting, pursuant to Article 81(3) of the
EC Treaty, standard agreements covering the production and sale of seeds protected by plant variety
rights in France. These agreements are concluded between Sicasov (Socie´ te´ Coope´ rative d’Inte´reˆ t
Collectif Agricole Anonyme a` Capital Variable, Paris) and multipliers. Sicasov groups together the
breeders of plant varieties protected in France, and its role is to manage plant varieties entrusted to it

23 1997 Competition Report, point 80.
24 See press release IP/98/355 published on 15 April 1998.
25 OJ L 4 of 8.1.1999

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ANTITRUST 161

by breeders (or their assignees). This entails concluding seed-production contracts with multipliers,
which are the enterprises which multiply seed in order to meet farmers’ needs.

The products in question are seeds protected by plant variety rights (under French law or the relevant
Community law). Community and national provisions lay down detailed rules governing seed
production and sale. On the basis of those provisions, seeds can be sub-divided as follows:

— basic seed: seed which is not intended for sale to farmers for sowing but is intended solely for
producing additional seed. As such, it can be compared to intermediate industrial machinery;

— certified seed: seed which is generally intended for sale to farmers for sowing. As such, it is to some

extent comparable to a finished industrial product covered by a patent;

— technical seed: certified seed which, in some countries, may lawfully be used to produce new
certified seed (and thus serves the purpose of basic seed), whereas, in other countries, it may only
be sold to farmers (and thus serves the purpose of certified seed).

In order to be lawfully marketed, seed must belong to a variety which has been entered in one of the
national catalogues on a prior basis,
in accordance with the rules applicable in the various
Member States. After a certain period of time, the variety is entered in the common catalogue, which
enables the seed of the variety in question to circulate freely within the European Community without
restriction.

Sicasov has notified the Commission 26 of standard agreements by which it granted multipliers
(referred to hereinafter as ‘licensees’) a non-exclusive licence to reproduce and sell seed in France (or,
in the case of seeds protected by a Community scheme for plant variety rights, throughout the
Community).

First, the standard agreements contain a series of clauses which make basic seed and technical seed
subject to Sicasov’s controls. Thus the agreements prohibit licensees from carrying out (direct and
indirect) exports of basic seed and require them to ‘reclassify’ 27 technical seed before exporting it. The
decision states that these clauses are covered by plant variety rights and, as such, are not covered by
Article 81(1) of the EC Treaty (cf. Court of Justice judgment in Case 27/87 Erauw Jacquery v La
Hesbignonne [1988] ECR 1919).

Second, the standard agreements contain clauses prohibiting the export of certified seed to countries
which are not Member States or to countries which do not grant legal protection for plant varieties.
The decision finds that this obligation is not covered by the prohibition provided for in Article 81(1) of
the EC Treaty.

Lastly, the standard agreements contain a clause whereby the licensee may not export certified seed
directly to Member States other than France in so far as the variety to which the seed in question
belongs has been entered in the common catalogue for less than four years. The decision finds that this
obligation is designed to restrict competition and that it is therefore covered by Article 81(1) of the
EC Treaty. It also takes the view that the agreements do not form an integral part of a national market

26 OJ C 95, 19.4.1995.
27 Reclassification effectively prevents exported seed from being used for reproduction acts (beyond the control of

the breeder) in the country of destination.

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162 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

organisation and that they are not necessary for the attainment of the objectives set out in Article 33 of
the EC Treaty. Accordingly, the decision states that an exception under Article 2 of Regulation No 26/
62 must be ruled out and that, by the same token, Article 81(1) of the Treaty is applicable. However,
under the decision, the obligation in question can be exempted pursuant to Article 81(3) of the Treaty
in so far as it facilitates the dissemination of new varieties in Member States other than France. Firms
in those Member States will be encouraged to conclude licence and distribution agreements for new
varieties since they will be sure that they will not be subject to direct exports by French licensees for
four years. Accordingly, even if this obligation restricts exports, it must be exempted because it helps to
promote technical progress and the distribution of new products to the benefit of consumers.

On the basis of the above considerations, the Commission decided to adopt an exemption decision
under Article 81(3) of the EC Treaty which will apply until 26 October 2004.

3. Rejections of complaints

NALOO, SWSMA, JW Soils Suppliers

On 22 April and 28 July the Commission decided not to act on complaints concerning alleged past
infringements of the ECSC Treaty.

The complaints:

Before 1990, the state-owned British Coal Corporation (BCC) accounted for around 95% of coal
production in the United Kingdom. The remaining 5% was produced by private mines which, under
the 1946 Coal Industry Nationalisation Act, had to pay the BCC royalties on each tonne produced.
When the Central Electricity Generating Board 28 (CEGB) was privatised, new supply contracts were
concluded for coal purchases between the privatised generating companies, BCC and the mines in the
United Kingdom. These new contracts took effect on 1 April 1990.

The day before, the National Association of Licensed Opencast Operators (NALOO) had lodged a
complaint with the Commission alleging that the price paid to its members was too low and that the
royalty set by BCC was excessive. Similar complaints were lodged by the South Wales Small Mines
Association (SWSMA) and JW Soils Suppliers, a coal producer.

The complainants relied inter alia on :

— Article 63 ECSC, prohibiting systematic price discrimination. The parties alleged that the
generators had infringed that article in that they offered better conditions to BCC than to other
coal mines.

— Article 66(7) ECSC or Article 82 EC, prohibiting abuse of a dominant position. NALOO alleged
that BCC had infringed Article 66(7) ECSC by imposing excessive royalties on private mines.

28 The CEGB was the monopoly power producer in the UK. Its assets have been split up between National Power

and PowerGen, amongst others.

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ANTITRUST 163

— Article 65 ECSC or Article 81 EC, prohibiting agreements restricting competition. NALOO
alleged that the contracts between BCC and the private mines restricted competition in that the
rate of royalties set out in those contracts was excessive.

The Commission took action on the private mines’ complaints and ruled that as of 1 April 1990 the
price received by private mines should be increased and the royalties charged by BCC reduced. On
23 May 1991 the Commission rejected the complaints relating to the situation after 1 April 1990. 29

NALOO was not satisfied with the reduced royalty set by BCC and challenged the Commission’s
decision. 30 Furthermore, two of the NALOO and SWSMA members brought actions before the
British courts for damages for past injuries allegedly suffered before 1 April 1990. These actions led to
two preliminary rulings: Banks 31 in 1994 and Hopkins 32 in 1996, in which the claims were rejected.

After the Banks judgment was handed down, NALOO lodged a new complaint with the Commission
concerning alleged infringements before 1 April 1990 (excessive royalties and discriminatory pricing).
Reacting to NALOO’s new complaint, BCC called on the Commission to rule under Article 35 ECSC
that it had no jurisdiction to hear NALOO’s complaint or, alternatively, to reject the complaint on
legal grounds without examining its merits. When the Commission did not reject NALOO’s complaint
within the two-month period stipulated in Article 35 ECSC, BCC brought an action before the Court
of First Instance for annulment of the implied decision of refusal resulting from the Commission’s
failure to reject NALOO’s complaint outright. BCC’s application was, however, dismissed by order of
the Court on 29 April 1998. 33

Subsequently the Commission decided, on 27 April and 28 July 1998, to take no action on the NALOO
and SWSMA complaints. NALOO and SWSMA are challenging these Commission decisions in two
actions brought on 8 June 1998 34 and 6 October 1998 respectively.

Required prospective effect

The Commission did not publish the decision to take no action on the complaint lodged by NALOO in
1994, taking the view that:

— the imposition of allegedly excessive royalties did not constitute an infringement of

Article 65 ECSC;

— it was not empowered to deal with past infringements under Articles 63(1) and 66(7) ECSC;

— NALOO had not provided sufficient evidence in support of its complaint.

The issue of “evidence” is not specific to the ECSC Treaty and will not be developed further.

29 1991 Competition Report, point 107.
30 Case T-57/91 NALOO v Commission [1996] ECR II-1019.
31 Case C-128/92 H.J. Banks and Co. Ltd v BCC [1994] ECR I-1209; see 1994 Competition Report, point 477.
32 Case C-18/94 Hopkins and Others v National Power and PowerGen [1996] ECR I-2281.
33 Case T-367/94 BCC v Commission, Order of the Court of First Instance of 29 April 1998.
34 Notice published in OJ C 234, 25.7.1998.

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164 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Application of Article 65

The Commission did not accept NALOO’s contention that BCC’s licence agreements infringed Article
65 in that the rate of royalties set out in those agreements was excessive. It drew a parallel between the
competition rules of the EC Treaty and those of the ECSC Treaty. It then relied on the case-law of the
Court of Justice on the imposition of excessive prices, which is based exclusively on Article 82 EC.

Application of Articles 63(1) and 66(7) to past infringements

The Court judgment in Hopkins refers to the prospective wording of Article 63(1), which empowers
the Commission to make appropriate recommendations when it “finds that discrimination is being
systematically practised by purchasers”. The wording of Article 66(7) is also prospective in that the
Commission may make recommendations to undertakings in a dominant position in order to “prevent
the position from being so [for purposes contrary to the Treaty] used” (paragraph 17).

In paragraph 19 the Court expressly addresses the issue of applying Article 63(1) to restrictive
practices in the past:

“In order to ensure the effectiveness of the prohibition laid down in Article 4(b), the powers conferred
by Article 63(1) on the Commission must be such as to enable it, not only to oblige the authorities of
the Member States to bring to an end for the future any systematic discrimination which the
Commission has found to exist, but also, on the basis of that finding, to draw all the consequences as
regards the effects which such discrimination may have had in relationships between purchasers and
producers within the meaning of Article 4(b) even before the Commission took action. That same
finding may be relied on by the persons concerned before the national courts.”

The Commission interpreted this statement as follows:

— it can recommend that Member States bring to an end for the future any systematic discrimination

it has found to exist. This merely confirms the prospective interpretation of Article 63(1);

— it can deal with discrimination occurring in the past only if this is necessary to ensure the

effectiveness of the prohibition laid down in Article 4(b).

In the NALOO complaint, for example, the Commission was called upon to intervene in 1994 with
regard to alleged infringements that took place between 1973 and 31 March 1990. The Commission
found that it was not empowered to deal with these infringements under Article 63(1) as this was not
necessary in order to ensure the effectiveness of Article 4(b). The same reasoning, applied mutatis
mutandis, underlies its decision not to act under Article 66(7).

This does not, of course, mean that the Commission could never be competent to deal with
infringements of Article 63(1) and 66(7) that occurred in the past. It merely makes such intervention
conditional upon the necessity to ensure the effectiveness of Article 4, a condition that was not met in
the cases at issue in the decisions.

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ANTITRUST 165

IFCO

The Commission has given the green light to the IFCO (International Fruit Container Organisation)
packaging system. The IFCO system is a way of packing fruit and vegetables using standardised,
the firm
collapsible and reusable plastic crates. The boxes are produced by subsidiaries of
Schoeller Plast Holding GmbH and are used for the transportation of goods between producers,
grocers and shops by twelve big German food trading companies. The crates were introduced at the
end of 1992, when the trading chains informed their suppliers that they would prefer goods to be
packed in plastic crates. Two members made their use obligatory.

Following complaints lodged by some of the traders and fruit producers, the Commission examined the
IFCO system in the light of the competition rules of the EC Treaty. In the course of the procedure the
Commission demanded substantial modifications to the system. Accordingly, mandatory use of the
crates and other aspects, such as fixing standard contracts, lump-sum payments to IFCO, an arbitration
system for users and the obligation for the food traders to exchange detailed information about trade
flows were abolished.

In a press release dated 3 June 1993 (IP(93)430) and in letters to food traders, the Commission
informed the public of these modifications.

The Commission closely observed developments in the relevant sectors and carried out extensive
market research. On the basis of this analysis and taking account of the aforementioned modifications,
the Commission concluded that the IFCO system did not contain any competition restrictions under
Article 81(1) of the EC Treaty, in particular because the use of the crates was unilaterally organised by
IFCO/Schoeller, which lent their products to users on a bilateral contract basis. The IFCO system is
therefore in direct competition with other packaging systems, i.e. those based on plastic, wood or
cardboard, and Article 81(1) is inapplicable.

The Commission also ruled out a dominant position by IFCO members in the light of their market
share.

On the basis of the above considerations, the complaints of two associations have been rejected.

EUDIM

On 17 September the examination of the agreements notified by EUDIM (European Distributors of
Installation Materials) in November 1995 was concluded with the dispatch of a comfort letter.
EUDIM, which is based in Switzerland, is an association of wholesalers in plumbing, heating and
sanitary (bathroom) equipment, generally one per country, which are leaders in their home markets.

The notification of the agreements was a stage in the proceedings initiated by the Commission in
February 1991 following the lodging of a complaint by Van Marcke NV. The Commission sent EUDIM
a statement of objections in February 1995 in which it raised the issue of a gentlemen’s agreement in
respect of information sharing whereby each member of EUDIM refrained from entering the market
of the other members without prior authorisation. While denying the existence of a market-sharing
agreement, EUDIM agreed to supplement and clarify its agreements so as to bring them into line with

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166 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

the competition rules. The Commission reacted favourably to the notified agreements, publishing a
summary of their contents. 35

In its decision to reject the complaint, the Commission provided an in-depth evaluation of the
conditions of competition on the relevant market which had led it to conclude that any competition
restrictions on the part of EUDIM were not appreciable. The Commission also confirmed its policy of
not adopting a formal decision of negative clearance on notified agreements unless this was deemed in
the Community interest. Apart from the fact that any restrictions were regarded as not appreciable in
the case in point, account was also taken of the existence of competition-law guidelines on cooperation
between wholesalers such as that which took place within EUDIM, the publication of a notice
pursuant to Article 19(3) of Regulation No 17 and the renewal of healthy competition following the
Commission’s intervention, together with the fact that the Commission is not obliged to take action on
complaints where the practice in question has ceased.

Micro Leader/Microsoft

On 15 October the Commission decided to reject a complaint lodged by the French company
Micro Leader Business against Microsoft Corporation and its subsidiary Microsoft France.

Micro Leader is a French software and hardware distribution company which purchased French-
language Microsoft software packages in Canada and then resold them in France. The software
distributed in Canada was sold with a licence for use exclusively in Canada. Microsoft took action
together with the French customs authorities to try and prevent this resale in Europe and to protect its
copyright. Micro Leader lodged a complaint with DG IV on 24 September 1996, claiming that
Microsoft’s actions to prevent the parallel import of its software into Europe from Canada infringed
Articles 81 and 82 of the EC Treaty. According to Micro Leader, the actions taken by Microsoft’s
subsidiaries and their distributors in Canada and France constituted agreements and concerted
practices designed to prevent, by illegal means, the import of products into the EEA and to set their
resale prices within that territory, and as such were also abuses of a dominant position.

The Commission took the view that Microsoft’s actions to prevent the import of copies of its products
from Canada could not be regarded as resulting from an agreement or concerted practice between
Microsoft and its resale agents to fix resale prices. Computer programs are protected by copyright in
the European Union as defined by the directive on the legal protection of computer programs (Council
Directive 91/250/EEC of 14 May 1991, OJ L 122 of 17 May 1991). This directive states that the first sale
in the Community of a copy of a program by the rightholder, or with his consent, exhausts the
distribution right within the Community of that copy. The purchase of a copy of a computer program
does not exhaust the legal protection provided for in the above-mentioned directive. Thus any attempt
to use or to sell such a copy in the Community would be an infringement of copyright, and any action
by Microsoft to prevent the import of such copies would constitute an attempt to enforce its legitimate
rights rather than an agreement or concerted practice between Microsoft and its distributors, whether
in Canada or in the Community. In addition, there is no evidence to suggest that Microsoft sought to
influence the prices at which its products were resold by its distributors.

The Commission also took the view that Microsoft’s actions to prevent the import of copies of its
software for which no user licence has been granted in the Community and which, accordingly, benefit
from legal protection in the Community, constituted legitimate enforcement of its copyright and could

35 OJ C 111, 17.4.1996.

COMPETITION REPORT 1998

not be deemed to be an abuse pursuant to Article 82 of the EC Treaty. The Commission did not
consider it necessary to issue a ruling on a possible dominant position by Microsoft on the relevant
market.

ANTITRUST 167

Greene King/Roberts

Mr and Mrs Roberts operate a pub owned by Greene King. In May 1997 they lodged a complaint with
the Commission to the effect that the beer tie (the obligation in their lease to buy most of the beer they
sell exclusively from Greene King, their landlord/brewer) infringed Article 81. A ruling in the Roberts’
favour would allow them to buy beer from the suppliers of their choice, thereby benefiting from
substantial discounts.

The assessment in this case is based on two tests set out in the Delimitis judgment whereby it can be
decided whether the cumulative network of agreements of individual brewers is caught by the EC
competition rules.

The first test is whether the relevant market is foreclosed. The Commission takes the view that, in the
light of the information currently available, the UK on-trade beer market continues to be foreclosed.
In 1997 between 50 and 58% of throughput on the UK on-trade beer market was covered by restrictive
agreements.

The second test is whether the network of agreements of an individual brewer contributes significantly
to that foreclosure. The Commission has concluded that Greene King is too small to contribute
significantly to the foreclosure of the UK on-trade beer market, given that the company’s sales in its
managed, tenanted and loan-tied estate account for only 1.3% of the UK on-trade market. This is
considerably less than the 5% (or more) that each of the big UK brewers (Scottish & Newcastle, Bass,
Whitbread and Carlsberg-Tetley) realises in its tied network (including restrictive agreements with
non-brewing pub companies).

The reasoning applied to Greene King is also valid for leases of other small and regional UK brewers
and for leases of non-brewing pub companies supplied by more than one brewer. The decision of
6 November 1998 36 to reject this complaint can therefore be considered a clear precedent for the
companies concerned and the pubs forming part of their tied networks.

Tambue

On 21 September the Commission decided to reject a complaint and a request for interim measures
against Ordre national des avocats de Belgique (ONAB).

The Commission concluded that the complaint was not of sufficient Community interest owing to the
fact that, first, the measures challenged — the ONAB rules on pupillage and vocational training, which
require students to pass an examination before the end of the second year of training in order to obtain
the certificate of aptitude for the practice of law (CAPA), together with the limitations imposed by the
local bar associations on the number of trainees per pupil master and the conditions for becoming a
pupil master — essentially take effect within a single Member State and, second, that the complainant
had not exhausted the possibilities of applying to the national competition authorities and/or the

36 SG(98) D/9557. Published on DGIV homepage : http ://europa.eu.int/comm/dg04/entente/closed/en/

1998.htm#563.

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168 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

national courts. The request for interim measures was rejected as the Commission can take such
measures only if they are essential in order to prevent the right to take decisions granted by Article 3
from becoming ineffective or even a dead letter as a result of the actions of certain firms.

In short, the Commission took the view that its policy with regard to the professions, as recently upheld
by the Court of Justice in its judgment in Case C-35/96 Commission v Italy ([1998 ECR I-3851), was
sufficiently clear to leave the national competition authorities and/or national courts in no doubt that
Articles 81 and 82 of the Treaty are applicable to the professions and may be applied directly by those
authorities. The difficulties encountered by the complainant with the application of Belgian
competition law to the professions were not regarded as automatically transferable to the direct
application of the two Treaty provisions.

4. Rejection of application for interim measures

Vickers/Rolls-Royce

This case concerns the relationship between trade mark rights and the Community rules on
competition. In rejecting an application for interim measures, the Commission pointed out that, at the
stage of a preliminary appraisal, the assessment under competition law of a clause granting the trade
mark owner the power to terminate a trade mark licence on a change of control of the licensee did not
seem to be different from that of a provision preventing the licensee from assigning or sublicensing the
benefit of the agreement to third parties. The Commission has normally not considered the latter to be
anticompetitive, recognising instead that it is intended to provide the trade mark owner with the means
to ensure that the quality associated with the mark is maintained.

In January, Vickers plc, the ultimate parent company of the Rolls-Royce Motors Group, lodged a
complaint in which it alleged that the agreements between Rolls-Royce Motors Group and Rolls-
Royce plc, relating to the licensed use by the former of the Rolls-Royce name and relevant trade
marks, infringed Article 81(1).

In this connection it should be recalled that Rolls-Royce Motors Group, which manufactures and sells
luxury motor cars under the ‘Rolls-Royce’ and ‘Bentley’ names and trade marks, and Rolls-Royce plc,
which manufactures, in particular, gas turbine and nuclear propulsion systems, are two separate and
unconnected undertakings, although both use the name ‘Rolls-Royce’ in their company name. In
March 1973, Rolls-Royce (1971) Limited, now named Rolls-Royce plc — to which ownership of the
Rolls-Royce name and trade marks was assigned after the old Rolls-Royce Limited went into
receivership — and Rolls-Royce Motors Group notified to the Commission a number of agreements
whereby Rolls-Royce (1971) Limited granted Rolls-Royce Motors Group the right to use the Rolls-
Royce trade marks on motor cars and engines manufactured by the latter. At that time the notification
was settled by the sending of a comfort letter in which the Commission indicated that it was closing the
file since the agreements did not restrict competition.

In the present complaint, Vickers objected to a clause in the licence agreements which gave Rolls-
Royce plc the right unilaterally to terminate the Rolls-Royce Motors Group’s right to use the Rolls-
Royce name and trade mark in the event of the motor car business coming under the control of a non-
UK resident, including a company or individual resident in another EEA country (residence clause).

As Vickers was proposing to dispose of the Rolls-Royce Motors Group, it requested the Commission,
as a matter of urgency, to adopt interim measures. In particular, it requested an order restraining Rolls-

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ANTITRUST 169

Royce plc from enforcing or seeking to enforce the residence clause. Vickers alleged that the threat by
Rolls-Royce plc to exercise that clause would disrupt the open and fair competitive auction of Roll-
Royce Motors Group and that Vickers would be denied the opportunity of receiving valuable
consideration for it.

By decision of 6 April the Commission rejected Vickers’ application for interim measures, taking the
view that, on the evidence provided, the criteria for the adoption of such measures were not met.

For the reason given above, the Commission concluded that the provision at issue was not likely prima
facie to constitute an infringement of the Community competition rules. This was all the more so as,
even in the market identified by Vickers as the relevant market, i.e. the luxury car sector, it was not
clear that the clause objected to had a significant impact on the conditions of competition by
preventing a non-UK resident purchaser from acquiring the Rolls-Royce Motors Group. In particular,
Vickers had failed to show that the purchase of an existing player was the only way for a company to
increase its share of, or enter, that market.

Lastly, given that Rolls-Royce plc supported the sale of Rolls-Royce Motors Group to a non-UK
resident, it did not seem that, in the present case, the residence clause would have had the significance
which Vickers claimed.

The Commission also pointed out that, in so far as Vickers disputed the ownership of the Rolls-Royce
name and trade mark, such a dispute fell within the remit of the national courts and not of the
Commission.

As regards the risk of serious and irreparable damage establishing an urgent need to adopt interim
measures, the Commission took the view that this condition had not been met either. In fact, Vickers
did not say anything about the need for it to sell its interests in Rolls-Royce Motors Group or about the
impossibility of continuing to operate the Rolls-Royce business. The urgency appeared to be entirely of
Vickers’ own making in the light of its decision to dispose of the Rolls-Royce Motors Group, and was
therefore subjective rather than objective.

In the event, on 3 July Volkswagen acquired the Rolls-Royce Motors Group from Vickers. This
transaction was notified to the Commission pursuant to Article 4 of Council Regulation (EEC)
No 4064/89. Subsequently, BMW AG acquired the rights to the Rolls-Royce name and trade mark for
use in motor cars from Rolls-Royce plc and granted a licence to Rolls-Royce Motors Group, now
owned by Volkswagen, to use the Rolls-Royce name and trade mark until 31 December 2002.

Subsequent to this acquisition, the complaint was withdrawn in September and the case was closed.

5. Settlement

IRE/Nordion

The Commission has terminated proceedings it initiated under Article 82 of the EC Treaty against
Nordion for abuse of a dominant position. Nordion is a Canadian company active on the world market
for the production and sale of molybdenum 99 (Mo-99), a base product for radiopharmaceuticals used
in nuclear medicine. The product is used primarily for the early detection and diagnosis of cancer,
cardiovascular disease and AIDS.

COMPETITION REPORT 1998

170 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

The Commission’s decision followed the undertaking given by Nordion to formally renounce the
exclusivity clauses in its sales contracts with European customers. The Commission took the view that
withdrawing the exclusivity clauses would restore and guarantee competition in the sector. The
opening-up of the market should have an immediate positive impact in so far as European purchasers
are henceforth completely free to buy Mo-99 from any other supplier.

In 1996, the Commission received a complaint from a Belgian company, IRE (Institut National des
Radioe´ le´ ments), Nordion’s main competitor, which was directed in particular against the conclusion of
exclusive, long-term supply agreements for Mo-99 between Nordion and its principal worldwide
customers. Following this complaint, the Commission initiated Article 82 proceedings in February 1997
and sent a statement of objections to the Canadian producer for abuse of a dominant position. In this it
was stated that the conclusion of the exclusive contracts prevented the sole European competitor, IRE,
from developing, at the risk of ultimately eliminating it from the market, and made the entry of
potential new competitors impossible.

After the Commission had made its objections known, Nordion decided not to enforce its exclusive
rights through its contracts with its European customers.

IRE thereupon withdrew its complaint.

In addition, the Commission learnt of the enquiry carried out in Japan by the Japanese Fair Trade
Commission, which led to a recommendation being adopted by that authority on 24 June to the effect
that exclusivity clauses between Nordion and its Japanese customers should be annulled.

The Commission will closely monitor the situation to ensure that Nordion’s renunciation of its
exclusive rights is strictly adhered to in practice, and that there is no resulting distortion of competition
in this important public health sector.

SPEGNN

In 1992, SPEGNN 37 lodged a complaint alleging that Gaz de France (GDF) had abused its dominant
position. The complaint centred on GDF’s alleged attempts to prevent independent municipal
distribution companies from expanding their gas distribution businesses in parts of France not covered
by GDF. The question of law at issue stemmed from the application of the French 1946 nationalisation
law granting GDF a monopoly for the distribution of gas in France. An exception from that monopoly
was granted to a few municipal distribution companies which were not nationalised in 1946, some of
which still operate independently today. These companies have encountered difficulties when seeking
to expand with a view to satisfying demand in neighbouring areas. GDF argued that the distribution
monopoly granted to it by the French nationalisation law prohibited independent municipal operators
from expanding their activities.

The Commission prepared a decision establishing that France had infringed Article 86(1) in
conjunction with Article 82 of the EC Treaty. By allowing GDF to invoke the provisions of the French
nationalisation law to prevent independent municipal operators from meeting demand which it was not
able to satisfy itself, the French authorities had enabled GDF to abuse its dominant position. The
Commission adopted the decision on 9 July 1997 but delayed implementation. On 3 June 1998 the

37 Syndicat Professionnel des Entreprises Gazie`res Non Nationalise´es.

COMPETITION REPORT 1998

ANTITRUST 171

French Parliament adopted a new law to bring the infringement identified by the Commission to an
end. The new law provides for the following framework:

— municipalities wishing to have a gas distribution network installed and operated in their territory by
GDF must apply to the local authority within three months of publication of the implementing
decree;

— a final list of municipalities in which GDF should, within three years of the list being adopted, build
and operate a gas distribution network is to be drawn up by the Minister for Energy. The Minister
will examine a business plan and study assessing the potential impact of the envisaged distribution
on other energy sources;

— municipalities which have not applied to be included in the GDF distribution network and
municipalities not featuring on the final list are free to conclude concession contracts, on their own
or together with neighbouring municipalities, with the gas distribution network operator of their
choice to operate a gas distribution network. This also applies to municipalities which wanted to be
included in the GDF network, but for which GDF did not start building the network within the
three-year time limit;

— any new operators, i.e. other than GDF or the existing independent municipal distributors, must be
licensed by the Minister for Energy. At least 30% of the shares in such operators must be held by
the State or by a public enterprise.

This framework should allow municipalities without a gas distribution network to enter into a
concession agreement with the operator of their choice or to operate a gas distribution service
themselves. The new law appeared to resolve the issues raised by the complaint. The Commission
decided to close the file on the case after publication of the decree implementing the law. 38

B — New legislative provisions and notices adopted or proposed by the

Commission

Title

Communication pursuant
to Article 5 of Council
Regulation (EEC) No 3976/87 of 14 December 1987
on the application of Article 85(3) of the Treaty to
certain categories of agreements and concerted prac-
tices in the transport sector

Commission Regulation (EC) No 2483/98 of 22
December 1998 on the form, content and other details
of applications and notifications provided for in
Council Regulations (EEC) Nos 1017/68, 456/86 and
3975/87 applying the rules on competition to the
transport sector

Communication on the application of the Community
competition rules to vertical restraints

Proposals for Council Regulations amending Council
Regulation No 19/65/EEC of 2 March 1965 and Council
Regulation No 17 of 6 February 1962

Date

Publication

OJ C 369, 28.11.1998

22.12.1998

OJ L 354, 30.12.1998

30.9.1998

OJ C 365, 26.11.1998

OJ C 365, 26.11.1998
OJ C 365, 26.11.1998

38 Press release IP/99/291.

COMPETITION REPORT 1998

172 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Notice on the application of the competition rules to
access agreements in the telecommunications sector

Notice on the status of voice communications on the
Internet

31.3.1998

OJ C 265, 22.8.1998

7.1.1998

OJ C 6, 10.1.1998

C — Formal decisions pursuant to Articles 81, 82 and 86 of the EC Treaty

1. Published decisions

Published decisions

FAG-Flughafen Frankfurt/Main AG (IV/34801)

Proceeding pursuant to Article 65 of the ECSC Treaty
(IV/35814 — Alloy surcharge)

Commission decision of 28 January 1998 relating to a
proceeding under Article 85 of the EC Treaty ( IV/
35733 — VW-Audi)

Commission decision of 11 March 1998 relating to a
proceeding under Articles 85 and 86 of the EC Treaty
(IV/34 073, IV/34 395 and IV/35 436 — Van Den Bergh
Foods)

Alpha Flight Services/ADP (IV/35613)

Commission decision of 17 June 1998 relating to a
proceeding under Article 86 of the EC Treaty (IV/
36010 — AAMS)

Transatlantic Conference Agreement (TACA) (IV/
35134)

Commission decision of 14 October 1998 relating to a
proceeding under Article 85 of the EC Treaty (IV/
33708 — British Sugar, IV/33709 — Tate & Lyle, IV/
33710 — Napier Brown, IV/33711 — James Budgett &
Son)

Commission decision relating to a proceeding under
Article 85 of the EC Treaty (IV/35691 — Pre-insulated
pipe cartel)

Greek ferries (IV/34466)

Commission decision of 14 December 1998 relating to a
proceeding under Article 85(3) of the EC Treaty (IV/
35280 — Sicasov)

2. Other formal decisions 39

2.1. Rejections of complaints by decision

Case No IV/

Name

34907

36029

35628

NAIL/Inntrepreneur

Aircall/Eirpage

AIL/IEL

39 Not published in the Official Journal.

Date of
decision

14.1.1998

21.1.1998

Publication

OJ L 72, 11.3.1998, p. 30

OJ L 100, 1.4.1998, p. 55

28.1.1998

OJ L 124, 25.4.1998, p. 60

11.3.1998

OJ L 246, 4.9.1998, p. 1

11.6.1998

17.6.1998

OJ L 230, 18.8.1998, p. 10

OJ L 252, 12.9.1998, p. 47

16.9.1998

OJ L 95, 9.4.1999, p. 1

14.10.1998

21.10.1998

OJ L 24, 30.1.1999, p. 1

9.12.1998

14.12.1998

OJ L 109, 27.4.1999, p. 24

OJ L 4, 8.1.1999, p. 27

Date of decision

5.3.1998

9.3.1998

14.4.1998

COMPETITION REPORT 1998

ANTITRUST 173

22.4.1998

26.5.1998

28.5.1998

9.7.1998

9.7.1998

9.7.1998

9.7.1998

9.7.1998

9.7.1998

9.7.1998

10.7.1998

13.7.1998

15.7.1998

15.7.1998

28.7.1998

28.7.1998

6.8.1998

21.9.1998

5.11.1998

16.11.1998

16.11.1998

16.11.1998

29.12.1998

Date of decision

4.6.1998

21.9.1998

Date of
closure

4/1/1998

5/1/1998

8/1/1998

9/1/1998

Type of
comfort
letter 40

1

1

2

2

35821

34415

36537

35036

35116

35148

35988

35989

35990

35991

36381

35811

36644

33014

35823

37037

33815

36771

36511

35137

35149

35150

NALOO/BCC & CEGB

IFCO

Kapitol/Belgacom

Massol/Rossi

Colomb/Peugeot

Givry/Sodirac

Gevaudan Autos/Motor dealers

Lebrasseur/Motor dealers

Lezau/Motor dealers

Garage Henri Prost/Motor dealers

Finnair/Maersk Air

Cerri Automobili/BMW Italia

Combined Merchants/UK Cement Industry

Asia Motor (France)+3/Toyota France+4

JWS/BCC

SWSMA

Van Marcke/Eudim

Tambue/ONAB

Roberts/Greene King

Trabisco/PSA, Garage Ardon and others

Serieys/PSA, Renault, Grand Garage Albigeois and
others

Aqueducs Automobiles/PSA, Renault, Fontaine and
others

35136

Sodima/PSA

2.2. Refusal to grant interim measures

Case No IV/

Name

36859

36771

Vickers/Rolls-Royce

Tambue/ONAB

D — Cases closed by comfort letter in 1998

Case No

36837

36610

35286

35424

Alpha Fry+Micro Metallic+1

Sanofi Pharma Bristol-Myers Squibb+2

Epogam

Polygram+Emi+BMG

40 1 = Negative clearance 81(1) or 82
2 = Individual exemption 81(3)
3 = Conformity with notice/block exemption.

COMPETITION REPORT 1998

174 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

36556

36780

36241

36619

35726

36658

36400

35290

36540

36578

35536

36370

36785

35923

36204

36860

36651

36697

35697

36277

36579

34786

36815

35969

36529

36543

36544

35562

35982

36715

36716

36677

36838

36724

36786

36916

36461

36917

35073

36618

36494

35084

35355

36627

NB Chrome

Pasteur Me´ rieux+RIVM

CMG Finance+CCN Marketing Systemen

Nordpay

OTR+7 (ex EFTA 0068)

Mider+Helm+1

TCM+3

Akzo+Bayer

Valpak

CDI

Brockbank+Lloyd’s Syndicate

Italcementi+Aalborg+Cementa

Marlene+Montell+Cracker+3

Neste+Esso+3

Genusa+2

Anheuser+Damm

Novapol+2

Preussag+Voest Alpine+1 (ex M.979)

Pirelli+Mitsubishi+PIRI

Orbcomm Europe — satellite based services

EASDAQ+3

Nestle´ +Coca-Cola+1

Avebury Taverns

Canal+ +GDI+TINTA+1

Reemtsma+ATW

BAT+ATW

Reynolds+ATW

Unilever+Pepsi+6

Fina Antwerp Olefins+2

EECA+KSIA+6

EECA+KSIA+6

Kvaerner+BG

Arco+Repsol+3

Sugar Distributors

Holsten+S&N+1

GPC

Shell+Basf+1

NEC+BULL+PBN (ex M.1095)

FAG+ROL+Minebea

Nordic Mail+SDPS Denmark

EACEM

Coca-Cola+Buxton+Perrier+Nestle Sources

Coca-Cola+Wild+1

DeTeMobil Deutsche Telekom MobilNet

9/1/1998

12/1/1998

13/1/1998

13/1/1998

14/1/1998

19/1/1998

23/1/1998

26/1/1998

26/1/1998

26/1/1998

27/1/1998

30/1/1998

3/2/1998

5/2/1998

5/2/1998

13/2/1998

16/2/1998

16/2/1998

18/2/1998

20/2/1998

23/2/1998

24/2/1998

26/2/1998

3/3/1998

3/3/1998

3/3/1998

3/3/1998

10/3/1998

12/3/1998

16/3/1998

16/3/1998

18/3/1998

18/3/1998

19/3/1998

23/3/1998

27/3/1998

3/4/1998

6/4/1998

14/4/1998

16/4/1998

21/4/1998

21/4/1998

21/4/1998

22/4/1998

1

1

1

1

1

2

1

2

2

1

1

3

2

1

1

1

1

1

2

2

1

2

1

2

1

1

1

2

2

1

1

1

1

1

2

1

2

1

2

2

2

2

2

1

COMPETITION REPORT 1998

36845

33430

35743

36711

36823

35835

36468

36710

36884

33055

35759

37026

34796

36782

36908

36624

36625

36643

36636

36150

35489

35891

33635

34064

36273

36835

36925

36848

36947

36962

37031

37004

34977

36210

36754

37048

37115

36580

36895

35930

36178

36236

37002

36495

Armstrong+NMC

Assurnet

Nordic Capital — Transpool

Heatric+Fotomechanix+1

PO/Fujitsu+AMD

Coca-Cola & S.B.+Trebor Bassett

Stack International+8

Iberdrola/Telefo´ nica

APROMA

PO/Dansk Tennis Forbund

Dansk Tennis Forbund+PS

CoCreate Software+2

Canon+Kodak+3

Siemens Medical Systems+Lohmeier Medizin Elektronik

RGR+3

MAN B&W Diesel+Halla Engineering & Heavy Industries

MAN B&W Diesel+Hyundai Heavy Industries

Versfust+Wavin Trepak

Versfust

Nordiska Satellit+Telenor

Teracom+Rymdbolaget+1 (ex EFTA 0103)

NSAB+GECSI

Davidson Marley

Marley Plc+Marley Automotive Components+Kansei+1

INMS

Oxford Biscuits+Bisca

Searle+Oxford

RVI+ZF+STV

Time+Newsweek+1

Canal+ +CCETT+2

BST+2 (Siemens/Breed)

ESM+6

CCSB+Appletise

ABB Stotz-Kontakt+Hanson Electrical

Telefo´ nica+Portugal Telecom

Royale Belge+Partena+3

OMV+PCD+3

SVE Rail Italia+2

Tele Danmark+Canal Digital+2

Allied Colloids+Atlas

Metalogenia+Esco

ESCO+Metalogenia

Scottish Courage+Miller

Greenalls

COMPETITION REPORT 1998

ANTITRUST 175

4/5/1998

5/5/1998

5/5/1998

5/5/1998

8/5/1998

12/5/1998

15/5/1998

18.5.1998

19/5/1998

20/5/1998

20/5/1998

26/5/1998

28/5/1998

28/5/1998

29/5/1998

29/5/1998

29/5/1998

2/6/1998

2/6/1998

4/6/1998

4/6/1998

4/6/1998

8/6/1998

8/6/1998

9/6/1998

15/6/1998

15/6/1998

23/6/1998

25/6/1998

25/6/1998

25/6/1998

2/7/1998

6/7/1998

16/7/1998

20/7/1998

22/7/1998

22/7/1998

24/7/1998

28/7/1998

31/7/1998

31/7/1998

31/7/1998

3/8/1998

5/8/1998

1

1

1

1

1

2

1

1

1

1

1

1

2

1

2

1

1

2

1

2

1

1

2

2

1

1

1

2

1

1

1

2

2

2

2

1

2

2

1

3

3

2

1

176 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

36921

37017

37043

36995

36850

36978

37158

36564

36273

35831

35856

36002

36913

36856

36857

36934

37079

35520

35612

37023

37044

36215

37153

36215

36580

37134

34881

35916

32825

35342

37142

36757

37113

37113

36840

37225

36437

37155

36397

35813

37073

37231

36611

Enterprise Inns

Trent Taverns

Eastman Kodak+Heidelberger+1

Interbrew+Palm

RS Hansa Auto+3

RVI+DAF

Raytheon+Indra

IRE+AEC

INMS+14

ProNet(Services)+CPT Holdings

Fox+Pronet

Warner Bros+ProNet

Schott+Pasabahce+4

UBOD

UBOD+Copy-Dan

Delfzijl+Rovin

Chevron+Exxon

Belgacom Mobile+2

Pripps+Tuborg (ex EFTA 0053)

Ransomes+Scot-Track

Punch Taverns

CSX-Deutsche Bahn/Cargo

Petrofina+Amoco

‘NDX’ CSX+Deutsche Bahn+NS Cargo+1

SVE Rail Italia+2

Autocare Europe

Videocrypt

Skafor

VHD

Skafor

Sweden Post+PTT Post

Paribas-Bacob

Euskattel

Tetevision+Euskaltel

HSS+Alpha

Lion Nathan International Ltd+Ushers of Trowbridge
Plc+H.P.Bulmer Ltd

Finnish Chemicals+UPM

S&N+Becks

Internet+13

BP+Erdo¨ lchemie+Bayer

Ladbroke+Hilton

ACEA

DERPART

5/8/1998

5/8/1998

10/8/1998

20/8/1998

24/8/1998

25/8/1998

27/8/1998

1/9/1998

2/9/1998

3/9/1998

3/9/1998

3/9/1998

3/9/1998

4/9/1998

4/9/1998

4/9/1998

4/9/1998

7/9/1998

7/9/1998

8/9/1998

8/9/1998

8/9/1998

9/9/1998

10/9/1998

10/9/1998

16/9/1998

18/9/1998

18/9/1998

18/9/1998

18/9/1998

21/9/1998

22/9/1998

25/9/1998

29/9/1998

29/9/1998

30/9/1998

2/10/1998

6/10/1998

6/10/1998

12/10/1998

12/10/1998

13/10/1998

13/10/1998

1

1

1

1

1

1

2

1

1

1

1

1

1

3

3

1

1

1

2

1

1

1

2

1

1

1

1

2

1

1

1

1

1

1

1

1

1

2

2

2

1

1

1

COMPETITION REPORT 1998

36964

37168

37162

36594

37180

37135

33146

34243

34288

34289

34419

34573

34574

34575

34576

34871

34961

35199

35261

35370

35381

35429

35594

35751

37183

36912

36372

35949

37107

35152

36432

36966

35949

36674

37025

36949

36586

37209

37295

36406

35742

36510

36735

36601

EECA+EIAJ

Tuborg+Falcon

Fedders+BSH+1

Shell+BP

Shell+Bayer

Great Greenland+CFC

Hermes Parfums

Escada

Sofipar International

Jean Patou

Esthederm

Parfums Jacques Bogart

Parfums Chevignon

Parfums Ted Lapidus

Parfums Balenciaga

Juvena

Eurocos cosmetics

Laboratoires La Prairie

Pierre Balmain

Bulgari+10

Burberrys+Inter Parfums+

Cartier (perfumes)

The Donna+La Prairie

Kanebo+9

Beamish+Miller

Cantab+Glaxo+1

Tetra Pak+Danapak

Ericsson/Marconi

Merck+Basf

BPI & CIN

BPI+CIN+BARD+1

Bayer+GEC+4

Ericsson+Marconi

Philip Morris+Austria Tabak

Tobaccoland

KGS+3

British Digital Broadcasting+4

British Cement Association

Lomellina+Enel

Nordion+Amersham+3

Eucar+13

Greene King

Wolverhampton & Dudley Breweries+1

SkyPak

COMPETITION REPORT 1998

ANTITRUST 177

15/10/1998

21/10/1998

22/10/1998

26/10/1998

26/10/1998

26/10/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

4/11/1998

5/11/1998

5/11/1998

6/11/1998

6/11/1998

10/11/1998

13/11/1998

13/11/1998

16/11/1998

17/11/1998

18/11/1998

18/11/1998

20/11/1998

25/11/1998

25/11/1998

27/11/1998

30/11/1998

30/11/1998

30/11/1998

30/11/1998

1/12/1998

1

2

2

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

1

2

1

2

2

1

1

1

1

2

1

1

1

3

1

2

1

1

1

1

1

178 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

36576

37110

37065

35842

35708

35847

36878

33131

33389

33394

33360

35490

37253

36849

37178

37177

36014

Vaux Group

Heidelberger+Ostendorf

Pilkington+Glaverbel

Eudim+10

PO/Sony

Sony

Warner Sogefilms+2

Eurogroup

Eurogroup

EMD

AMS

World Partners

Vio World-wide

MPEG-2 licensing programme

Celestica+Madge

Papierfabriken Cham Tenero+Consolidated Papers

Delifrance+5

3/12/1998

7/12/1998

11/12/1998

14/12/1998

15/12/1998

15/12/1998

16/12/1998

18/12/1998

18/12/1998

18/12/1998

18/12/1998

18/12/1998

18/12/1998

18/12/1998

21/12/1998

21/12/1998

21/12/1998

1

1

2

1

1

1

1

1

1

1

1

1

1

2

1

1

2

E — Notices pursuant to Articles 81 and 82 of the EC Treaty

1. Publication pursuant to Article 19(3) of Council Regulation No 17

Case No IV/

Name

Scottish & Newcastle

Bass

Spring Inns

Yves Saint Laurent

Inntrepreneur

EPI Code of Conduct

ZVEI+Arge Bat

KGS+3

P&I Clubs

Te´ le´com De´veloppement

NSAA

BIB

35992

36081

36492

36533

36456

36147

36172

36949

30373

36581

36759

36539

36213

36748

36718

Publication

OJ C 8, 13.1.1998, p. 4

OJ C 36, 3.2.1998, p. 5

OJ C 61, 26.2.1998, p. 3
OJ C 133, 30.4.1998, p. 23

OJ C 120, 18.4.1998, p. 2

OJ C 133, 30.4.1998, p. 23

OJ C 155, 20.5.1998, p. 3

OJ C 172, 6.6.1998, p. 13

OJ C 247, 7.8.1998, p. 10

14.8.1998

OJ C 293, 22.9.1998, p. 4

OJ C 293, 22.9.1998, p. 3

OJ C 322, 21.10.1998, p. 6

General Electric Aircraft Engines/Pratt & Whitney

OJ C 339, 7.11.1998, p. 3

REIMS II

CECED

OJ C 371, 1.12.1998, p. 7

OJ C 382, 9.12.1998, p. 6

COMPETITION REPORT 1998

2. Notices inviting interested third parties to submit observations on proposed transactions

ANTITRUST 179

Case No IV/

Name

ACMA

REIMS II

TNN Network

Belgacom

Farland

Lufthansa, SAS, United Airlines

Publication

OJ C 37, 4.2.1998, p. 6

OJ C 53, 20.2.1998, p. 3

OJ C 111, 9.4.1998, p. 8

OJ C 171, 5.6.1998, p. 2

OJ C 233, 25.7.1998, p. 17

OJ C 239, 30.7.1998, p. 5

British Airways, American Airlines

Financial Times/Goldman Sachs

OJ C 239, 30.7.1998, p. 10

OJ C 329, 27.10.1998, p. 5

3. “Carlsberg” notices concerning structural cooperative joint ventures

Case No IV/

Name

Yoplait+Valio

IPSO

Pratt & Whitney+General Electric Aircraft

OJ C 25, 24.1.1998, p. 17

RVI+ZF+STV

DBKom II

Exxon+UCC+3

KGS+3

Bayer+GEC+4

BST (Siemens/Breed)

Tamrock+Caterpillar

Pilkington-Glaverbel

Chevron+Exxon

Du Pont+Pioneer

Metro Holdings

Searle+Pfizer

Ballard Power Systems, Daimler Benz AG & Ford
Motor Company

Publication

OJ C 16, 20.1.1998, p. 4

OJ C 18, 21.1.1998, p. 7

OJ C 37, 4.2.1998, p. 5

OJ C 40, 7.2.1998, p. 11

OJ C 44, 10.2.1998, p. 7

OJ C 81, 17.3.1998, p. 4

OJ C 97, 31.3.1998, p. 7

OJ C 162, 28.5.1998, p. 3

OJ C 179, 11.6.1998, p. 7

OJ C 186, 16.6.1998, p. 6

OJ C 188, 17.6.1998, p. 3

OJ C 219, 15.7.1998, p.8

OJ C 232, 24.7.1998, p. 2

OJ C 311, 10.10.1998, p. 3

OJ C 322, 21.10.1998, p. 3

OJ C 336, 4.11.1998, p. 12

36858

36748

36896

37067

37130

36076,
36201
36078

36089

37161

36836

36530

36212

36848

36409

36 831

36 949

36 966

37031

37018

37065

36 079

37078

37123

37207

37239

37156

Pfizer+Draxis

F — Press releases

Reference

Date

Subject

IP/98/25

IP/98/27

IP/98/30

13.1.1998

14.1.1998

14.1.1998

IP/98/39

15.1.1998

COMPETITION REPORT 1998

Commission intends to clear Scottish and Newcastle’s standard pub leases

Frankfurt Airport

Book pricing agreement between publishers and booksellers in Germany
and Austria: Commission initiates competition proceedings

Commission defines its position on Internet telephony in the context of the
liberalisation of the EU telecommunication markets

180 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

IP/98/70

IP/98/94

21.1.1998

28.1.1998

IP/98/141

10.2.1998

IP/98/147

11.2.1998

IP/98/154

IP/98/165

IP/98/197

IP/98/228

13.2.1998

18.2.1998

26.2.1998

10.3.1998

IP/98/242

11.3.1998

IP/98/264

IP/98/309

20.3.1998

31.3.1998

IP/98/346

15.4.1998

IP/98/353

15.4.1998

IP/98/355

15.4.1998

IP/98/430

13.5.1998

IP/98/476

28.5.1998

IP/98/536

17.6.1998

IP/98/546

IP/98/547

IP/98/556

IP/98/557

IP/98/640

IP/98/641

IP/98/647

IP/98/652

IP/98/656

18.6.1998

18.6.1998

23.6.1998

23.6.1998

8.7.1998

8.7.1998

9.7.1998

10.7.1998

13.7.1998

IP/98/663

14.7.1998

IP/98/731

IP/98/763

IP/98/794

IP/98/811

IP/98/827

29.7.1998

13.8.1998

8.9.1998

16.9.1998

23.9.1998

Commission fines stainless steel cartel

Commission fines Volkswagen ECU 102 million following consumer
complaint

Commission launches inquiry into mobile and fixed telephony prices in the
European Union

Commission proposes coordinated introduction of next generation of
mobile communications in the European Union (UMTS)

Car prices in the European Union on 1 November 1997

Third report on the implementation of
regulatory package

the EU telecommunications

Position of the Commission on Spring’s “new” pub leases

Commission approves agreement between the European and the Korean
semiconductor industries to prevent anti-dumping conflicts

Decision of the Commission against Unilever concerning freezer cabinet
exclusivity in the Irish ice cream sector

Creation of a joint venture between Sanofi and Bristol-Myers Squibb

Commission adopts notice on the application of the competition rules to
access agreements in the telecommunications sector

Commission exempts an industry scheme from the competition rules
because of its environmental benefits

Canon — Kodak; Commission clears cooperation between photographic
manufacturers

Commission conditionally approves sponsorship contracts between the
Danish Tennis Federation and its tennis ball suppliers

Commission terminates procedure against Deutsche Telekom’s fees for
preselection and number portability and transfers the case to national
authorities

Commission clears joint venture for the provision of Internet services in
Sweden

Commission imposes a fine of ECU 6 million on the Amministrazione
Autonoma dei Monopoli di Stato

Alpha Flight Services (AFS)-ADP

Agreement between Tuborg International A/S and AB Pripps Bryggerier
for Tuborg beer in Sweden

Lombard Club

Commission clears telecommunications joint venture in Italy

Lufthansa/SAS/United Airlines

British Airways/American Airlines

Commission suspends procedure against Nordion regarding abuse of
dominant position

Car prices in the European Union on 1 May 1998

Commission authorises operation between shareholders of Spanish mobile
operator

Commission authorises Finnair and Maersk Air to continue joint operation
between Copenhagen and Stockholm

Falling cost of fixed networks telecommunications in Europe

Commission decides to concentrate its investigation into international
telephone prices on 7 cases

Frankfurt Airport

TACA fine

Commission responds favourably to SNCF-Ce´ge´ tel agreements

COMPETITION REPORT 1998

ANTITRUST 181

IP/98/832

IP/98/865

IP/98/898

25.9.1998

6.10.1998

14.10.1998

IP/98/896

15.10.1998

EUCAR — R&D agreements in the motor industry

ACEA CO2 commitment
British Sugar — Commission imposes fines for violation of the European
competition rules on Great Britain’s sugar market

Commission approves agreement between the European and the Japanese
semiconductor industries to prevent anti-dumping conflicts

IP/98/917

21.10.1998

Commission imposes heavy fines for price-fixing and bid-rigging in district
heating pipe cartel

IP/98/923

IP/98/927

22.10.1998

23.10.1998

IP/98/967

6.11.1998

IP/98/1034

25.11.1998

IP/98/1036

IP/98/1046

IP/98/1060

IP/98/1065

IP/98/1069

IP/98/1091

IP/98/1128

26.11.1998

1.12.1998

3.12.1998

4.12.1998

8.12.1998

9.12.1998

17.12.1998

IP/98/1155

18.12.1998

Commission gives green light to Inmarsat restructuring

Commission reaches preliminary agreement with British Interactive
Broadcasting (BiB)

The tied pub leases of the small and regional UK brewers fall outside the
reach of European competition rules

Fourth report on the implementation of
regulatory package

the telecommunications

Commission closes mobile telecommunications cases after price cuts

Commission takes a provisionally favourable view on revised agreement
between postal operators on cross-border mail

Commission strengthens fight against cartels

Commission opens detailed enquiry into proposed joint venture between
BT and AT&T

Commission clears Sony’s licensing agreements for video games

Commission fines price cartel for ferry services on Greece-Italy routes

Commission exempts standards agreement for the production and sale of
seeds protected by plant breeding rights

Commission approves a patent licensing programme to implement the
MPEG-2 standard

G — Judgments and orders of the Community courts

1. Court of First Instance

Case

T-275/97

T-276/97

T-235/95

T-367/94

T-262/97

T-304/94

T-308/94

T-309/94

T-311/94

T-317/94

T-319/94

T-334/94

T-338/94

Parties

Date

Publication

Gue´ rin Automobiles v Commission

13.2.1998

[1998] ECR II-0253

Gue´ rin Automobiles v Commission

13.2.1998

[1998] ECR II-0261

Anthony Goldstein v Commission

16.3.1998

C 151, 16.5.1998, p. 8

British Coal Corporation v Commission

29.4.1998

C 209, 4.7.1998, p. 39

Anthony Goldstein v Commission

14.5.1998

C 234, 25.7.1998, p. 27

Europa Carton v Commission

Cascades SA v Commission

NV Koninklijke Nederlandse Papierfabriek (KNP)
v Commission

14.5.1998

C 209, 4.7.1998, p. 30

14.5.1998

C 209, 4.7.1998, p. 30

14.5.1998

C 209, 4.7.1998, p. 30

Kartonfabriek de Eendracht NV v Commission

14.5.1998

C 209, 4.7.1998, p. 31

Moritz J. Weig GmbH v Commission

14.5.1998

C 209, 4.7.1998, p. 32

Fiskeby Board AB v Commission

14.5.1998

C 209, 4.7.1998, p. 33

Sarrio` SA v Commission

14.5.1998

C 209, 4.7.1998, p. 33

Finnish Board Mills v Commission

14.5.1998

C 209, 4.7.1998, p. 34

COMPETITION REPORT 1998

182 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

T-339/94

T-340/94

T-341/94

T-342/94

T-347/94

T-348/94

T-352/94

T-354/94

T-375/94

T-596/97

T-262/97

Metsa¨-Serla Oy v Commission

14.5.1998

C 209, 4.7.1998, p. 35

United Papermills Ltd v Commission

14.5.1998

C 209, 4.7.1998, p. 35

Tampella Corporation v Commission

14.5.1998

C 209, 4.7.1998, p. 35

Oy Kyro AB v Commission

Mayr-Melnhof Kartongesellschaft mbH v
Commission

14.5.1998

C 386, 4.7.1998; p. 35

14.5.1998

C 209, 4.7.1998, p. 35

Enso Espan˜ ola SA v Commission

14.5.1998

C 209, 4.7.1998, p. 36

Mo och Domsjo¨ AB v Commission

14.5.1998

C 209, 4.7.1998, p. 37

Stora Kopparbergs AB v Commission

European Passenger Service Ltd v Commission

14.5.1998

15.5.1998

Dalmine SpA v Commission

24.6.1998

C 312, 10.10.1998, p. 12

Anthony Goldstein v Commission

26.6.1998.

C 258, 15.8.1998, p. 36

T-286/97R

Anthony Goldstein v Commission

15.7.1998

C 312, 10.10.1998, p. 12

T-111/96

T-374/94

T-375/94

T-384/94

T-388/94

T-28/95

T-110/95

T-116/95

T-204/95

T-133/95

ITT Promedia NV v Commission

17.7.1998

C 299, 26.9.1998, p. 31

European Night Services Ltd v Commission

European Passenger Service Ltd v Commission

Union internationale des chemins de fer (UIC) and
NV Nederlandse Spooorwegen v Commission

Socie´ te´ nationale des chemins de fer franc(cid:224)ais
(SNCF) v Commission

15.9.1998

15.9.1998

15.9.1998

15.9.1998

International Express Carriers Conference (IECC)
v Commission

16.9.1998

C 327, 24.10.1998, p. 19

International Express Carriers Conference v
Commission

Cementir Cementerie del Tirreno SpA v
Commission

International Express Carriers Conference (IECC)
v Commission

International Express Carriers Conference (IECC)
v Commission

16.9.1998

C 327, 24.10.19, p. 19

16.9.1998

C 258, 15.8.1998, p. 31

16.9.1998

C 327, 24.10.1998, p. 20

16.9.1998

C 327, 24.10.1998, p. 20

T-100/98 R Anthony Goldstein v Commission

T-100/98

Anthony Goldstein v Commission

23.10.1998

28.10.1998

2. Court of Justice

Case

Parties

Date

Publication

C-196/97 P

Intertronic F. Cornelis GmbH v Commission

15.1.1998

[1998] ECR I-199

C-306/96

C-230/96

Javico International and Javico AG v Yves Saint
Laurent Parfums

Cabour SA and Nord Distribution Automobile SA
v Arnor ‘SOCO’ SARL

C-401/96 P

Somaco SARL v Commission

28.4.1998

[1998] ECR I-1983

30.4.1998

[1998] ECR 1998, I-2055

7.5.1998

[1998] ECR I-2587

28.5.1998

[1998] ECR I-3111

C-7/95 P

C-8/95 P

John Deere v Commission

New Holland Ford Ltd v Commission

28.5.1998

[1998] ECR I-3175

C-279/95 P

Langnese-Iglo GmbH v Commission

15.6.1998

C 286, 28.10.95, p. 3

C-35/96

Commission v Italy (customs agents)

18.6.1998

[1998] ECR I-3851

COMPETITION REPORT 1998

ANTITRUST 183

C-266/96

Corsica Ferries France SA v Gruppo Antichi
Ormeggiatori del porto di Genova, Gruppo
Ormeggiatiori del Golfo di La Spezia and Ministero
dei Trasporti e della Navigazione

18.6.1998

[1998] ECR I-3949

C-38/97

Autotrasporti Librandi Snc di Librandi F & C v
Cuttica spedizioni e servizi internazionali Srl

1.10.1998

C 94, 22 3 97, p. 10

C-279/95 P

Langnese-Iglo GmbH v Commission

C-70/97 P

Kruidvat BVBA v Commission

C-7/97

Oscar Bronner Gesellschaft mbH & Co KG v
Mediaprint Zeitungs- und Zeitschriftenverlag
Gesellschaft mbH & Co. KG, Mediaprint
Zeitungsvertriebsgesellschaft mbH & Co. KG and
Mediaprint Anzeigengesellschaft mbH & Co. KG

1.10.1998

17.11.1998

26.11.1998

COMPETITION REPORT 1998

II — MERGER CONTROL: COUNCIL REGULATION (EEC) NO 4064/89

AND ARTICLE 66 OF THE ECSC TREATY

MERGER CONTROL 185

A — Summaries of decisions taken under Article 6(1)(b) of Council

Regulation (EEC) No 4064/89

1. Merger proposals where undertakings have been given by the firms involved

ABB/Elsag Bailey 41

ABB Transport Participations (ABB TP), a part of the ABB engineering and technology group, is
active in a range of engineering activities including process control. The target company, Elsag Bailey,
is a subsidiary of Finmeccanica SpA and active only in process control automation.

The Commission’s investigations showed that one particular type of product, namely the process
analyser known as an on-line gas chromatograph, should be considered a separate product market. The
relevant geographic markets were considered to be at least Europe-wide, given the legislative
harmonisation of standards and codes throughout Europe, public procurement obligations,
low
transport costs and buyer power on the part of customers.

Two factors led the Commission to raise serious concerns with regard to a dominant position of the
parties. First, on either geographic definition, the acquisition would give the new entity a very strong
position. The parties would reach combined market shares of at least three times those of their nearest
competitor, and at most over two thirds of the market. Second, there was hardly any competitor
capable of operating across the full range of technical applications for which the relevant ABB TP and
Elsag Bailey products could be used.

In order to remove these concerns ABB TP submitted a proposal for modification of the operation in
accordance with the terms of Article 6(2) of the ECMR. This proposal involved an undertaking to
divest the Analytical Division of Elsag Bailey’s subsidiary, Applied Automation Inc., based primarily
in the United States, but with some relevant operations in Europe and Asia. The AAI business
activities to be divested are based mainly in the US, and cover Elsag Bailey’s interest in gas
chromatographs as well as in the development of a mass spectrometer product.

Johnson & Johnson/ Depuy 42

The activities of Johnson & Johnson (J&J) include a wide range of hygiene products, pharmaceuticals
and professional high-tech medical products used by hospitals and doctors. The target company DePuy
is a subsidiary of Roche and is active in the development, production and sale of orthopaedic products.

The Commission found significant overlaps in one segment of the spinal implants market, namely the
segment of reconstructive implants for hips and knees.

41 16.12.1998.
42 28.10.1998

COMPETITION REPORT 1998

186 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

The geographic market was defined by the parties as being EEA-wide due to the ongoing legal
harmonisation and accelerated price approximation. The Commission, however, defined national
markets, reasoning that customers’ requirements included training and assistance for which the
maintenance of national representations was indispensable. Moreover the Commission found that
national public reimbursement systems in a number of countries had partitioned off the markets.

The Commission concluded that the operation would have a significant impact in Ireland. Several
circumstances led the Commission to raise serious concerns regarding common market compatibility.
First, the Irish market is a small market where the public tender procedures are not yet fully
developed. Second, combined market shares of the merging entity would be extremely high with a
considerable distance to the next competitors, who would have only a marginal position. In addition,
the new entity would acquire uncontested leadership in both hip and knee implants.

To remove these competition concerns, J&J undertook to divest its orthopaedic sale and distribution
business in Ireland to a competitor in the hip and knee implant sector independent of the parties. The
sale will comprise inventory, all contracts in Ireland, know-how, technical and commercial information
and other assets required by the purchaser to promote the marketing and sale of the products in
Ireland.

Akzo Nobel/Courtaulds 43

Akzo Nobel, a Dutch corporation, is an international manufacturer of coatings, fibres, chemicals, and
healthcare products. The target company, Courtaulds, produces coatings, sealants, chemicals, fibres and
polymer products.

Akzo’s and Courtaulds’ activities are largely complementary. Competition concerns, however, were
found to arise from the operation in the markets for aerospace coatings and sealants. Aerospace
coatings are highly specialised coatings supplied to aircraft manufacturers, maintenance companies,
airlines, etc. Aerospace sealants are used to seal joints in aircraft, notably in fuel tanks.

The parties argued that the geographic scope of the markets for aerospace coatings and aerospace
sealants is at least the EEA. The Commission did not proceed to a final definition. It confirmed that
the markets for aerospace coatings and aerospace sealants are at least EEA-wide markets, but found
that there were indications that both markets could be global markets.

Competition concerns invoked by the Commission were based on existing high market shares and the
significant increment as a result of the merger. In aerospace coatings, Courtaulds and Akzo Nobel,
through its joint venture ADAF with the American company Dexter, are the two leading suppliers in
Europe. Their combined market share would comprise more than 3⁄4 of the whole market size in the
EEA. In aerospace sealants Courtaulds is the world leader with more than 2/3 of the market.
Moreover, there are very high barriers to entry to the markets in question. Further concern was related
to the presence of ADAF in an R&D project which seeks to develop, inter alia, sealants that could
compete with Courtaulds’ current products.

Following negotiations with the Commission, Akzo Nobel undertook to divest the whole of
Courtaulds’ worldwide aerospace coatings and sealants business to an independent purchaser who
would need to be approved by the Commission. Alternatively, Akzo Nobel had the possibility to

43 30.6.1998.

COMPETITION REPORT 1998

propose a sale of all its interest in ADAF to its current partner Dexter. Whichever alternative Akzo
proposes to adopt the Commission will need to satisfy itself that customers will continue to benefit
from competition in the markets of concern, before giving its approval.

MERGER CONTROL 187

Alcatel/Thomson CSF-SCS 44

Alcatel heads a group of companies active in all types of telecommunication equipment. Thomson-CSF
produces electronic systems for both civil and military applications. Alcatel and Thomson notified an
operation by which the French undertakings Alcatel, Thomson-CSF and Ae´ rospatiale would
contribute their activities in the manufacture of satellites to a newly created joint venture, SCS. SCS
will be active in the manufacture of satellites.

Global shares of the parties in the market for travelling waves tubes (TWTs) for satellites were
significant. The market for satellites tubes is highly concentrated. The Commission’s investigation
showed that there are relatively scarce capacities due to the increasing demand for telecommunication
satellites. The market entry barriers are significant.

The Commission found that Thomson’s subsidiary Thomson Tube Electronique (TTE) was by far the
most influential supplier and already had a dominant position in the global satellite market.
Competitors expressed concerns that TTE could use its market power to apply discriminatory prices to
competitors and distort competition in the downstream market for satellites.

In order to dismiss these concerns the parties proposed to undertake to insert an arbitration clause into
the general sales terms and conditions of their Satellite JV. The clause provides for an independent
third party (the European Space Agency) to act as arbitrator. This arbitrator will settle any litigation
that might arise between TTE and any of its customers concerning the sale or delivery of TWTs. The
arbitrator will intervene at the request of this customer. It will be empowered to make an award within
one month. Under French civil law, both Thomson and the complainant will be bound by the award.
Such an award can include injunctions, such as an order to deliver the ordered TWTs, and damages.
The arbitrator will also be empowered to carry out any investigation or cross-survey it might find
necessary to perform its task.

Thyssen/Krupp 45

The German firms Thyssen AG (Thyssen) and Krupp are both active mainly in the areas of production
and processing of steel and other materials and manufacturing of escalators and elevators. The
Commission’s investigations showed that the merger would lead to a serious competition problem only
in the market for escalators. The geographic market was defined as EU-wide because all major
suppliers of escalators are active throughout the Community and competitive conditions do not differ
to a sizeable extent.

This market for escalators is highly concentrated. Besides Thyssen, there are only three other major
suppliers in Europe. These are the undertakings Kone, Otis and Schindler, with nearly equal market
shares. Since the sale of its escalators business to Kone, Krupp itself is not active on this market any
more. Nevertheless, there were some problematic links between Thyssen/Krupp and Kone since Krupp
held a 10% shareholding in Kone, had privileges regarding the acquisition of further Kone shares and a

44 4.6.1998.
45 2.6.1998.

COMPETITION REPORT 1998

188 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

seat on the board of directors of Kone. Furthermore, non-competition clauses existed between both
companies. In the Commission’s view, the merger as originally notified would therefore lead to a
unification of the escalator business of Thyssen with the links of Krupp with Kone.

In the course of the proceedings, Krupp proposed to give up permanently its right to nominate a
member of Kone’s board of directors. Krupp committed itself further to enter into negotiations with
Kone to annul the non-competition clauses and to give up the privileges regarding the acquisition of
further shares in Kone. Thus, in future there will be four independent competitors on this market.

Neste/IVO 46

Neste Yhtyma¨ Oy (Neste) notified the acquisition of sole control of Imatran Voima Oy (IVO). Neste is
active in the oil, energy (natural gas) and chemical businesses. IVO’s main business activities consist of
power and heat generation, power trading and electricity distribution. The Finnish State controls both
companies.

The product markets affected were the markets for natural gas and electricity. Agreeing with the
parties, the Commission found that the geographic market followed the location of gas pipelines in
Finland.

The Commission found that IVO and Neste had vertical relations in the field of electricity generation
that presented competition problems. Neste, through its subsidiary Gasum Oy (Gasum), is the only
importer, supplier and seller of natural gas for electricity generation. Gasum controlled by Neste has
already prior to the concentration a de facto monopoly on sales of natural gas in Finland. IVO is active
in the market for the generation, wholesale and distribution of electricity. The operation as notified
would have threatened to create or strengthen Neste-IVO’s dominant position on the market for
wholesale sales of electricity in Finland. Following the merger, the Commission concluded that Neste-
IVO would have been in a position to control, or at least exert significant influence over, both
electricity and gas prices in Finland due to its strong position in both the electricity and the natural gas
market.

To address these concerns Neste-IVO undertook to give up its control of Gasum and to reduce its
share to a non-controlling minority interest. The shares will be sold to Finnish and European entities
independent of Neste-IVO, with a possibility for the State to acquire a maximum of 24%. Through
these undertakings, Neste-IVO’s position in Gasum will change from one of sole control over the
company to one of a minority owner.

Allianz/AGF 47

The German Allianz group is leader of a group of insurance companies and one of the largest
industrial insurers in Europe. The target company, Assurances Ge´ ne´rales de France (AGF), is a French
insurance company active in life and non-life insurance and reinsurance in the EEA and worldwide.

46 2.6.1998.
47 8.5.1998.

COMPETITION REPORT 1998

MERGER CONTROL 189

The product market mainly affected by the merger was credit, and in particular “delcredere”,
insurance (domestic, export and capital credit insurance market). The Commission had to appraise the
operation at both a European and a national level.

The Commission’s investigation showed that the merger between the number one and number two
credit insurers in Europe would produce rather high market shares. Those shares are produced in a
niche market with a high degree of specialisation where few global players are active. On a European
level, the new entity will have, on the credit insurance market, well over twice the shares of the second
and more than three times the shares of the third competitor. A similar situation can be observed in
Italy where parties already enjoy a dominant position and there is a considerable distance in market
shares to the next significant competitor. Nevertheless, those elements as such were not sufficient to
raise serious doubts, given the existence of several globally active competitors and evidence of recent
market entries, together with the negligible increment in market shares that will result from the merger
impact of existing links between AGF and Coface, the main
in Italy. However, the additional
competitor in delcredere, raised serious concerns with regard to their impact on effective competition.

Consequently, the parties submitted undertakings according to which the structural links between
AGF and Coface would be changed to the effect that the two companies compete on the delcredere
market as independent entities. According to these commitments AGF, after clearance of the
operation, would sell a certain percentage of its shares in Coface to buyers not belonging to the AGF/
Allianz group. Furthermore, any personal links existing between companies owned/controlled by one
of the parties and companies belonging to Coface would be removed.

Owens-Illinois/BTR Packaging 48

Owens-Illinois, an American corporation,
is an international manufacturer of glass containers,
machinery and plastic packaging products and a worldwide licensor of glass technology. The target
company, BTR, is a global engineering company and manufactures glass containers in the UK through
its subsidiary BTR Packaging.

Along the lines of its previous findings in cases IV/M.603 — Crown Cork & Seal/Carnaud MetalBox
and IV/M.081 — VIAG/Continental Can, the Commission confirmed that, due to the lack of
interchangeability of the different packaging materials, the relevant product market in the present case
was the market for glass containers used to package food products, beverages, wines and spirits. The
relevant geographic markets were defined as being national due to lack of cross-border competition,
local supply structures and significant price differences between countries.

The Commission concluded that the proposed operation, as originally notified, would have created or
reinforced Owens-Illinois’s dominant position in the glass container market in the UK and Ireland.
This finding is based on the high market shares of the parties, the low market shares of the remaining
competitors, and the lack of competitive pressure from outside the UK due to high transport costs.

To dismiss these concerns Owens-Illinois undertook to divest the whole of the glass container business
carried on by BTR Packaging through its subsidiary Rockware Group Limited (Rockware) at its four
plants in the UK. Owens-Illinois also undertook to divest Rockware’s 50% interest in a glass recycling
joint venture, British Glass Recycling Company Ltd, which was jointly owned with Owens-Illinois.

48 21.4.1998.

COMPETITION REPORT 1998

190 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

These commitments completely eliminate the overlap between Owens-Illinois and BTR Packaging in
the UK glass container market.

RAG/Saarbergwerke 49

After a detailed investigation under Article 66 of the ECSC Treaty, under which the Commission
examines concentrations in the coal and steel industries, the Commission authorised, subject to
conditions, the acquisition of Saarbergwerke AG (Saarbergwerke) and Preussag Anthrazit GmbH
(Preussag) by RAG Aktiengesellschaft (RAG). The three companies are the only three remaining
German coal producers. In addition, both RAG and Saarbergwerke are active in coal importing. The
companies also have other activities not falling under the ECSC Treaty. These aspects of the proposed
operation had already been cleared by the Federal Cartel Office.

The Commission identified competition concerns arising from the proposed operation, particularly in
relation to imported coal in Germany. However, following discussions with the Commission, RAG has
given commitments to address these concerns. These include the divestment, to an independent third
party, of all of Saarbergwerke’s coal importing activities and the complete separation of the sales of
domestic coal from the sales of imported coal.

These undertakings would ensure that RAG’s position as an importer of third-country coal is not
strengthened. As a result of the complete separation of the marketing of German coal and the
marketing of imported coal, there is likely to be no distortion of competition between RAG and its
competitors in respect of sales of imported coal in Germany and the transparency of the German
market will be improved. Lastly, the Saarbergwerke import operations to be sold include certain
transshipment, storage and transport facilities which will further strengthen the position of its future
purchaser in the importing of hard coal.

B — Summaries of decisions taken under Article 8 of Council Regulation

(EEC) No 4064/89

1. Merger proposals where undertakings pursuant to Article 8(2) of the ECMR have been

given by the firms involved

Skanska/Scancem 50

Skanska is active in building construction, production and distribution of building materials and real
estate management. The target company Scancem is active in production and distribution of building
materials, primarily cement and other mineral-based materials.

The relevant product markets identified by the Commission were cement, aggregates, ready and dry
mixed concrete, pre-cast concrete products and construction. The Commission assessed the operation
on the basis of the parties’ national activities, concerning ready-mixed concrete and aggregates. It also
assessed the competitive impact of the deal at a regional and local level.

49 29.7.1998.
50 11.11.1998.

COMPETITION REPORT 1998

MERGER CONTROL 191

The Commission found that the notified transaction would give rise to the strengthening of a dominant
position of the parties in the Swedish market for cement, and possibly also in Finland and Norway.
Moreover, it would create a dominant position on the Swedish markets for ready-mixed concrete, dry
concrete and pre-cast concrete products. The combined entity would account for over 4/5 of the cement
market and for 2/5-3/5 of the other markets. On all these markets the negative effects would follow
partly from the superior market power of the combined entity, as evidenced by its high market shares
in relation to its smaller and weaker competitors. However, these effects would be substantially
reinforced by the vertical effects, resulting from the combined activities of Skanska and Scancem on
the raw material markets (cement and aggregates), the construction materials markets (concrete and
other construction products) and, finally, on the construction market itself. The combined entity’s
wide-ranging activities would also serve as a significant barrier to entry at every level of its activities.

In order to resolve the Commission’s concerns relating to Scancem, Skanska promised to procure the
divestiture of Scancem’s cement business in Finland, and also to divest Skanska’s entire shareholding
in Scancem. These measures will open up the market by creating an additional independent source of
supply, where high-quality cement can be obtained. Moreover, Skanska’s undertaking to divest its
shareholding in Scancem will remove the competitive concerns relating to the vertical integration
between the companies.

Hoffmann-La Roche/Boehringer Mannheim 51

Hoffmann-La Roche (Roche) is a Swiss company mainly active in the production and distribution of
pharmaceuticals, diagnostics, flavours and fragrances. Boehringer Mannheim (BM) is a manufacturer
and distributor of diagnostics, pharmaceuticals and biochemicals. DePuy is a manufacturer and
distributor of orthopaedic products and devices.

The affected markets where a possible impact on effective competition was identified were in vitro
diagnostics (IVD tests used to identify and measure substances in patients’ tissue, blood or urine
samples) and DNA probes. In their notification the parties indicated that the markets for in vitro
diagnostics are worldwide or at least the EEA. Given the need for a local presence for suppliers, the
lack of interchangeability for customers with other products and national distribution systems of major
competitors, the Commission found that the markets for in vitro diagnostics and DNA probes remain
essentially national.

The Commission concluded that the merger in its notified form would create or strengthen dominant
positions in the fields of classical clinical chemistry and immunochemistry diagnostics and DNA probes
in a number of national markets.

For classical clinical chemistry and immunochemistry diagnostics the combination of Roche’s and
BM’s installed bases would strengthen BM’s dominant position in some countries and facilitate the
creation of a dominant position in others. Roche and BM after the merger would have a strong
advantage in terms of having the greatest installed bases of instruments.

Furthermore, the merger would remove Roche as a competitor from the market. In some markets
Roche would have been among the leading challengers of BM. Existing competitors in the respective
countries are already not in a position in terms of market share and installed base to effectively
challenge the leadership of Roche/BM. Nor was there sufficient countervailing buying power, because

51 4.2.1998.

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192 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

not even the largest customer of the parties accounts for a substantial amount of either party’s sales. As
for the DNA probes market, Roche has a very strong position based mainly on its extensive patent
portfolio relating to the main DNA probe technology, the polymerase chain reaction (PCR) technique.
The research licences granted by Roche do not give the licensees any right to commercialise products
or equipment using the patented PCR technology.

To dismiss the competition concerns raised by the Commission, Roche undertook to divest the most
important installed base (Cobas Mira) in the respective countries and to sell it to a single purchaser
who is a viable competitor in the clinical chemistry business. Roche undertook further to give access to
the PCR technology for all in vitro diagnostic applications to interested market participants on non-
discriminatory terms (most-favoured-customer clause). The commitment significantly reduces the
addition of installed base and market share in clinical chemistry and will enable the purchaser to
immediately act as a full-range supplier. The undertaking will also ensure that there will be several
entries from large IVD producers in the DNA probes market.

Agfa-Gevaert/Dupont 52

Both Agfa and DuPont are active worldwide in the production of graphic arts film and offset printing
plates.

In defining the product markets the Commission distinguished between the graphic arts film sector and
the offset printing plates sector. Within the latter, four different product markets were identified:
positive and negative offset printing plates, plates for computer-to-plate technology and electrostatic
plates. Due to substantial trade flows and the absence of legislative barriers, geographic markets were
defined as being EEA-wide.

The Commission found that the proposed deal in its notified form would lead to the creation of a
dominant position of the parties in the market for negative offset printing plates. These offset plates
are sold either to printing and publishing firms, such as, for example, newspaper printers or printers of
packaging, or to distributors and retailers. The creation of a dominant position was caused not only by
the high market shares in the EEA but also by several additional factors.

Most competitors offering negative offset printing plates usually enter into package deals with their
customers whereby they agree to provide equipment for free and the customer agrees to purchase its
consumables for a certain time from the supplier. Agfa, however, had entered into relations obliging
suppliers of equipment to sell certain equipment to Agfa only. These exclusivity contracts reduced the
ability of most competitors to offer similar package deals to their customers because the majority of
them lack equipment production of their own. Consequently the new entity would enjoy much easier
access to customers than its main competitors.

Moreover, Agfa and DuPont concluded exclusivity arrangements with a number of important dealers
who were only allowed to offer Agfa or DuPont products respectively.

In order to remove the competition concerns of the Commission, Agfa undertook to cancel its
exclusivity arrangements with dealers and suppliers. Afga-Gevaert would release all of its OEM-
suppliers of processing equipment for negative plates from any contractual provisions whereby such
suppliers of Agfa-Gevaert would be prevented from selling such processing equipment to any third

52 11.2.1998.

COMPETITION REPORT 1998

party of their choice. With regard to negative plates, Agfa-Gevaert would release all existing exclusive
dealers and distributors of DuPont. This undertaking will allow dealers to sell products of competitors
and this will increase inter-brand competition.

MERGER CONTROL 193

Worldcom/MCI II 53

WorldCom and MCI are publicly quoted telecommunications companies offering the normal range of
telecommunications services. Both are also active in the supply of Internet-related services.

Whatever the configuration of the final user’s system, access to the Internet is usually obtained by
subscribing for access services provided by an internet service provider (ISP). ISPs offer Internet
access services on a commercial basis to paying subscribers.

Within the Internet sector the Commission found that various types of service provision could be
distinguished, ranging, for example, from small operators providing little more than retail dial-up
services, to bigger players running local networks, and still larger operators running international long
distance international networks, which provide the overarching structure of the Internet. The only
organisations which are capable of delivering complete Internet connectivity entirely on their own
account are the top-level ISPs. If the top-level networks increased the price of their Internet
connectivity services the cost base of resellers would be increased by the same amount, and that
increase would have to be passed on to the customer. Secondary peering ISPs are not entirely captive
to the prices charged by the top-level networks. If they wanted to offer complete connectivity, however,
they could not avoid continuing to buy some transit 54 from the top-level networks. Therefore neither
pure resellers nor secondary peering ISPs can provide a competitive constraint on the prices charged
by the top-level network. Therefore, the relevant market on which the merging parties are active was
defined as the market for the provision of top-level or ‘universal’ Internet connectivity.

The parties belong to a small group of internet service providers who have the ability to provide
connectivity anywhere on the Internet solely through their own peering agreements and without
having to rely on the purchase of a transit service from any other provider. WorldCom is currently the
leading player in the market, with MCI one of its principal competitors. After the merger the combined
entity would have a share of some 50% of the relevant market. MCI/WorldCom could control market
entry by denial of new peering requests, foreclosure or the threat of foreclosure of peering agreements,
and/or their replacement with paid interconnection. Moreover, the combination of the Internet
backbone networks of WorldCom and MCI would create a network of such absolute and relative size
that the combined entity could behave to an appreciable extent independently of its competitors and
customers. The Commission therefore concluded that the operation in its notified form would have
created or strengthened a dominant position of the parties.

To meet these competition concerns the parties proposed remedies which involved the divestiture of a
package including all of MCI’s Internet interests. This commitment was considered sufficient to enable
the acquirer to take over the position of MCI as a player in this market.

53 8.7.1998.
54 The purchase of a transit service may be described as a right on the part of an ISP to have its traffic treated as the

traffic of the transit provider’s network for the purpose of exchange across a peering interface.

COMPETITION REPORT 1998

194 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

2. Merger proposals approved without undertakings

Price Waterhouse/Coopers & Lybrand 55

Price Waterhouse (PW) and Coopers & Lybrand (C&L) are two of the so-called Big Six audit and
accounting organisations worldwide (the other four being Arthur Andersen (AA), Deloitte Touche
Tohmatsui International (DTTI), KPMG, and Ernst & Young (EY). Both groups are active in the
provision of auditing and accounting services, tax compliance and advisory services.

The Commission’s substantive analysis focused on the provision of audit and accounting services to
large companies. Such companies are dependent for such services on the Big Six, since only the latter
have the necessary depth of resources and expertise, the requisite geographic spread and a sufficiently
strong reputation in the financial markets. The Commission found this market to be national in
geographic scope in view of national regulatory requirements for statutory audits and professional
qualifications, and the need on the part of the service provider for a local presence.

The Commission found that the market in question was characterised by many elements which would
be conducive to the creation of collective dominance, such as slow demand, homogeneous products
and the fact that suppliers are interlinked via self-regulatory professional organisations. Despite these
market characteristics, the Commission found no conclusive proof of the creation/strengthening of
dominance given the likely continued participation of these five suppliers in the tender offers and the
improbability that a situation of collective dominance at the level of five service providers would be
stable over time.

TKS/ITW Signode/Titan 56

The Commission had to deal with a joint venture between TKS (a joint venture between Thyssen Stahl
and Krupp-Hoesch Stahl) and US-based Signode System GmbH (Signode). TKS produces and
distributes quality steel flat products. Titan, a subsidiary of Krupp-Hoesch, has activities in steel
strapping, balelocks and seals. The business activity of Signode essentially consists of the production
and distribution of strapping band made of steel and plastic.

The Commission concluded that the relevant geographic market for steel and plastic strapping is
limited to the EEA area and Switzerland (Western Europe) because the conditions of competition in
this area are sufficiently homogeneous and can be distinguished from neighbouring areas and because,
taken together, the transport costs and duty payable place imports at a significant disadvantage
compared with producers based in the EEA.

The Commission’s investigation showed that ITW Signode and the joint venture would together have
between 35% and 40% of the combined market for steel and plastic strapping in the Western
European market. The Commission concluded that the operation would not strengthen or create a
dominant position for a number of reasons, including the fact that the overall market for strapping was
growing, the parties were comparatively weak in plastic strapping, which is growing rapidly, whereas
they are stronger in steel strapping, which is in long-term decline. There are a large number of active
competitors and barriers to entry into the growing plastic sector are low.

55 20.5.1998.
56 6.5.1998.

COMPETITION REPORT 1998

On this basis the Commission decided not to raise any objections to the notified joint venture and to
declare the operation compatible with the common market and with the functioning of the EEA
Agreement.

MERGER CONTROL 195

Enso/Stora 57

Enso is an international industrial group the activities of which consist mainly in wood procurement
and paper merchandising. Stora produces pulp, paper and board.

The three product markets mainly addressed by the investigation were the market for newsprint, the
market for magazine paper and the market for liquid consumer packaging boards. The parties stated
that all these markets had a global dimension. The Commission admitted that some aspects, such as the
phasing-out of customs duties, might point to a gradual shift towards a market which is wider than the
EEA. However, the Commission found that those factors were not sufficient to prove this conclusively.

In the markets for newsprint and magazine papers, the deal would cause the concentration of most of
the supply in the hands of five major suppliers. The Commission, however, found that neither market
was transparent on such key parameters as supplies and prices. Some countervailing purchasing power
of the largest buyers appeared to exist, too. Therefore, the Commission found that the change from six
to five members of the oligopoly was not sufficiently significant to lead to the creation or strengthening
of an oligopolistically dominant position.

In the market for liquid packaging board the new entity would be the leading producer in the EEA
with a very high market share with only limited potential competition. However, the demand side is as
concentrated as the supply side, and the countervailing buyer power of the main buyers, in particular
Tetra Pak, meant that the operation would not lead to the creation or strengthening of a dominant
position in the market for liquid packaging board.

The concentration was declared compatible with the common market under Article 8(2) of the ECMR
without the attachment of any conditions or obligations. In reaction to the Commission’s statement of
objections, the parties, however, undertook to provide a price-protection mechanism for smaller
customers. Any increase in their prices to the largest customer would not be less, in percentage terms,
than any increase in the prices to the smaller customers. Similarly, any percentage price decrease to the
largest customer will not be greater than any percentage price decrease to the smaller customers. The
parties also undertook to use their best efforts to facilitate the opening of a duty-free quota on imports
of liquid packaging board if requested by one or more Community processors or manufacturers.
Thirdly, Enso promised to sell its entire interest in these activities to Elopak. Such a sale would remove
any concerns that this link would reduce the countervailing buyer power of Elopak. The Commission
took note of these undertakings.

57 25.11.1998.

COMPETITION REPORT 1998

196 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

3. Merger proposals declared incompatible with the common market under Article 8(3) of

the ECMR

Bertelsmann/Kirch/Premiere 58

The parties to the proposed merger were CLT-UFA, a joint venture between Bertelsmann AG and
Audiofina SA, and Kirch, the leading supplier of cinema films and TV entertainment programmes in
Germany. They would have acquired joint control of the German pay-TV provider Premiere and the
German company BetaDigital. In a second part of the operation, CLT-UFA, Kirch and Deutsche
Telekom would have taken over the German company BetaResearch. The concentrations were
notified separately but later on handled in parallel because together they would have set the
framework for digital pay-TV in Germany.

After a preliminary examination of the operation the Commission concluded that the proposed
operations would have led to the creation or strengthening of dominant positions on the markets for
pay-TV, technical services for pay-TV and cable networks.

Currently Premiere and DF1 are the only providers of pay-TV in Germany. Through the merger
Premiere would have achieved a dominant position on the market for pay-TV in Germany and in the
German-speaking area. With regard to the market for technical services for pay-TV, BetaDigital would
have attained a lasting dominant position on this market for the satellite sector. With regard to the
market for cable networks, Deutsche Telekom continues to hold a dominant position on this market
since it controls the major share of the cable network on netlevel 3. Broadcasting of cable TV takes
place on netlevel 3 and netlevel 4 of the cable network. On netlevel 3 Deutsche Telekom supplies 16.5
million out of a total of 18.5 million cable TV households.

At a very late stage in the proceedings the parties proposed several commitments concerning pay-TV
programmes, decoder technology and a possible marketing of Premiere “bouquets” by cable operators.
However, they made a possible marketing of Premiere “bouquets” subject to some far-reaching
restrictive conditions with the result that a realistic chance for the establishment of an alternative
programme and marketing platform in the cable network would have been excluded. These
commitments were not sufficient to allow a clearance of both operations.

The Commission, after having completed a detailed investigation into these proposed operations,
decided to prohibit both of them.

C — Decisions pursuant to Article 2(4) of the ECMR (joint venture cases)

Telia/Telenor/Schibsted 59

Telia, a Swedish telecom operator, Telenor a Norwegian telecom operator and Schibsted, a Norwegian
publishing and broadcasting company, formed a joint venture to provide Internet gateway services and
offer web site production services. Internet gateway services enable users to access content more easily.
This content, provided by the gateway service provider or third parties, can be for free to the user or be
content for which the user has to pay.

58 27.5.1998.
59 27.5.1998.

COMPETITION REPORT 1998

MERGER CONTROL 197

There were two markets which had to be examined under Article 2(4): the market for web site
production, where both the joint venture and two of the parent companies were active, and the market
for provision of dial-up Internet access, where both Telia and Telenor (through its share in the Swedish
telecoms company Telenordia) were present.

On the market for web site production the Commission, due to the very low combined market shares
of the parents and the joint venture, concluded that, even if the parents were to coordinate their
activities, it would not amount to a sizeable restriction of effective competition.

In the case of the market for dial-up Internet access in Sweden, the Commission found that the market
was characterised by high growth, low entry barriers and low switching costs. Even if the combined
shares of Telia and Telenordia were relatively high, the Commission’s investigation showed that these
shares were of limited importance in a strongly growing market and that the market structure was not
conducive to coordination of competitive behaviour. The Commission therefore concluded that there
would be no likelihood of the parent companies coordinating their competitive behaviour on this
market.

Exante/Canal+/Numericable 60

BankAmerica Investment Corporation (BankAmerica), controlled by BankAmerica Corporation, and
Capital Communications CDPQ inc. (CDPQ), a subsidiary of Caisse de de´poˆ t et placement du
Que´ bec, proposed to acquire through an acquisition vehicle (Exante) joint control over Numericable
Holding (NCH) with Canal+. NCH operates cable television networks in France.

No negative impact on competition was found to result from the transaction in France since neither
BankAmerica nor CDPQ were active in that market. The Commission established, however, in the
course of its investigation that the operation would give rise to a risk of coordination in the Spanish
pay-TV market due to the parent companies’ interests in that market.

In Spain Canal+ has joint control (with Prisa) over Sogecable, a company which occupies a very strong
position in the pay-TV market and which is a leading distributor of content (it holds exclusive rights to
most of the Hollywood majors and the most important pay-per-view football rights). BankAmerica and
CDPQ are also present on the pay-TV market with the joint venture Cableuropa, a licensed operator
of cable pay-TV and telecommunications services in 14 regions in Spain.

The Commission ruled out the possibility of horizontal coordination between Sogecable and
Cableuropa since the latter, being a new entrant to the Spanish pay-TV market, was deemed to be at a
stage where it would have to attract as many subscribers as possible and would consequently be keen to
compete on price. Furthermore, the product offered by Cableuropa is different from that offered by
Sogecable since it consists of an unbundled package of services (Internet, telephony and pay-TV). The
Commission concluded, however, that the operation would raise serious competition concerns as to the
vertical relationship between Cableuropa and Sogecable, namely as regards content provision and such
preferential treatment as Cableuropa might receive.

In order to meet such concerns, Canal+ and Sogecable gave an undertaking to the effect that any
negotiations with Spanish cable operators with respect to theme or other television programming over
which they had distribution rights would be conducted in a fair, non-discriminatory manner consistent

60 3.12.1998.

COMPETITION REPORT 1998

198 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

with Community and national competition rules. The same principles would also govern the possible
granting of exclusive rights. These undertakings would remain in force as long as the conditions in the
Spanish market and the shareholdings of the notifying parties in Sogecable, Cableuropa and
Numericable remained substantially the same. The Commission considered that these undertakings
constituted a powerful incentive for Canal+ and its subsidiaries not to discriminate between, and to
ensure fair and equal treatment of, cable pay-TV operators which need, to varying degrees, the content
owned by Canal+ if they are to successfully operate in the pay-TV market.

BT/AT&T 61

British Telecommunications (BT) and AT&T, two of the world’s largest telecommunications operators,
proposed to form a joint venture which would provide a variety of telecommunications services to
multinational corporate customers and international carrier services to other carriers. The Commission
opened a detailed enquiry concentrating on the effects of the joint venture on several global
telecommunications markets and some in the United Kingdom.

After a preliminary examination the Commission raised competition concerns with regard to the
parties’ combined market shares on the markets for the provision of global telecommunications
services to large multinational companies and for international carrier services. Furthermore, it found
that the joint venture might lead to the creation or strengthening of a dominant position for certain
telecommunications services in the UK.

With regard to cooperative aspects assessed under Article 2(4) the Commission is examining potential
coordination issues in the UK between ACC, a wholly owned subsidiary of AT&T and BT, and
Telewest, in which AT&T through TCI will have a jointly controlling stake. The Commission’s
investigation has not yet been completed.

D — Commission decisions

1. Decisions under Articles 6 and 8 of Council Regulation (EEC) No 4064/89

1.1. Decisions under Article 6(1) of Council Regulation (EEC) No 4064/89

Case No.

Name

IV/M.1047 WIENERBERGER/CREMER & BREUER

IV/M.1005 M’RSK DATA / DEN DANSKE BANK — DM

DATA

Date of
decision

15/01/98

15/01/98

Published in OJ

OJ C 18/9, 21 1 98

OJ C 46/4, 11 2 98

IV/M.1025 MANNESMANN / OLIVETTI / INFOSTRADA 15/01/98

OJ C 83/4, 18 3 98

IV/M.1042

EASTMAN KODAK / SUN CHEMICAL

IV/M.1070

SPAR / PFANNKUCH

IV/M.1071

SPAR / PRO

IV/M.1076

IV/M.1075

ACERALIA / ARISTRAIN (see ECSC.1264)
NORDIC CAPITAL / MO¨ LNLYCKE CLINICAL
/ KOLMI

15/01/98

15/01/98

15/01/98

15/01/98

20/01/98

OJ C 32/5, 30 1 98

OJ C 49/14, 14 2 98

OJ C 49/13, 14 2 98

OJ C 46/4, 11 2 98

OJ C 39/19, 6 2 98

61 Following commitments of the parties the concentration was approved on 30 March 1999 based on Article 8 (2)

of the Merger Regulation and Article 81 (3) of the ECT.

COMPETITION REPORT 1998

MERGER CONTROL 199

IV/M.1016

PRICE WATERHOUSE / COOPERS &
LYBRAND

IV/M.993

BERTELSMANN / KIRCH / PREMIERE

IV/M.1061

ING / BBL

IV/M.1081

DOW JONES / NBC — CNBC EUROPE

IV/M.1089

PARIBAS BELGIQUE / PARIBAS
NEDERLAND

21/01/98

22/01/98

22/01/98

22/01/98

26/01/98

OJ C 32/6, 30 1 98

OJ C 40/10, 7 2 98

OJ C 83/4, 18 3 98

OJ C 136/19, 1 5 98

IV/M.945

MATRA BAE DYNAMICS / DASA / LFK

27/01/98

OJ C 149/4, 15 5 98

IV/M.1022

CABLE I TELEVISIO DE CATALUNYA (CTC)

28/01/98

OJ C 101/31, 3 4 98

IV/M.1091

CABLEUROPA / SPAINCO / CTC

IV/M.1093

ECIA / BERTRAND FAURE

IV/M.1045

DFO / SCANDLINES

28/01/98

28/01/98

29/01/98

OJ C 97/8, 31 3 98

OJ C 48/5, 13 2 98

OJ C 92/16, 27 3 98

IV/M.1064

BOMBARDIER / DEUTSCHE WAGGONBAU

29/01/98

OJ C 49/13, 14 2 98

IV/M.1072
IV/M.1073 METALLGESELLSCHAFT / KLO¨ CKNER

BERTELSMANN / BURDA / FUTUREKIDS

CHEMIEHANDEL

29/01/98

29/01/98

OJ C 116/2, 16 4 98

OJ C 53/7, 20 2 98

IV/M.1027

DEUTSCHE TELEKOM / BETARESEARCH

29/01/98

OJ C 37/4, 4 2 98

IV/M.1056

STINNES / BTL

IV/M.1062

ALPITOUR / FRANCOROSSO

4/02/98

4/02/98

OJ C 58/6, 24 2 98

OJ C 188/4, 17 6 98

IV/M.1088

THOMSON CORPORATION / FRITIDSRESOR 4/02/98

OJ C 92/16, 27 3 98

IV/M.1044

KPMG / ERNST & YOUNG

IV/M.1085

PROMODES / CATTEAU

IV/M.1087

IV/M.1096

PROMODES / SIMAGO
SOCIE´ TE´ GE´ NE´ RALE / HAMBROS BANK

IV/M.1053 MANNESMANN / PHILIPS

IV/M.1078

IV/M.1043

BP / HU¨ LS
BAT / ZU¨ RICH

IV/M.1065

NESTLE / SAN PELLEGRINO

IV/M.1090

GRE / PPP

IV/M.1100

CGEA / LINJEBUSS

IV/M.1094

CATERPILLAR / PERKINS ENGINES

4/02/98

6/02/98

6/02/98

6/02/98

12/02/98

13/02/98

16/02/98

16/02/98

16/02/98

16/02/98

23/02/98

OJ C 65/11, 28 2 98

OJ C 70/14, 6 3 98

OJ C 97/8, 31 3 98

OJ C 144/4, 9 5 98

OJ C 71/26, 7 3 98

OJ C 92/17, 27 3 98

OJ C 81/5, 17 3 98

OJ C 168/12, 3 6 98

OJ C 208/2, 4 7 98

OJ C 93/23, 28 3 98

IV/M.1014

BRITISH STEEL / EUROPIPE (See also M.501)

26/02/98

OJ C 181/3, 12 6 98

IV/M.1099

IV/M.999

OTTO VERSAND / ACTEBIS
CLT-UFA / HAVAS INTERME´ DIATION

IV/M.1069 WORLDCOM / MCI (II)

IV/M.1106

BAYERISCHE VEREINSBANK / FGH BANK

IV/M.1108

SBG / SBV

IV/M.987

ADTRANZ / SIEMENS / THYSSEN –
TRANSRAPID INT

IV/M.1009

GEORG FISCHER / DISA

IV/M.1086

PROMODES / S21 / GRUPPO GS

IV/M.1105

TENGELMANN / GRUPPO PAM

IV/M.1117

PINAULT / GUILBERT

IV/M.1125

CEREOL / SOFIPROTEOL — SAIPOL

IV/M.1107

EDFI / ESTAG

26/02/98

26/02/98

3/03/98

4/03/98

4/03/98

9/03/98

10/03/98

10/03/98

10/03/98

10/03/98

10/03/98

17/03/98

OJ C 79/3, 14 3 98

OJ C 85/2, 20 3 98

OJ C 116/3, 16 4 98

OJ C 149/4, 15 5 98

OJ C 92/17, 27 3 98

OJ C 125/7, 23 4 98

OJ C 205/3, 1 7 98

OJ C 219/9, 15 7 98

OJ C 85/2, 20 3 98

OJ C 97/9, 31 3 98

OJ C 142/15, 7 5 98

COMPETITION REPORT 1998

200 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

IV/M.1113

NORTEL / NORWEB

IV/M.1120

COMPAQ / DIGITAL

IV/M.1133

BASS PLC / SAISON HOLDINGS B.V.

IV/M.1112

ADVENT INTERNATIONAL / EMI / WH
SMITH

IV/M.1134

TARMAC / BOVIS

IV/M.1127

NESTLE / DALGETY

IV/M.1138

ROYAL BANK OF CANADA / BANK OF
MONTREAL

IV/M.1144 WINTERTHUR / ARAG

IV/M.1083

RHONE-POULENC / NOVALIS / NYLTECH

IV/M.1109

OWENS-ILLINOIS / BTR PACKAGING

IV/M.1098

GENERALI / AMB / ATHENA

IV/M.1131

AGF / ROYAL

IV/M.1155

CENDANT CORPORATION / NPC

IV/M.1020

GE CAPITAL / SEA CONTAINERS

IV/M.1139

DLJ / FM HOLDINGS

IV/M.1102

BBL / AMERICAN EXPRESS

IV/M.1167

ICI / WILLIAMS

IV/M.1142

COMMERCIAL UNION / GENERAL
ACCIDENT

IV/M.1143

DSM / KONINKLIJKE GIST-BROCADES

IV/M.1082

ALLIANZ / AGF

IV/M.1178

KOCH / EURO SPLITTER & J ARON

IV/M.1164

GEC ALSTHOM / CEGELEC

IV/M.1122

KREDIETBANK / CERA BANK

IV/M.1101

HERMES / SAMPO / FGB — FCIC

IV/M.1110

VAW / REYNOLDS METALS

IV/M.1132

IV/M.1146

BT / ESB
SHV ENERGY / THYSSEN KLO¨ CKNER
RECYCLING (See CECA 12)

18/03/98

23/03/98

23/03/98

24/03/98

OJ C 123/3, 22 4 98

OJ C 128/21, 25 4 98

OJ C 156/11, 21 5 98

OJ C 172/17, 6 6 98

24/03/98

OJ C 154/5, 19 5 98

2/04/98

2/04/98

14/04/98

15/04/98

21/04/98

23/04/98

23/04/98

24/04/98

28/04/98

28/04/98

29/04/98

29/04/98

6/05/98

7/05/98

8/05/98

14/05/98

15/05/98

18/05/98

19/05/98

19/05/98

19/05/98

19/05/98

OJ C 144/4, 9 5 98

OJ C 150/2, 16 5 98

OJ C 225/3, 18 7 98

OJ C 165/7, 30 5 98

OJ C 175/5, 9 6 98

OJ C 205/3, 1 7 98

OJ C 154/5, 19 5 98

OJ C 162/4, 28 5 98

OJ C 272/5, 1 9 98

OJ C 188/4, 17 6 98

OJ C 218/5, 14 7 98

OJ C 211/3, 7 7 98

OJ C 353/9, 19.11.98

OJ C 246/4, 6 8 98

OJ C 212/5, 8 7 98

OJ C 181/3, 12 6 98

OJ C 212/5, 8 7 98

OJ C 212/6, 8 7 98

OJ C 211/17, 7 7 98

OJ C 307/5, 7 10 98

OJ C 208/2, 4 7 98

IV/M.1177

BELGACOM / TELE DANMARK / TULIP

19/05/98

OJ C 213/3, 9 7 98

IV/M.1121

ALCATEL / THOMSON SA — THOMSON CSF 25/05/98

OJ C 272/6, 1 9 98

IV/M.1158

ELF ATOCHEM / ATOHAAS

IV/M.1169

EDFI / GRANINGE

IV/M.1170

DAN TRANSPORT / INTER FORWARD

IV/M.1060

VENDEX / BIJENKORF

IV/M.1160

GKN / BRAMBLES / SKP

IV/M.1148

STET / GET / MADRID CABLE

IV/M.1161

ALCOA / ALUMAX

IV/M.1175 MAGNA / STEYR

IV/M.1080

THYSSEN / KRUPP

IV/M.931

NESTE / IVO

IV/M.1179

TECH DATA / COMPUTER 2000

IV/M.1154 MC DERMOTT / ETPM
(DECONCENTRATION)

25/05/98

25/05/98

25/05/98

26/05/98

26/05/98

28/05/98

28/05/98

28/05/98

2/06/98

2/06/98

3/06/98

4/06/98

OJ C 225/3, 18 7 98

OJ C 186/6, 16 6 98

OJ C 192/4, 19 6 98

OJ C 280/5, 9 9 98

OJ C 177/14, 10 6 98

OJ C 218/5, 14 7 98

OJ C 307/5, 7 10 98

OJ C 268/8, 27 8 98

OJ C 252/7, 11 8 98

OJ C 218/4, 14 7 98

OJ C 218/3, 14 7 98

COMPETITION REPORT 1998

MERGER CONTROL 201

IV/M.1185

ALCATEL / THOMSON CSF — SCS

IV/M.1006

UPM-KYMMENE / APRIL

IV/M.1162

IV/M.1174

GE / BAYER
RWE — DEA / HU¨ LS

IV/M.1195

SIEBE / EUROTHERM

IV/M.1193

AXA / ROYALE BELGE

IV/M.1200

ARCO / UNION TEXAS

IV/M.1004

BLOHM + VOSS / LISNAVE

IV/M.1159

SNECMA / MESSIER DOWTY

IV/M.1186

GEAL / CREA / CGE

IV/M.1188

KINGFISHER / WEGERT / PROMARKT

IV/M.1153

KRAUSS-MAFFEI / WEGMANN

IV/M.1206

DRUM HOLDINGS / NATWEST EQUITY /
CVC

IV/M.1184

TRAVELERS / CITICORP

IV/M.1192

CHS ELECTRONICS / METROLOGIE
INTERNATIONAL

IV/M.1201

DUPONT / MERCK

IV/M.1172

FORTIS AG / GENERALE BANK

IV/M.1194

SGB / FORTIS AG

IV/M.1196

IV/M.1150

JOHNSON CONTROLS / BECKER
SCHWEIZER RU¨ CK / NCM

IV/M.1168

DHL / DEUTSCHE POST

IV/M.1129

COMMERCIAL UNION / BERLINISCHE
LEBENSVERSICHERUNG AG

IV/M.1165

LUFTHANSA / MENZIES / LCC

IV/M.1182

AKZO NOBEL / COURTAULDS

IV/M.1211 MAGNETI MARELLI / TELESPAZIO

IV/M.1198

BAE / SAAB

IV/M.1218

PACKAGING INTERNATIONAL BV / NV
KONINKLIJKE KNP BT

IV/M.1124 MAERSK AIR / LFV HOLDINGS

IV/M.1140

HALLIBURTON / DRESSER

IV/M.1207

DANA / ECHLIN

IV/M.1137

EXXON / SHELL

IV/M.1208

JEFFERSON SMURFIT / STONE
CONTAINERS

IV/M.308

KALI + SALZ / MDK / TREUHAND

IV/M.1199

UTA TELEKOM AG / SWISSCOM

IV/M.1157

SKANSKA / SCANCEM (See IV/M.695)

IV/M.1189

TEKSID / NORSK HYDRO PRODUKSJON /
MERIDIAN

IV/M.1232

INGRAM / MACROTRON

IV/M.1126

CARGILL / VANDEMOORTELE

IV/M.1224

TPM / WOOD GROUP

IV/M.1227

CARGILL / VANDEMOORTELE — JV

COMPETITION REPORT 1998

4/06/98

11/06/98

11/06/98

11/06/98

11/06/98

12/06/98

15/06/98

18/06/98

18/06/98

18/06/98

18/06/98

19/06/98

19/06/98

23/06/98

23/06/98

23/06/98

24/06/98

24/06/98

24/06/98

26/06/98

26/06/98

30/06/98

30/06/98

30/06/98

2/07/98

3/07/98

3/07/98

6/07/98

6/07/98

6/07/98

8/07/98

8/07/98

9/07/98

13/07/98

14/07/98

17/07/98

17/07/98

20/07/98

20/07/98

20/07/98

OJ C 272/5, 1 9 98

OJ C 219/9, 15 7 98

OJ C 218/6, 14 7 98

OJ C 212/6, 8 7 98

OJ C 239/17, 30 7 98

OJ C 16/8, 21 1 99

OJ C 239/18, 30 7 98

OJ C 213/3, 9 7 98

OJ C 218/4, 14 7 98

OJ C 342/3, 10.11.98

OJ C 217/8, 11 7 98

OJ C 239/17, 30 7 98

OJ C 394/20, 17.12.98

OJ C 222/14, 16 7 98

OJ C 253/3, 12 8 98

OJ C 336/11, 4 11 98

OJ C 267/18, 26 8 98

OJ C 280/5, 9 9 98

OJ C 307/3, 7 10 98

OJ C 236/9, 28 7 98

OJ C 238/8, 29 7 98

OJ C 265/28, 22 8 98

OJ C 286/5, 15 9 98

OJ C 41/3, 16 2 99

OJ C 253/4, 12 8 98

OJ C 239/16, 30 7 98

OJ C 267/18, 26 8 98

OJ C 252/9, 11 8 98

OJ C 252/8, 11 8 98

OJ C 275/3, 3 9 98

OJ C 288/4, 16 9 98

OJ C 228/4, 21 7 98

OJ C 252/7, 11 8 98

OJ C 252/9, 11 8 98

OJ C 253/4, 12 8 98

OJ C 280/4, 9 9 98

202 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

IV/M.1204

DAIMLER — BENZ / CHRYSLER

IV/M.1163

BOREALIS / IPIC / OMV / PCD

IV/M.1226

GEC / GPTH

IV/M.1243

ALLIANCE UNICHEM PLC / SAFA
GALENICA
SA

IV/M.1245

VALEO / ITT INDUSTRIES

IV/M.1251

PARTICITEL INTERNATIONAL /
CABLEUROPA

IV/M.1225

*** ENSO / STORA

IV/M.1097 WACKER / AIR PRODUCTS

IV/M.1231

IVO / STOCKHOLM ENERGI

IV/M.1223

TYCO INTERNATIONAL / US SURGICAL
CORP.

IV/M.1230

GLAVERBEL / PPG

IV/M.1190

AMOCO / REPSOL / IBERDROLA / ENTE
VASCO
DE LA ENERGI

IV/M.1239

RWE-DEA / FUCHS PETROLUB

IV/M.1273

CREDIT SUISSE / NIKKO / MSA

IV/M.1135

ELF / TEXACO / ANTIFREZE JV

IV/M.1257

CHS ELECTRONICS / CHS FAR EAST

IV/M.1244

BANK AMERICA / NATIONSBANK

IV/M.1248

KINGFISHER / BUT

IV/M.1263

NORTEL / BAY

IV/M.1265

CHS / VOBIS

IV/M.1260

EDON / ROVA / RECO

IV/M.1280

KKR / WILLIS CORROON

IV/M.1283

VOLKSWAGEN / ROLLS-ROYCE /
COSWORTH

IV/M.1253

PARIBAS / JDC / GERFLOR

IV/M.1275

HAVAS / BERTELSMANN / DOYMA

IV/M.1258

GEC MARCONI / ALENIA

IV/M.1242

PARIBAS / ECUREUIL-VIE / ICD

IV/M.1289

HARBERT MANAGEMENT / DB / BANKERS
TRUST / SPP / O¨ HMA

IV/M.1270

KNP BT / ALLIUM

IV/M.1276

NEC / PBN

IV/M.1279

CDE / LA HENIN

IV/M.1291

BOSCH / ZF FRIEDRICHSHAFEN

IV/M.1296

NORSKE SKOG / ABITIBI / HANSOL

IV/M.1292

CONTINENTAL / ITT

IV/M.1300

ALLIED SIGNAL / AMP

IV/M.1306

BERKSHIRE HATHAWAY / GENERAL RE

IV/M.1219

SEAGRAM / POLYGRAM

IV/M.1262

CEBECO / PLUKON

22/07/98

24/07/98

27/07/98

27/07/98

30/07/98

30/07/98

31/07/98

4/08/98

5/08/98

7/08/98

7/08/98

11/08/98

11/08/98

14/08/98

18/08/98

18/08/98

21/08/98

21/08/98

21/08/98

21/08/98

24/08/98

24/08/98

24/08/98

27/08/98

27/08/98

28/08/98

31/08/98

31/08/98

3/09/98

3/09/98

3/09/98

14/09/98

14/09/98

18/09/98

18/09/98

18/09/98

21/09/98

24/09/98

OJ C 252/8, 11 8 98

OJ C 280/3, 9 9 98

OJ C 252/10, 11 8 98

OJ C 280/4, 9 9 98

OJ C 288/5, 16 9 98

OJ C 268/8, 27 8 98

OJ C 324/5, 22.10.98

OJ C 288/4, 16 9 98

OJ C 282/5, 11 9 98

OJ C 282/2, 11 9 98

OJ C 288/3, 16 9 98

OJ C 282/2, 11 9 98

OJ C 306/11, 6 10 98

OJ C 16/8, 21 1 99

OJ C 289/10, 17 9 98

OJ C 392/10, 16.12.98

OJ C 403/3, 23.12.98

OJ C 281/8, 10 9 98

OJ C 289/10, 17 9 98

OJ C 369/9, 28.11.98

OJ C 385/4, 11.12.98

OJ C 286/5, 15 9 98

OJ C 288/3, 16 9 98

OJ C 306/12, 6 10 98

OJ C 288/5, 16 9 98

OJ C 307/3, 7 10 98

OJ C 344/7, 12.11.98

OJ C 309/8, 9 10 98

OJ C 306/11, 6 10 98

OJ C 385/4, 11.12.98

OJ C 309/7, 9 10 98

OJ C 338/10, 6 11 98

OJ C 308/9, 9 10 98

COMPETITION REPORT 1998

MERGER CONTROL 203

IV/M.1229

AMERICAN HOME PRODUCTS /
MONSANTO

IV/M.1297

LA RINASCENTE / COLMARK

IV/M.1221

REWE / MEINL

IV/M.1203

USINOR / FINARVEDI (See ECSC.1282)

IV/M.1271

PIRELLI / SIEMENS

IV/M.1308 WOLSELEY / HALL

IV/M.1304

HERCULES / BETZDEARBORN

IV/M.1259

VOEST ALPINE STAHL / VOSSLOH : VAE

IV/M.1314

FRAMATOME / BERG ELECTRONICS

IV/M.969

A.P. MOLLER (Art. 14 proc.)

IV/M.1202

RENAULT / IVECO

IV/M.1246

LHZ / CARL ZEISS

IV/M.1298

KODAK / IMATION

IV/M.1307 MARSH & McLENNAN / SEDGWICK

IV/M.1319

SMURFIT CONDAT / CVC

28/09/98

28/09/98

28/09/98

29/09/98

30/09/98

30/09/98

5/10/98

6/10/98

8/10/98

12/10/98

22/10/98

23/10/98

23/10/98

23/10/98

23/10/98

OJ C 303/8, 2 10 98

OJ C 336/11, 4 11 98

OJ C 336/10, 4 11 98

OJ C 394/20, 17.12.98

OJ C 336/10, 4 11 98

OJ C 384/9, 10.12.98

OJ C 331/21, 29.10.98

OJ C 17/2, 22 1 99

OJ C 372/10, 2 12 98

OJ C 361/15, 24.11.98

IV/M.1254

DEXIA / ARGENTARIA / CREDITO LOCAL

28/10/98

OJ C 4/8, 7 1 99

IV/M.1286

JOHNSON & JOHNSON / DEPUY

IV/M.1282

RETEVISION MOVIL

IV/M.1301

TEXACO / CHEVRON

IV/M.1318

CONSTRUCTOR / DEXION

28/10/98

30/10/98

30/10/98

30/10/98

OJ C 385/5, 11.12.98

IV/M.1313

DANISH CROWN / VESTJYSKE SLAGTERIER 6/11/98

OJ C 345/3, 13.11.98

IV/M.1326

TOYOTA / DAIHATSU

6/11/98

OJ C 355/32, 20.11.98

IV/M.1269

LSG / ONEXCORP / SKY CHEFS / CATERAIR 9/11/98

IV/M.1303

ADEG / EDEKA

IV/M.1331

ING / BHF

IV/M.1325

BAYER / CHIRON DIAGNOSTICS

IV/M.1334

VOLVO AERO / ABB / TURBOGEN

IV/M.1114

SAP / HEIDELBERGER

IV/M.1287

ELENAC / HOECHST

IV/M.1337

KOCH INDUSTRIES / SABA / HOECHST

IV/M.1359

ROYALE BELGE / ANHYP

IV/M.1327

NC / CANAL + / CDPQ / BANK AMERICA

IV/M.1252

AT&T/TCI

IV/M.1320

IV/M.1361

LGV / DORANA / EMTEC
RAST — UND TANKSTA¨ TTEN AG

IV/M.1305

EUROSTAR

IV/M.1336
IV/M.1356 METSA¨ -SERLA / UK PAPER

DEUTSCHE BANK / VIANOVA

IV/M.1293

BP / AMOCO

IV/M.1335

DANA / GLACIER VANDERVELL

IV/M.1342

KNORR-BREMSE / BOSCH

IV/M.1171

PTA / TELECOM ITALIA / TELEKOM
AUSTRIA

9/11/98

16/11/98

17/11/98

17/11/98

23/11/98

24/11/98

24/11/98

27/11/98

3/12/98

4/12/98

7/12/98

7/12/98

9/12/98

9/12/98

9/12/98

11/12/98

11/12/98

14/12/98

16/12/98

OJ C 385/5, 11.12.98

OJ C 19/22, 23 1 99

OJ C 24/25, 29 1 99

OJ C 405/15, 24.12.98

OJ C 400/6, 22.12.98

OJ C 34/6, 9 2 99

OJ C 11/4, 15 1 99

OJ C 29/22, 4 2 99

OJ C 32/5, 6 2 99

OJ C 25/18, 30 1 99

OJ C 32/6, 6 2 99

COMPETITION REPORT 1998

OJ C 17/2, 22 1 99

OJ C 36/16, 10 2 99

OJ C 32/5, 6 2 99

art. 6 1.(b) without

16/12/98

17/12/98

18/12/98

18/12/98

21/12/98

21/12/98

21/12/98

21/12/98

21/12/98

22/12/98

26/05/98

27/05/98

22/06/98

3/07/98

8/07/98

204 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

IV/M.1339

ABB / ELSAG BAILEY

IV/M.1333

KINGFISHER / CASTORAMA

IV/M.1235

NEW HOLLAND / ORENSTEIN & KOPPEL

IV/M.1372

IV/M.1256

HUGH BAIRD / SCOTTISH & NEWCASTLE
OK EKONOMISK FO¨ RENING / KUWAIT
PETROLEUM SVERIGE AB

IV/M.1332

THOMSON / LUCAS

IV/M.1340

BNP / DRESDNER BANK — AUSTRIAN JV

IV/M.1354

SAIR GROUP / LTU

IV/M.1368

FORD / ZF

IV/M.1370

PEUGEOT / CREDIPAR

JV.2

JV.1

JV.2

JV.7

JV.3

JV.5

JV.6

JV.4

JV.7

JV.9

JV.11

JV.8

JV.14

JV.15

JV.13

JV.12

ENEL / FT / DT

TELIA / TELENOR / SCHIBSTED

ENEL / FT / DT

TELIA / SONERA / LITHUANIAN
TELECOMMUNICATIONS

BT / AIRTEL

CEGETEL / CANAL + / AOL / BERTELSMANN 4/08/98

ERICSSON / NOKIA / PSION

VIAG / ORANGE UK

TELIA / SONERA / LITHUANIAN
TELECOMMUNICATIONS

11/08/98

11/08/98

14/08/98

TELIA / SONERA / MOTOROLA / OMNITEL

18/08/98

@ HOME BENELUX B.V.

DEUTSCHE TELEKOM / SPRINGER /
HOLTZBRINK / INFOSEEK / WEBSEEK

PANAGORA / DG BANK

BT / AT&T

15/09/98

28/09/98

26/11/98

3/12/98

WINTERSHALL / ENBW / MVV / WV / DEO

11/12/98

ERICSSON / NOKIA / PSION / MOTOROLA

22/12/98

1.2. Decisions under Article 8 of Council Regulation (EEC) No 4064/89

Case No.

Name

M.950

M.986

M.970

M.1016

M.993

M.1027

HOFFMANN — LA ROCHE / BOEHRINGER
MANNHEIM

AGFA-GEVAERT / DU PONT

TKS / ITW SIGNODE / TITAN

PRICE WATERHOUSE / COOPERS &
LYBRAND

BERTELSMANN / KIRCH / PREMIERE

DEUTSCHE TELEKOM / BETARESEARCH

Date of
Decision

4/02/98

11/02/98

6/05/98

20/05/98

27/05/98

27/05/98

Published in OJ

COMPETITION REPORT 1998

M.1069

M.969

M.1157

M.1225

WORLDCOM /MCI (II)

A. P. MOLLER (Art. 14 proc.)

SKANSKA / SCANCEM ( See IV/M.695)

ENSO / STORA

8/07/98

12/10/98

11/11/98

25/11/98

2. Decisions pursuant to Article 66 of the ECSC Treaty

Case No.

Name

ECSC.1260

ECSC.1262

ECSC.1264

ECSC.1278

ECSC.1269

ECSC.1252

ECSC.1286

ECSC.1282

ECSC.1289

ECSC.1272

USINOR / FAFER

MAYER PARRY / ROBINSON GROUP

ACERALIA / ARISTRAIN (see M.1076)

THYSSEN / KRUPP (See IV/M.1080)

SOLLAC / ACERALIA / SOLMED

RAG / SAARBERGWERKE / PREUSSAG
ANTHRAZIT

EWS / KRUPP HOESCH ROHSTOFF + RECYCLING

USINOR / FINARVEDI (See IV/M.1203)

BS / LAYDE

BRITISH STEEL / EUROPIPE (See IV/M.1014)

E — Press releases

MERGER CONTROL 205

Date of
decision

19/01/98

9/02/98

20/02/98

2/06/98

10/06/98

29/07/98

18/09/98

29/09/98

7/12/98

14/12/98

1. Decisions under Articles 6 and 8 of Council Regulation (EEC) No 4064/89

1.1. Decisions under Article 6(1) of Council Regulation (EEC) No 4064/89

Reference

IP/98/38

Date

15.01.98

IP/98/46

19.01.98

IP/98/47

19.01.98

IP/98/48/

19.01.98

IP/98/49

19.01.98

IP/98/50

19.01.98

IP/98/51

19.01.98

IP/98/57

20.01.98

IP/98/73

IP/98/74

22.01.98

22.01.98

COMPETITION REPORT 1998

Subject

The Commission approves the acquisition by ARBED /ACERALLA of
the ARISTRAIN STEEL group

Commission clears acquisition of parts of PRO-Group by SPAR Handels
AG/ITM-Group

Commission clears acquisition of PFANNKUCH_Group by SPAR
Handels AG/ITM-Group

Commission clears the acquisition by Mannesmann of a controlling stake
in the Italian telecommunications operator INFOSTRADA

The Commission approves the creation of a joint venture between
Eastman Kodak and Sun Chemical in the sector of graphic arts

The Commission approves merger in information technology sector in
Denmark

Commission decides to open indepth investigations regarding the creation
of a joint venture between Wienerberger and Cremer & Breuer

The Commission authorises the acquisition by Usinor of control of
Fabrique de Fer de Charleroi

Commission approves a joint venture in the clinical sector

Commission to carry out detailed inquiry into proposed merger between
Price Waterhouse and Coopers & Lybrand

206 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

IP/98/77

22.01.98

IP/98/78

IP/98/83

23.01.98

26.01.98

IP/98/97

28.01.98

IP/98/98

29.01.98

IP/98/101

30.01.98

IP/98/102

30.01.98

IP/98/104

IP/98/105

30.01.98

30.01.98

IP/98/106

30.01.98

IP/98/107

30.01.98

IP/98/129

IP/98/130

05.02.98

05.02.98

IP/98/131

05.02.98

IP/98/132

05.02.98

IP/98/137

09.02.98

IP/98/138

09.02.98

IP/98/139

09.02.98

IP/98/152

12.02.98

IP/98/155

IP/98/156

IP/98/157

16.02.98

17.02.98

17.02.98

IP/98/158

17.02.98

IP/98/159

IP/98/166

IP/98/181

17.02.98

18.02.98

24.02.98

IP/98/201

27.02.98

IP/98/202

27.02.98

IP/98/205

02.03.98

Commission opens indepth investigation in the BERTELSMANN /
KIRCH /PREMIERE case

Commission clears joint venture between Dow Jones and NBC

The Commission approves the acquisition of sole control over Banque
Bruxelles Lambert/Bank Brussel Lambert by the ING GROEP

The Commission authorises two concentrations affecting the situation of
control in CABLE I TELEVISIO DE CATALUNYA (a cable operator in
Catalonia)

Commission clears the acquisition of Matra BAe Dynamics of a 30 %
interest in the missile business of Daimler Benz Aerospace

Commission approves joint venture between DFO and Scadlines to merge
their Baltic Sea ferry operations

The Commission approves the acquisition of sole control over Banque
Paribas Nederland by Banque Paribas Belgique

Commission clears the take over of Bertrand Faure by Ecia

Commission clears the computer training joint venture “Futurekids
Deutschland” between Burda and Bertelsmann

Commission clears acquisition of Klo¨ ckner Chemiehandel GmbH by
Metallgesellschaft AG

Commission clears acquisition of DEUTSCHE WAGGONBAU AG by
BOMBARDIER

The Commission approves the acquisition of Fritidsresor by Thomson

Commission clears the acquisition of Francorosso by Alpitour under the
joint control of IFIL and the Isoardi family

The Commission approves the acquisition by Stinnes of BTL from
Finnlines

Commission to carry out detailed inquiry into proposed merger between
KPMG and Ernst & Young

Commission clears the acquisition of Catteau by Promode` s in the retail
distribution sector

Commission approves the acquisition by PROMODES of SIMAGO, S.A.
in the sector of the retail grocery in Spain

The Commission approves the acquisition of sole control over HAMBROS
BANK by Socie´ te´ Ge´ ne´ rale

Commission authorises the acquisition of the automotive components
activities of Philips by Mannesmann

Commission authorises the acquisition of Hu¨ ls Styrene Business by BP

Commission clears merger in private medical insurance

Commission clears the merger between Zu¨ rich and the financial services
business of B.A.T. Industries

Commission clears a concentration in local and regional passenger
transport sector

Commission clears the acquisition of San Pellegrino by Nestle´

The Commission fines Samsung for late notification of a concentration

The Commission approves Caterpillar’s acquisition of Perkins diesel
engine business

The Commission authorises the acquisition by British Steel of a part of the
capital of Europipe

Commission clears acquisition of ACTEBIS Holding GmbH by OTTO
Versand

Waste management: the UK group Shanks & McEwan enters the Belgian
market by acquiring some of the activities of the Suez-Lyonnaise des Eaux
group

COMPETITION REPORT 1998

MERGER CONTROL 207

Commission clears the take over of Havas Interme´ diation by the group
CLT-UFA

Commission to carry out detailed inquiry into proposed merger between
WorldCom and MCI

Commission clears acquisition of Dutch real estate bank by the German
Bayerische Vereinsbank

Com mis sion a ppro ves
Bankgesellschaft (SBG) and Schweizerischer Bankverein (SBV)

the mer ge r be twe en Sc hwe iz er is che

Commission approves joint venture TRANSRAPID between THYSSEN,
ADTRANZ and SIEMENS to merge their magnetic leviation train
activities

Wolters Kluwer and reed Elsevier have announced that following the
objections of the Commission, they have abandoned their projected
merger

Commission clears the take over of GUILBERT by the group PINAULT-
PRINTEMPS-REDOUTE

Commission has decided to refer partially to the Italian authorities the
proposed acquisition of GS by PROMODES and SCHEMAVENTUNO
for a detailed investigation. Commission has also cleared the rest of the
operation

The Commission approves merger in foundry equipment sector

Commission approves joint venture in the modern retail sector (hard
discount) in Italy

The Commission approves the creation of a joint venture between
CEREOL/EBS and SOFIPROTEOL in the sector of oilseed crushing
and oil production

Commission authorises the acquisition of a participation in ESTAG by
EDF

Commission has approved the creation of a joint venture between Sanofi
and Bristol Myers Squibb for two new pharmaceuticals

Commission clears a concentration between NORTEL and NORWEB in
the telecommunications sector

Commission clears acquisition of Digital by Compaq

Commission clears hotel groups merger

Commission clears UK plant hire joint venture by Tarmac and Bovis

Commission clears UK music and bookshop joint venture

Commission approves merger between ROYAL BANK OF CANADA
(RBC) and BANK OF MONTREAL (BMO)

Commission approves Nestle´ ’s acquisition of the Spillers pet food business
from Dalgety

Commission decides that Deutag and Ilbau aspahlt plant joint venture is
not a merger

Commission approves the formation of a joint venture between ARAG
and Winterthur in Switzerland

The Commission approves acquisition of Novalis and Nyltech by
Rhodianyl, subsidiary of Rhoˆ ne-Poulenc

Wienerberger and Cremer & Breuer withdraw their notification of
creation of a joint venture

Commission clears the acquisition of BTR PACKAGING by OWENS-
ILLINOIS with undertakings submitted by OWENS-ILLINOIS

The Commission clears take over of Royal Nederland Verzekeringsgroep
by assurances Ge´ ne´rales de France

Commission clears acquisition of AMB, GPA and Proxima by
Assicurazioni Generali S.p.A.

IP/98/206

02.03.98

IP/98/213

04.03.98

IP/98/215

04.03.98

IP/98/216

05.03.98

IP/98/226

10.03.98

IP/98/230

10.03.98

IP/98/243

11.03.98

IP/98/244

11.03.98

IP/98/248

IP/98/249

12.03.98

12.03.98

IP/98/252

13.03.98

IP/98/261

18.03.98

IP/98/264

19.03.98

IP/98/265

19.03.98

IP/98/268

IP/98/269

IP/98/293

IP/98/294

IP/98/318

24.03.98

24.03.98

26.03.98

26.03.98

03.04.98

IP/98/326

03.04.98

IP/98/332

06.04.98

IP/98/362

17.04.98

IP/98/363

17.04.98

IP/98/366

21.04.98

IP/98/369

23.04.98

IP/98/370

24.04.98

IP/98/371

24.04.98

COMPETITION REPORT 1998

208 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

IP/98/389

29.04.98

IP/98/390

29.04.98

IP/98/391

30.04.98

IP/98/414

07.05.98

IP/98/419

11.05.98

IP/98/420

11.05.98

IP/98/439

15.05.98

IP/98/448

IP/98/464

19.05.98

26.05.98

IP/98/465

28.05.98

IP/98/466

28.05.98

IP/98/467

28.05.98

IP/98/468

28.05.98

IP/98/476

28.05.98

IP/98/478

28.05.98

IP/98/479

IP/98/480

IP/98/481

28.05.98

28.05.98

28.05.98

IP/98/483

29.05.98

IP/98/484

02.06.98

IP/98/491

02.06.98

IP/98/493

02.06.98

IP/98/494

02.06.98

IP/98/503

IP/98/504

IP/98/508

IP/98/509

03.06.98

03.06.98

04.06.98

05.06.98

IP/98/511

08.06.98

IP/98/528

12.06.98

Commission approves the GE SEACO joint venture between GE Capital
Services and Sea Containers Ltd

Commission approves the buy-out of BTR’s Formica business by three
investment banks

The Comission approves the creation of a joint venture between Banque
Bruxelles Lambert and American Express, in the sector of business travel
in Belgium and Luxembourg

Commission approves the merger of Commercial Union and General
Accident

Commission clears take over of Assurances Ge´ne´ rales de France by
Allianz subject to the fulfilment of undertakings

Commission clears the acquisition of Gist Brocades by DSM N.V. under
the merger regulation

Commission approves acquisition by KOCH of the oil refinery activities of
EUROSPLITTER

Commissioon approves acquisition by GEC Alstholm of Cegelec

The Commission authorises the acquisition of joint control of Thomson
C.S.F. by Alcatel and Thomson SA

Commission authorises a merger in the Belgian banking and insurance
sectors between Kredietbank/Cera/Fidelitas/ABB

Commission approves new company in the mobile telecommunications
sector in the Netherlands

Commission clears acquisition by VAW Aluminium of the aluminium
business of Reynolds

Commission clears the acquisition of sole control by SHV Holdings N.V. of
the scrap business of Thyssen Klo¨ ckner Recycling GmbH

Commission clears joint venture for the provision of Internet services in
Sweden

Commission clears a joint venture between BT, ESB and AIG to provide
telecommunications services in Ireland

Commission approves a joint venture in the Finnish credit insurance sector

Commission clears concentration in the Swedish electricity sector

The European commission has authorised the acquisition of Atohaas by
Atochem

Commission approves acquisition of Steyr group by automobile supplier
Magna

Commission clears acquisition by Telecom Italia, Endesa and Union
Electrica Fenosa of Telecommunications Madrid (CYC)

Commission approves the acquisition of Inter Forward of Sweden by Dan
Transport of Denmark

Commission clears the acquisition of Alumax by world aluminium leader
Alcoa

Commission refers the Decision on the Merger between Vendex and KBB
to the Dutch Competition Authorities

Commission approves concentration between IVO and NESTE

Commission clears THYSSEN / KRUPP merger

Commission approves acquisition by TECH DATA of COMPUTER 2000

The Commission authorises the creation of a joint venture between
ALCATEL and THOMSON in the satellites sector

Commission approves the acquisition by ETPM of assets from its joint
venture with J. Ray

Commission clears the venture between BAYER AG and GENERAL
ELECTRIC in silicones sector

COMPETITION REPORT 1998

MERGER CONTROL 209

Commission approves two joint ventures in the fine paper sector

Commission clears merger in process control equipment

Commission clears the acquisition by Arco of Union Texas

Commission authorises RWE-DEA’s acquisition of the surfactants and fat
business of Hu¨ ls AG

Commission approves the acquisition of sole control of the insurance
company Royale Belge by the AXA-UAP group

Commission approves the take-over by Snecma of Messier Dowty and IT
Group’s overhaul services business

Commission approves Kingfischer’s acquisition of the German electrical
retailers Wegert and ProMarkt

Commission approves CVC’s investment in Drum Holdings

Commission partially refers Krauss-Maffei/Wegmann case to the
Bundeskartellamt and otherwise clears the planned concentration

Commission clears telecommunications joint venture in Italy

Commission clears the acquisition of sole control of DMPC by DuPont

Commission approves acquisition by CHS of Metrologie

Commission clears CITIGROUP merger

The Commission authorised the creation of a joint venture between the
Commune of Lucca, CREA and CGE, in water supply sector

Commission approves increase in Socie´ te´ Ge´ne´rale’s holding in Fortis AG

Commission clears the acquisition of G-Bank by FORTIS

Commission clears the acquisition by Johnson Controls of Becker

Commission approves Deutsche Post’s participation in DHL

Commission clears take-over of the Dutch insurance Company NCM by
Schweizerische Ru¨ ck

Commission approves London airports cargo handling joint venture

Commission clears the acquisition of COURTAULDS by AKZO NOBEL

Commission clears take-over of Berlinische Lebensversicherung AG by
Commercial Union

Commission approves Magneti Marelli’s stake in Comnet

Commission approves CVC’s and CINVEN’s investment in KNP BT

Commission clears joint venture between MAERSK AIR and
LUFTFARTSVERKET

La Commission autorise la cre´ ation d’une entreprise commune entre
MAERSK AIR et LUFTFARTSVERKET dans le secteur des services
d’escale

Commission clears the merger of Halliburton and Dresser in the area of
oilfield services

Commission authorizes the acquisition of Echlin Inc. by Dana Corp.

Commission gives conditional clearance to Exxon Shell joint venture

Commission clears concentration between Kali+Salz/MdK/Treuhand after
a new examination
Commission approves the acquisition of UTA Telekom by VTO¨ B and
Swisscom

The Commission opens detailed investigation into Skanska’s acquisition of
Scancem

Commission approves the acquisition of Macrotron by Ingram Micro Inc.

Commission clears Daimler-Benz/Crysler merger

IP/98/529

IP/98/527

IP/98/533

IP/98/526

12.06.98

12.06.98

16.06.98

12.06.98

IP/98/541

18.06.98

IP/98/549

19.06.98

IP/98/550

19.06.98

IP/98/552

IP/98/555

IP/98/557

IP/98/566

IP/98/567

IP/98/568

IP/98/571

IP/98/572

IP/98/573

IP/98/576

IP/98/583

IP/98/584

IP/98/601

IP/98/608

IP/98/609

IP/98/624

IP/98/633

IP/98/636

22.06.98

23.06.98

23.06.98

24.06.98

25.06.98

24.06.98

25.06.98

26.06.98

26.06.98

26.06.98

30.06.98

30.06.98

01.07.98

02.07.98

02.07.98

03.07.98

06.07.98

07.07.98

IP/98/642

08.07.98

IP/98/643

08.07.98

IP/98/644

IP/98/648

IP/98/655

08.07.98

09.07.98

13.07.98

IP/98/662

14.07.98

IP/98/668

15.07.98

IP/98/674

IP/98/696

17.07.98

23.07.98

COMPETITION REPORT 1998

210 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

IP/98/697

IP/98/699

23.07.98

24.07.98

IP/98/700

24.07.98

IP/98/712

IP/98/735

IP/98/742

IP/98/747

IP/98/748

28.07.98

29.07.98

30.07.98

31.07.98

31.07.98

IP/98/749

03.08.98

IP/98/754

05.08.98

IP/98/756

IP/98/758

06.08.98

10.08.98

IP/98/759

11.08.98

IP/98/764

14.08.98

IP/98/765

14.08.98

IP/98/766

14.08.98

IP/98/769

18.08.98

IP/98/773

IP/98/775

21.08.98

24.08.98

IP/98/776

25.08.98

IP/98/777

25.08.98

IP/98/779

25.08.98

IP/98/780

27.08.98

IP/98/782

IP/98/785

IP/98/791

IP/98/793

IP/98/800

IP/98/801

IP/98/821

IP/98/822

28.08.98

01.09.98

04.09.98

08.09.98

15.08.98

15.09.98

21.09.98

21.09.98

Commission clears joint control of Teksid and Norsk Hydro over Meridian

The Commission authorizes the creation of a joint venture between TPM
and TES in the industrial gas turbine sector

The Commission approves the operation between CARGILL Inc. and n.v.
VANDEMOORTELE International, in the sector of edible oil

Commission approves merger in the olefins and polyolefins sector

Commission clears acquisition of control by Alliance Unichem of SAFA

Commission refers to the Italian Authorities the acquisition of joint control
of Unifarma Distribuzione by Alliance Unichem

Commission approves acquisition by Valeo of part of ITT Industries

Commission clears the acquisition of joint control in Cableuropa by Caisse
de De´poˆ t et Placement de Quebec

Commission opens an in-depth enquiry into the merger between Enso and
Stora

Commission clears joint venture between Wacker and Air Products in the
field of dispersions and powders

Commission approves Swedish electricity merger

Commission approves acquisition of United States surgical Corp. by Tyco
LTD

Commission authorizes Glaverbel’s acquisition of the European float glass
business of PPG

Commission authorizes the creation of a joint venture by Fuchs Petrolub
and DEA

European Commission authorizes the creation of two joint ventures
between Amoco, Repsol, Iberdrola and Ente Vasco de la Energia

Commission gives green light to change of control of MSA Acquisitions
Co Ltd, owner of the UK-based ‘Roadchef’ Motorway Service Area
Business

Commission authorises the creation of a joint venture by ELF and
TEXACO in the field of engine coolants

Commission approves Kingfisher’s acquisition of the French retailer BUT

The Commission authorises the acquisition Bay Networks by Northern
Telecom

Commission clears take over of the Willis Corroon Group by KKR
Associates

Commission authorises the creation of a joint venture for the recycling of
plastics by Rova, Reko and Hanze

Commission clears the acquisition of Rolls-Royce/Bentley and Cosworth
by Volkswagen

Commission clears joint venture “Doyma” between Havas and
Bertelsmann

Commission approves Paribas’ and JDC’s investments in Gerflor group

Commission approves Parisbas’ and Ecureuil-Vie’s investements in the
joint venture ICD

Commission approves acquisition by KNP BT of Allium

Commission clears joint venture in the Swedish real estate sector

Commission clears a joint venture between ABITIBI CONSOLIDATED,
NORSKE SKOG and HANSOL PAPER

Commission authorizes a joint venture by Bosch and ZF Friedrichshafen

Commission clears Allied Signals public takeover bid of AMP

Commission clears takeover of GENERAL RE by BERKSHIRE
HATHAWAY

COMPETITION REPORT 1998

MERGER CONTROL 211

Commission authorizes the acquisition of POLYGRAM by SEAGRAM

Commission approves acquisition of ITT’s “breaks & chassis” business by
Continental

Commission opens in-depth enquiry into the proposed take over of Julius
Meinl AG by the Rewe Group

Commission approves merger between Italian retail groupes La
Rinascente and Colmark

Commission authorises merger in the poultry meat sector in the
Netherlands

Commission clears merger between American Home Products and
Montsanto following undertakings given by the parties

Commission approves Usinor’s participation in Finarvedi

Commission approves WOLESELEY’s take over of HALL & Co. in the
United Kingdom building merchants sector

Commission gives green light to acquisition by Pirelli of Siemens energy
cable business

Commission authorises the acquisition of joint control of VAE by VOEST
ALPINE and VOSSLOH

Commission gives green light
BETZDEARBORN

to acquisition by HERCULES of

Commission clears acquisition of Berg Electronics by Framatome in the
electronic connectors sector

La Commission approuve la mise en commun par IVECO et RENAULT
de leurs activite´ s respectives dans le domaine des autocars et autobus

Commission clears Marsh McLennan and Sedgwick merger

Commission gives green light to acquisition by KODAK of certain
IMATION imaging activities

Commission launches an in-depth enquiry into LHZ proposed joint
venture concerning earth information systems

Commission approves the acquisition of Banco Cre´dito Local (Spain) by
Dexia (France/Belgium) and Argentaria (Spain)

Commission authorises Johnson & Johnson acquisition over DePuy

Commission approves merger of Constructor group S.A. (Norway) with
Dexion Group Ltd (UK)

Commission approves joint venture between Texaco and Chevron (USA)

Commission authorises the creation of third Spanish mobile operator:
Retevision Movil S.A.

The Commission opens detailed investigation into the merger between the
two largest Danish slaughterhouses

Commission approves the acquisition by Edeka of joint control over
ADEG Austria

Commission authorises joint venture Arlington (USA)/Lufthansa
(Germany) to acquire control of “European Kitchens”

Commission clears acquisition of control of BHF (Germany) by ING (The
Netherlands)

Commission authorises take over of TurboGen Aktiebolag (Sweden)

Commission clears Bayer’s acquisition of Chiron Diagnostic’s “in vitro”
business

Commission approves joint venture between SAP and Heidelberger

Commission clears acquisition of Hoechst’s polythylene business by
Elenac

Commission authorises Koch Industries (US) and Saba (Mexico) to
acquire parts of Hoechst’s (Germany) polyester assets

IP/98/824

IP/98/829

22.09.98

24.09.98

IP/98/838

29.09.98

IP/98/839

29.09.98

IP/98/840

29.09.98

IP/98/841

28.09.98

IP/98/856

IP/98/862

01.10.98

02.10.98

IP/98/863

02.10.98

IP/98/869

07.10.98

IP/98/870

07.10.98

IP/98/880

09.10.98

IP/98/929

23.10.98

IP/98/931

IP/98/932

26.10.98

26.10.98

IP/98/933

26.10.98

IP/98/944

29.10.98

IP/98/945

IP/98/956

IP/98/961

IP/98/962

29.10.98

03.11.98

04.11.98

05.11.98

IP/98/968

06.11.98

IP/98/978

10.11.98

IP/98/979

10.11.98

IP/98/997

17.11.98

IP/98/1005

IP/98/1006

IP/98/1015

IP/98/1029

18.11.98

17.11.98

24.11.98

25.11.98

IP/98/1030

25.11.98

COMPETITION REPORT 1998

212 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

IP/98/1041

30.11.98

IP/98/1042

30.11.98

IP/98/1062

04.12.98

IP/98/1066

IP/98/1070

07.12.98

08.12.98

IP/98/1072

08.12.98

IP/98/1097

11.12.98

IP/98/1098

10.12.98

IP/98/1099

IP/98/1106

IP/98/1112

11.12.98

11.12.98

14.12.98

IP/98/1118

15.12.98

IP/98/1142

IP/98/1143

16.12.98

17.12.98

IP/98/1176

23.12.98

IP/98/1178

23.12.98

IP/98/1179

23.12.98

IP/98/1180

23.12.98

Commission approves joint venture between DG Bank (Germany) and
PanAgora (UK)

Commission approves acquisition of Anhyp Bank (Belgium) by Royale
Belge (Belgium)

Commission approves acquisition of Numericable (France) by Exante (US/
Canada) and Canal+ (France)

Commission clears merger between AT&T (US) and TCI (US)

Commission approves take over of Kohap Emtec Holding GmbH
(Germany) by Legal & general Group plc (UK)

Commission approves acquisition of Tank & Rast Ag by Lufthansa and
Allianz

Commission clears the creation of a joint venture to manage EUROSTAR
(UK) Ltd.

Commission agrees Metsa¨ -Serla (Finland) acquisition of paper production
business of UK Paper Ltd (United Kingdom)

Paribas/CDC/Beaufour/Schwabe operation not a merger

Commission clears BP/Amoco merger

Commission approves acquisition of Glacier Vandervell (US) by Dana
Corporation (US)

Commission approves the joint venture between Knorr-Bremse
(Germany) and Robert Bosch (Germany)

Commission authorises ABB’s acquisition of Elsag Bailey

Commission approves the participationof
TELEKOM AUSTRIA

the Italian TI-GROUP in

Commission clears joint venture between Lucas Varity (UK) and Thomson
(France)

Commission approves acquisition of Orenstein & Koppel (Germany) by
New Holland (Italy)

La Commission autorise la cre´ ation d’une entreprise commune entre
Kingfisher (GB) et Castorama (FR)

Commission clears joint venture between Hugh Baird & sons (UK),
Scottish & Newcastle plc and Bairds Malt Ltd. (UK)

1.2. Decisions under Article 8 of Council Regulation (EEC) No 4064/89

Reference

IP/98/103

Date

30.01.98

IP/98/121

04.02.98

IP/98/148

11.02.98

IP/98/407

06.05.98

IP/98/454

20.05.98

IP/98/477

27.05.98

IP/98/639

IP/98/982

08.07.98

11.11.98

Subject

Commission opens indepth investigation in the Deutsche Telekom / Beta
Research Case

The Commission clears the acquisition of Boehringer Mannheim by
Hofmann-La Roche under conditions and obligations

Commission approves acquisition by AGFA of Dupont’s activities in the
graphic arts sector, subject of conditions

The Commission approves a joint venture between Thyssen Krupp Stahl
and ITW Signode to produce strapping for packaging applications

Commission clears the merger between Price Waterhouse and Coopers &
Lybrand

Commission prohibits BERTELSMANN/KIRCH/PREMIERE and
DEUTSCHE TELEKOM/BETARESEARCH mergers

Commission clears WorldCom and MCI merger subject to conditions

The Commission approves Skanska’s acquisition of Scancem following
commitments

COMPETITION REPORT 1998

MERGER CONTROL 213

IP/98/1022

25.11.98

Commission clears Enso/Stora merger

F — Judgments of the Community courts

1. Court of First Instance

Case

T-133/95

Date

Judgment 1998-09-16

T-204/95 T-133/95

Judgment 1998-09-16

Parties

IECC v Commission

IECC v Commission

Field

Competition

Competition

T-327/94

Judgment 1998-05-14

SCA Holding v Commission

Competition

2. Court of Justice

Case

C-68/94

Date

Parties

Field

Judgment 1998-03-31

France v Commission

Competition

COMPETITION REPORT 1998

STATE AID 215

III — STATE AID

A — Overview of cases

1. Regional aid

Germany

a) Teleworking 62

On 25 February the Commission took a negative final decision on aid intensities for teleworking under
the 26th framework plan of the joint Federal Government/La¨nder scheme for improving regional
economic structures. The programme allowed investments for the creation of teleworking jobs to
receive aid at the intensity applicable in the area in which the investing company was situated, even if
the teleworkplace was located in an assisted area with a lower regional aid intensity ceiling. The
Commission considered this to be incompatible with the objectives of regional development aid. The
maximum aid intensity allowed for the investment creating the teleworking job should be subject to
the aid intensity ceiling applicable in the area where the job was created, even if there were a
technological and economic link with an employer in an area qualifying for higher aid intensities.

b) Amendment to Section 52(8) of the German Income Tax Act 63

On 21 January the Commission took a negative final decision on the insertion in Section 52(8) of the
German Income Tax Act of a provision amending Section 6(b) of the Act. The provision introduced a
special tax-relief measure applicable from 1996 to 1998 for the reinvestment of profits otherwise
subject to income tax in the equity capital base of firms having their registered office and central
administration in one of the new La¨nder or west Berlin and employing a maximum of 250 people. The
Commission found that the measure constituted state aid for firms in eastern Germany and Berlin
since its effect was to facilitate the acquisition of equity stakes in those firms. Investors would acquire
interests in the firms on more advantageous terms than would have been obtained without the
amendment. Given that the acquiring of stakes in these firms was not necessarily linked to new
investment, the aid had to be ranked as operating aid, which was not justifiable in west Berlin given its
Article 9287(3)(c) status. Furthermore, the measure was contrary to Articles 43 and 48 of the EC Treaty
(freedom of establishment) since it applied only to enterprises established in the regions specified.

c) KfW subsidised loan scheme to promote holdings in firms in North Rhine-Westphalia and

Saarland 64

On 18 February the Commission authorised a scheme aimed at making up for the shortage of risk
capital in the financial markets of the La¨nder of North Rhine-Westphalia and Saarland, where coal
subsidies had been significantly reduced. Under the scheme, the publicly owned bank Kreditanstalt fu¨ r
Wiederaufbau (KfW) might provide soft loans to any private intermediary (enterprise or natural
person) wishing to invest in enterprises in the above regions. The Commission decided that the scheme

62 C 52/97 (ex N 123/97).
63 C 16/97 (ex NN 9/96, ex N 881/95) (OJ L 212, 30.7.1998); Competition Policy Newsletter 2/98, p. 88; for the

initiation of proceedings see 1997 Competition Report, p. 209.

64 N 320/B/97 (OJ C 111, 9.4.1998).

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216 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

involved state aid in the form of capital injections in enterprises in the regions concerned. This aid
could be approved as regional aid under Article 87(3)(c) since it was linked to investment and
complied with the maximum intensities applicable in these regions. With regard to private
intermediaries, the Commission took note of the fact that the scheme was open to any type of
enterprise or any individual wishing to invest in the regions in question.

d) Extension of the eligibility of intangible property acquisition costs for large firms 65

On 6 May the Commission adopted a negative final decision on the deletion, under the 25th
framework plan of the joint Federal Government/La¨nder scheme, of the clause excluding intangible
property acquired by large firms from eligibility where such property accounted for more than 25% of
the cost of the investment. Contrary to what had already been decided for SMEs, this extension of the
base was incompatible with the common market inasmuch as it would have resulted in a substantial
increase in permissible regional aid for large firms, thereby neutralising the effect of the Commission’s
commitment to reducing aid intensities. The decision follows the new guidelines on regional aid. 66

e) Thu¨ ringer Industriebeteiligungs-Fonds 67

In a decision adopted on 27 July 1994 the Commission had authorised on certain conditions the
Thu¨ ringer Industriebeteiligungs-Fonds aid scheme, the purpose of which was to acquire shareholdings
in firms, including those in difficulty. Scrutiny of the annual reports on the scheme’s application having
revealed possible irregularities, the Commission decided on 9 December to request the German
Government to provide it with all such information as might be necessary for it to check whether the
aid had in fact been granted in the manner and on the terms laid down when it authorised the scheme
in 1994. The decision was based on the judgment of the Court of Justice of 5 October 1994 in the
Italgrani case (C-47/91).

f) Investment Allowance Act 1999 for the new German La¨ nder, including Berlin 68

On 9 December the Commission decided to initiate proceedings under Article 88(2) of the EC Treaty
in respect of part of the Investment Allowance Act 1999 for the new German La¨nder, including Berlin,
which covered a period of six years and had a budget of some ECU 15 billion. The Commission had
serious doubts about the compatibility with the common market of a number of the scheme’s
provisions, namely those on (1) operating aid (aid for replacement investment) in so far as it did not
observe the degressivity principle, (2) aid for initial investment for firms in Berlin, to the extent that it
was to be granted after 2000, (3) aid not in keeping with the multisectoral framework or the rules on
sensitive sectors, and (4) a retroactive increase in aid intensities. However, the Commission decided
not to object to the implementation of the scheme’s other provisions, although it proposed appropriate
measures to ensure their subsequent compatibility with the common market.

65 C 37/96 (ex N 186/96) (OJ L 316, 25.11.1998).
66 OJ C 74, 10.3.1998, point 4.6.
67 NN 120/98.
68 C 72/98 (ex N 702/97).

COMPETITION REPORT 1998

STATE AID 217

g) 27th framework plan of the joint Federal Government/La¨nder scheme for improving regional

economic structures69

On 22 December the Commission decided not to raise any objections to implementation of this
regional aid scheme as amended by the 27th framework plan, with the exception, however, of a new
provision concerning the granting of investment allowances in the context of a ‘sell and rent back’
operation, in respect of which it initiated proceedings under Article 88(2) of the EC Treaty. It
considered that the provision might contain an operating aid element which would be incompatible
with the common market. The scheme’s budget for 1998-2002 came to ECU 12 754.4 million.

h) Consolidation scheme of 20 July 1993 70 and loans scheme of 24 January 1996 71

The consolidation scheme of 20 July 1993 and the loans scheme of 24 January 1996 of the Land of
Thuringia were wrongly considered by the German authorities to be covered by the de minimis rule,
since the total amount of aid likely to be granted exceeded the authorised ceiling and since the
sensitive sectors were not excluded. The schemes were therefore state aid schemes caught by
Article 87(1) of the EC Treaty. The Commission had doubts about their compatibility with the
common market. The aid for firms in difficulty available under the two schemes did not comply with
the rules on the subject, and some of the aid provided under the 1996 scheme to healthy businesses
constituted operating aid and did not comply with the relevant provisions. The Commission therefore
decided on 22 December to initiate proceedings under Article 88(2) of the EC Treaty in respect of both
measures.

Greece

Law No 2601/98 on regional development 72

On 22 December the Commission decided to approve this Greek law on regional development laying
down the various types and intensities of regional aid which might be granted to companies according
to the areas in which they were located. Although the aid intensity ceiling applied at the time (75%)
would remain in force up to the end of 1999, the new law introduced significantly reduced authorised
aid ceilings and made a major adjustment between the various areas for after the end of 1999. The
Commission authorised the implementation of the law, having found it to be compatible with the new
guidelines on national regional aid. 73

69 C 84/98 (ex N 100/98).
70 C 85/98 (ex NN 106/98).
71 C 87/98 (ex NN 137/98).
72 NN 59/A/98, not yet published in the Official Journal.
73 OJ C 74, 10.3.1998.

COMPETITION REPORT 1998

218 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Spain

a) Castile-La Mancha 74

On 21 January the Commission authorised the amendment of a regional investment aid scheme to
promote R&D and assist SMEs in Castile-La Mancha. The annual budget
totalled some
ECU 21.06 million.

b) Mining — Andalusia 75

On 7 April the Commission authorised a regional aid scheme for developing the mining industry in
Andalusia. The scheme comprised investment aid and aid for R&D. The budget for 1998-99 was
ECU 32.08 million.

Netherlands

Aid for the construction of a hydrogen peroxide plant at Delfzijl 76

On 21 January the Commission decided to terminate Article 88(2) proceedings initiated in 1996 in
respect of part of the regional aid granted to FMC for the construction of a hydrogen peroxide plant at
Delfzijl, to the extent that the aid exceeded the authorised regional ceiling of 20% of investment costs.
In the course of the proceedings, the Commission noted that the ceiling had been exceeded by aid in
the form of grants and the sale of land at below market value amounting to a combined total of
ECU 2.85 million. The Commission therefore considered this aid to be incompatible with the common
market and ordered its repayment.

Austria

Regional aid map for 1999 77

On 28 October the Commission decided to renew the regional aid map for one year (1999), the only
amendments being to certain aid intensities. In accordance with point 6 of the new guidelines on
national regional aid, 78 the Austrian aid map for 1999 was one of the last maps to be examined on the
basis of the previously applicable regional aid rules, i.e. the method set out in the Commission’s 1988
notice. 79

74 N 266/97 (OJ C 103, 4.4.1998).
75 N 191/97 (OJ C 198, 24.6.1998).
76 C 41/96 (ex NN 182/95) (OJ L 171, 17.6.1998); Competition Policy Newsletter 2/98, page 89; for the initiation of

proceedings see 1996 Competition Report, p. 240.

77 N 482/98 (OJ C 396, 19.12.1998).
78 OJ C 74, 10.3.1998.
79 OJ C 212, 12.8.1988.

COMPETITION REPORT 1998

STATE AID 219

Finland

Accelerated depreciation on investments in “development areas” 80

On 29 July the Commission decided to initiate Article 88(2) proceedings in respect of the application
of a Finnish scheme providing for accelerated depreciation on investments in “development areas”.
Proceedings were opened only in respect of aid to companies operating in sectors where state aid was
subject to specific Community rules and frameworks and aid to investments covered by the
multisectoral framework on regional aid for large projects. The Finnish authorities had undertaken to
notify individual cases in the sectors concerned. The scheme, however, was based on a law adopted by
Parliament which was directly and, in principle, automatically applicable and which did not allow for
administrative discretion in individual cases. At that stage the tax authorities’ commitment to ensuring
compliance with the state aid rules was not sufficient for the Commission to conclude that the scheme
was compatible with the common market in sensitive sectors. The Commission considered that the law
needed amending in order to effectively prevent its being applied to such sectors.

Sweden

a) Map of “structural change areas” 81

On 21 January the Commission approved the regional aid map for the “structural change areas” in
Sweden for the period 1998-99. The “structural change areas” consisted of 26 municipalities and two
parishes and covered 4.5% of the population of Sweden. The investment aid intensity ceilings would be
set at a maximum of 25% gross (18% net) for large enterprises and 35% gross (25.2% net) for SMEs.
In the municipalities of Hagfors, Ha¨llefors, Ludvika, Ljusnarsberg and Smedjebacken, investment aid
up to a maximum of 30% gross (21.6% net) could be granted for large enterprises.

b) Regional aid scheme for “structural change areas” 82

On 17 June the Commission approved the scheme linked to the “structural change areas” for the
period 1998-99. Modifications included adjustment in line with the SME guidelines 83 and the R&D
framework. 84 Conditions were attached to the granting of training aid. The budget for regional
development aid to the “structural change areas” could be estimated at about ECU 50 million
(SKR 400 million) for the period concerned.

United Kingdom

English Partnerships 85

On 1 July the Commission proposed appropriate measures under Article 88(1) of the EC Treaty in
respect of the activities of English Partnerships (EP) under the Partnership Investment Programme.

80 C 55/98 (ex NN 20/98) (OJ C 377, 5.12.1998).
81 N 65/97 (OJ C 89, 25.3.1998).
82 N 110/98 (OJ C 300, 29.9.1998).
83 OJ C 213, 23.7.1996.
84 OJ C 45, 17.2.1996.
85 E 2/97.

COMPETITION REPORT 1998

220 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

This scheme assisted property development projects involving site regeneration, reclamation and
development and the construction of industrial, commercial and residential buildings and premises.
Development proposals and the developers’ applications for funding were vetted by EP’s internal
valuers. Under the scheme as it stood, the grant or other assistance provided to such projects was not
considered to constitute state aid within the meaning of Article 87(1) of the EC Treaty. Aid recipients
(site owners, developers, end-users) could also be undertakings competing in intra-Community trade
and, potentially, in sensitive sectors. Furthermore, as a rule EP financed developers with a continuing
interest in the site as initial owners or end-users. In the Commission’s view, this raised a problem of
transparency as regards identifying the real recipient of EP’s assistance and quantifying the amount of
aid actually received. Among its appropriate measures the Commission proposed that EP’s assistance
be granted directly to the real investor in the site (site owner/developer in cases of speculative
development, or site end-user in cases of bespoke development) and be subject to the rules governing
regional state aid and state aid to SMEs. The UK authorities were asked to communicate a modified
scheme to the Commission.

2. Aid to specific industries

2.1. Steel

Monitoring of Article 95 ECSC steel aid cases

The Commission continued its monitoring of the implementation of its decisions in the above sectors in
Spain, Italy, Ireland, Portugal, Germany and Austria. The ninth report on the subject was issued in
May, 86 and the tenth in November. 87

Germany

a) Eisen-und Stahlwalzwerke Ro¨ tzel 88

On 14 July the Commission adopted a negative final decision on aid in the form of a guarantee
covering 80% of loans totalling ECU 7.6 million for the restructuring of Eisen- und Stahlwalzwerke
Ro¨ tzel GmbH. The Commission decided that the guarantee was unlawful as it had been given without
approval and was incompatible with the coal and steel common market pursuant to Article 4(c) of the
ECSC Treaty. The national authorities were required to recover the full amount paid when the
guarantee was called in, with interest running from the date on which the aid had been granted to the
date of its recovery.

b) ESF Elbestahlwerk Feralpi GmbH 89

On 11 November the Commission decided to terminate with a negative final decision the proceedings
it had initiated under Article 6(5) of the Steel Aid Code in respect of several aid payments made in the
form of subsidies and loan guarantees to the steel company ESF Elbestahlwerk Feralpi GmbH (ESF).
In March 1993 and January 1995 the Commission had authorised investment aid to the firm. However,

86 SEC(1998) 672 final, 22.4.1998.
87 SEC(1998) 1684 final, 14.10.1998.
88 C 60/97 (ex NN 85/97).
89 C 75/97 (ex NN 108/97).

COMPETITION REPORT 1998

STATE AID 221

part of this aid, namely loan guarantees totalling ECU 6.14 million, had been deflected from its
purpose and misused to cover operating costs, although operating aid was prohibited by the
ECSC Treaty. The Commission concluded that this abuse of part of the aid previously authorised
rendered that part incompatible with the common market and ordered that it be repaid with interest.
in 1995 and 1997 additional, non-notified aid had also been granted to ESF. The
Moreover,
Commission found that this additional aid, totalling ECU 4.8 million in grants and ECU 6.14 million in
loan guarantees, in addition to being unlawful, did not comply with the provisions of the Steel Aid
Code or those of the ECSC Treaty and was therefore incompatible with the common market.
Accordingly, it also decided to order that this aid be repaid with interest.

c) MCR Gesellschaft fu¨ r metallurgisches Recycling 90

On 9 December the Commission decided to terminate the proceedings it had initiated under
Article 6(5) of the Steel Aid Code and to authorise additional investment aid planned for MCR
Gesellschaft fu¨ r metallurgisches Recycling in the interests of environmental protection. It found in
particular that the planned investment would significantly raise the standard of environmental
protection, to a level well above the minimum required, and concluded that the aid could be authorised
under Article 3 of the Steel Aid Code and under the guidelines on state aid for environmental
protection. 91

d) Neue Maxhu¨ tte 92

On 9 December the Commission decided to initiate proceedings under Article 6(5) of the Steel Aid
Code in respect of aid totalling ECU 1.49 million to the steel company Neue Maxhu¨ tte Stahlwerke
GmbH for investment in measures to prevent pollution from a slag heap used by the company. The
Commission had serious doubts about the aid’s compatibility with the common market since, in
accordance with the polluter pays principle, the cost of the investment should have been borne by the
company itself.

On 16 December the Commission decided to initiate proceedings under Article 84 of the ECSC Treaty
for Germany’s failure to fulfil its obligations. 93 In 1995 and 1996 it had taken two negative decisions in
respect of Neue Maxhu¨ tte, ordering ECU 37.75 million in unlawful aid granted to it to be repaid with
interest and requiring the German authorities under Article 86 of the ECSC Treaty to take all
appropriate measures in this respect. Since the German Government had not complied, the
Commission formally requested it to provide it with all the information necessary for it to take a
position.

Greece

SOVEL 94

On 16 December the Commission decided not to object to the granting of regional investment aid
totalling ECU 10.2 million to the steel producer SOVEL. It found that the conditions contained in the

90 C 85/97.
91 OJ C 72, 10.3.1994.
92 N 261/98.
93 C 55/94 and C 41/95.
94 NN 137/97.

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222 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

rules on aid to the steel industry were met, in particular since there was no increase in production
capacity, that the aid was confined to an amount of less than ECU 50 million and that the aid intensity
was in line with the Greek regional aid scheme.

Spain

Inespal 95

On 21 January the Commission decided that no state aid elements were involved in the privatisation of
the Spanish aluminium group Industria Espan˜ ola de Aluminio (Inespal). The Spanish authorities had
notified the Commission of the Inespal share purchase agreement between the seller, the state-owned
holding company SEPI, and the buyer, the private company Aluminum Company of America (Alcoa).
The result of the agreement would be the privatisation of Inespal. The Commission established that
Alcoa was the only buyer interested in practically all of Inespal’s assets (it was noted that the sale of
these assets as a unit made them more valuable), that Alcoa’s offer was the best one received and that
the seller’s environmental liabilities and social commitments concerned only the period preceding the
date on which the agreement was concluded. Finally, the Commission noted that the current electricity
tariffs charged to Inespal (‘G4’ tariffs) were decided by the Government, were published in Spain’s
official gazette and were applicable on a trans-sectoral basis to several large consumers which satisfied
the same conditions with regard to energy demand. Furthermore, Spain would inform the Commission
of any modification of the G4 tariffs.

Italy

a) Tax relief, Law No 549/95 96

On 13 May the Commission decided to terminate proceedings initiated in May 1997 and to find
incompatible with the common market aid granted by Italy to the steel industry in the form of tax relief
under Law No 549/95. More specifically, the Law offered firms investment aid in the form of tax
exemptions on 50% of reinvested profits. This aid was not covered by any of the exceptions allowed
under the Steel Aid Code for aid for R&D, environmental protection or closures. The Commission also
decided to require that any aid already disbursed by the Italian authorities be recovered. In May 1997
the Commission had initiated Article 88(2) proceedings in respect of the same aid measure in other
sensitive sectors (motor vehicles, synthetic fibres and shipbuilding), but it reserved its position at the
present juncture regarding the compatibility of the aid in these sectors as it still had to consider the
information which Italy had been formally requested to communicate.

b) Acciaierie di Bolzano 97

On 28 October the Commission decided to terminate the proceedings it had initiated under Article 6(5)
of the Steel Aid Code in respect of environmental protection aid and aid for R&D which Italy planned
to grant to the steel company Acciaierie di Bolzano. Having scrutinised the various projects with the
Italian authorities and following a reduction in the amount of aid initially planned by the latter, the
Commission concluded that the environmental protection aid of no more than ECU 5.73 million and

95 N 639/97 (OJ C 211, 7.7.1998).
96 C 27/97.
97 C 46/98 (ex N 791/97).

COMPETITION REPORT 1998

the R&D aid of no more than ECU 0.4 million met the conditions of the relevant guidelines and were
compatible with the common market. It therefore decided to authorise the aid within these ceilings.

STATE AID 223

Luxembourg

ProfilARBED 98

On 17 June the Commission adopted a negative final decision regarding, and ordered the recovery of,
aid granted by Luxembourg to the steel company ProfilARBED. In December 1994 the Commission
had adopted an initial decision authorising the aid which Luxembourg was planning to grant towards
investment in environmental protection to be undertaken by ProfilARBED in its new steelworks at
Esch-Schifflange. The Court of First Instance annulled that decision in a case brought by a competitor
of Arbed. 99 The Commission was therefore obliged to re-examine the aid in the light of the Court’s
findings. In line with the judgment, it now concluded that observations put forward by the Luxembourg
authorities were not in fact such as to alter the view of the case which it had taken at the very outset,
when it initiated proceedings in June 1994, namely that the aid was not covered by any of the
derogations from the general ban on aid laid down in Article 4(c) of the ECSC Treaty. Accordingly, the
aid received by ARBED, totalling ECU 2.279 million (LUF 91.95 million), had to be considered
incompatible with the common market and recovered with interest from the date of payment until the
date of recovery.

2.2. Non-ECSC steel products

Spain

A.G. Tubos Europa SA 100

On 28 October the Commission decided to terminate proceedings it had initiated under Article 88(2)
of the EC Treaty and to authorise the granting of ECU 7.02 million for the setting-up of Tubos Europa
in Extremadura. Although there was general overcapacity in the production of traditional tubes, the
Commission noted that the company was to produce, for the first time in Europe, very large cold-
formed hollow sections (diameter in excess of 406.4 mm), a product for which there was growing
demand. The Commission therefore concluded that the aid was compatible with the common market.

2.3. Shipbuilding

Germany

a) Aid for Bremer Vulkan Marineschiffbau GmbH 101

On 18 February the Commission initiated Article 88(2) proceedings in respect of aid granted to
Bremer Vulkan Marineschiffbau GmbH, a subsidiary of Bremer Vulkan Verbund AG (BVV) in
liquidation, in connection with its takeover by Lu¨ rssen Maritime Beteiligungen GmbH & Co. KG.

98 C 25/94 (ex N 11/94).
99 Case T-150/95 UK Steel Association (formerly BISPA) v Commission [1997] ECR II-1433.
100 C 13/98 (ex N 749/97).
101 C 9/98 (ex NN 176/97) (OJ C 252, 12.8.1998).

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224 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

These proceedings concerned a public contribution towards the cost of employing former workers of
another subsidiary of BVV, a waiving of debts by Hibeg, a company wholly owned by the Land of
Bremen, and an intended contribution towards the cost of planned investment. In its decision, the
Commission expressed doubts about whether these measures were indeed exempt from the provisions
of Article 87 of the Treaty and the provisions of the Seventh Directive on aid to shipbuilding. While the
activities of Bremer Vulkan Marineschiffbau GmbH were limited to naval shipbuilding, the Lu¨ rssen
Group was active in merchant shipbuilding as well. If the capacities acquired were used for merchant
shipbuilding or other civil marine activities, the rules under Article 87 of the Treaty would have to be
applied.

b) Aid to Bremer Vulkan via Krupp GmbH and Hibeg 102

By a judgment delivered in October 1996, 103 the Court of Justice annulled an earlier Commission
decision taken in April 1993 declaring incompatible with the common market aid awarded by the
German Government to Hibeg, a company wholly owned by the Land of Bremen, and by Hibeg via
Krupp GmbH to Bremer Vulkan AG, which had facilitated the sale of Krupp Atlas Elektronik GmbH
by Krupp GmbH to Bremer Vulkan. The Court ruled that the Commission’s decision contained
insufficient reasoning on certain points. The Commission was therefore required to take a new decision
to terminate the Article 88(2) proceedings which it had opened in May 1992. In the light of the Court’s
ruling, the Commission adopted a revised decision on 25 February, in which it confirmed its view that
the aid which the Land of Bremen had granted in 1991 to Bremer Vulkan (now in liquidation) towards
the purchase of Krupp Atlas Elektronik, a manufacturer of electronic systems for shipping and
defence, was incompatible with the common market.

Bremer Vulkan had purchased Krupp Atlas Elektronik for about ECU 175 million in a complex
financial transaction. The Commission examined the measure to ascertain whether the aid qualified for
exemption under Article 87 of the Treaty. However, the aid served only to facilitate the transfer of
Krupp Atlas Elektronik from Krupp to Bremer Vulkan, without any change in the business being
carried on. The aid affected competition with other enterprises in the Community and did not qualify
for exemption under the rules of the Treaty. The Commission accordingly ordered the recovery of the
aid.

c) Reprivatisation of Volkswerft Stralsund and of MTW-Schiffswerft, Wismar 104

The Commission decided on 25 February in the case of Volkswerft and on 29 July in the case of MTW-
Schiffswerft to approve the privatisation agreements for these yards and to raise no objections to a
second instalment of aid. Until 1996 the two shipyards, situated in the former GDR, had belonged to
Bremer Vulkan Verbund AG. Following the latter’s insolvency they were taken over by the
Bundesanstalt fu¨ r vereinigungsbedingte Sonderaufgaben (BvS) and the Land of Mecklenburg-Western
Pomerania. After a worldwide tendering procedure, both yards were sold under an asset deal in which
the buyers did not take over any of the pending liabilities, which were primarily linked to the financing
of shipbuilding contracts. Both yards had given guarantees to the shipowners concerning the expected
yields from the ships in the first few years after delivery and the placement on the market of shares in
the ships. Therefore, the Commission’s scrutiny of the sales concentrated on whether the agreements in
question ensured that the sales were not coupled with any aid over and above the amounts to be

102 C 14/92 (OJ L 316, 25.11.1998); for the initiation of proceedings see 1993 Competition Report, point 502.
103 Joined Cases C-329/93, C-62/95 and C-63/95 Germany and Others v Commission [1996] ECR I-5151.
104 N 803/97, N 802/97 (OJ C 24, 29.1.1999).

COMPETITION REPORT 1998

STATE AID 225

granted under the restructuring plans notified when Council Regulation 1013/97, covering the
authorisation of aid needed to continue the restructuring programmes, was adopted.

The Commission reached the conclusion that, even on the basis of an extremely conservative valuation
of all actual and potential liabilities remaining with the residual companies, no additional aid was
involved. In accordance with Article 6 of the Seventh Directive on aid to shipbuilding and with Council
Regulation 1013/97, it therefore approved in both cases a second instalment of aid for the continuation
of the restructuring.

d) Development assistance for Indonesia 105

On 25 February the Commission terminated in part, with a negative final decision, Article 88(2)
proceedings initiated in respect of aid granted by Germany for the construction of a dredger by
Volkswerft Stralsund. The aid had originally been approved as development aid under Article 4(7) of
the Seventh Directive on aid to shipbuilding. The Commission came to the conclusion that the aid had
been misused since the vessel had been employed outside Indonesia, in contravention of the conditions
laid down in the authorisation decision.

e) Misuse of restructuring aid for MTW and Volkswerft in the Bremer Vulkan Group 106

On 22 July 1997 the Commission adopted a negative final decision concerning the misuse of
ECU 400 million in aid granted for the restructuring of MTW-Schiffswerft, Wismar, and of Volkswerft
Stralsund, in other undertakings of the Bremer Vulkan Group. Bremer Vulkan Verbund AG had
acquired these two shipyards, located in eastern Germany, in 1992 and 1993 from the Treuhandanstalt.
Large amounts of aid had been provided for their restructuring and comprehensive modernisation. In
1992 the Council had adopted a specific derogation under the Seventh Directive on aid to shipbuilding
(90/684/EEC) for the restructuring of shipyards in the former GDR (Council Directive 92/68/EEC).
According to this legislation, the aid had to be used exclusively for the restructuring of the yards in
question. In view of this requirement and of the considerable amounts involved, the Commission had
decided to authorise the aid in separate instalments only. The Commission learnt in the course of the
proceedings that the notifications of the aid given in the context of the privatisations had been
incomplete. Large amounts of aid had been disbursed in advance under side agreements between the
Treuhandanstalt and Bremer Vulkan. Including interest, accruing up until the end of 1995, the two
companies had received approximately ECU 166 million more in aid than the amount authorised by
the Commission. The granting of this additional amount infringed the provisions on investment aid
(Article 6) and on the maximum operating aid to be granted for restructuring (Article 10a) of the
Seventh Directive as amended. The Commission therefore decided that this aid amount was
incompatible with the Treaty. The parts of the aid which were not yet needed for the restructuring had
been on-lent within the Bremer Vulkan Group, either on the basis of individual credit agreements, or,
from 1994 onwards, through the group’s cash concentration system. In spite of extensive investigations
it had been impossible to determine for certain the purposes for which the aid placed with the group
had been used. There were two reasons for this. Contrary to normal commercial practice, the
Treuhandanstalt had not ensured that provision was made in the privatisation agreements for any
earmarking of the lump-sum cash subsidy or for any suitable monitoring procedures. From 1995 at the
latest, the mixing of funds became irreversible owing to the multitude of transactions in the cash
concentration system. When the cash concentration system was wound up in early 1996, the total

105 C 22/97.
106 C 7/96.

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226 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

claims of MTW and Volkswerft amounted to ECU 437 million (DEM 854 million), of which
ECU 400 million originated in aid. According to the auditors’ report it was very likely that at least
those subsidiary companies of Bremer Vulkan which had been the main debtors under the cash
concentration system had received part of the misused aid. It could be said for certain that the
ECU 400 million, which included the unauthorised amount of ECU 166 million, had not been used, as
required, for the restructuring of the two shipyards but misused within the meaning of Article 88(2) of
the Treaty. The Commission decided that the German Government should recover the misused aid
from Bremer Vulkan Verbund AG as part of the insolvency proceedings concerning that company. In
addition, the German Government should take all steps required by German law to recover any partial
amounts from companies previously belonging to Bremer Vulkan, if suitable opportunities were to
arise in the course of subsequent inquiries.

f) Kvaerner Warnow Werft GmbH 107

On 25 November the Commission decided to initiate Article 88(2) proceedings in respect of the
exceeding of an annual new production ceiling imposed on the shipyard Kvaerner Warnow Werft
GmbH in Warnemu¨ nde. In several decisions taken between 1993 and 1995 the Commission had
approved restructuring aid totalling ECU 638 million (DEM 1 247 million) to the privatised eastern
German shipyard, subject to an annual production limit of 85 000 cgt. A monitoring report completed
in June indicated that this ceiling would be exceeded by a considerable margin in 1998 and 1999. It
therefore seemed that the conditions laid down in the decisions authorising the aid were no longer met.

Italy

a) Investment aid for the opening of shipyards in Oristano and Belvedere Marittimo 108

On 22 April the Commission decided to initiate proceedings under Article 88(2) of the EC Treaty in
respect of investment aid granted under Italian Law No 488/92 for the opening of two new shipyards,
one in Sardinia (Oristano) and one in Calabria (Belvedere Marittimo). These projects would create
new shipbuilding capacity and therefore came under Article 6(1) of the Seventh Directive, which
provided that aid had to be directly linked to a corresponding irreversible reduction in the capacity of
other yards in the same Member State over the same period. As matters stood, the Commission
doubted whether this condition had been met.

b) Regional investment aid for shipyards

On 30 September the Commission approved the granting of investment aid for the restructuring of
shipyards in six cases. 109 It found that the requirements laid down in Article 6 of Directive 90/684/EEC
on aid to shipbuilding were met, in particular since the restructuring plans did not lead to capacity
increases.

107 C 66/98 (ex NN 113/98).
108 C 35/98 (ex N 783/97, N 160/98) (OJ C 307, 7.10.1998).
109 N 784, 786/97, 157, 158, 159 and 161/98 (OJ C 409, 30.12.1998).

COMPETITION REPORT 1998

STATE AID 227

c) Aid to the shipyard INMA 110

On 11 November the Commission decided to terminate with a negative final decision proceedings
initiated under Article 88(2) in respect of the Italian authorities’ plan to grant the INMA shipyard in
La Spezia aid worth 9% of the contract price, i.e. double that authorised by the directive, for the
refitting of two passenger vessels. It concluded that the aid was incompatible with the common market
after finding that INMA had been placed in a more favourable position than the other Community
shipyards competing for the contract and that there was no evidence to suggest either that the aid was
necessary to enable the firm to win the contract in the face of competition from shipyards outside the
Community or that, even without such a high level of aid, INMA would have been awarded the
contract in preference to the other Community shipyards contacted.

2.4. Motor vehicles

Revision of the framework for the motor vehicle industry 111

Following its adoption in July 1997, the new framework for state aid to the motor vehicle industry had
the Commission initiated
been accepted by all Member States except Sweden. Accordingly,
Article 88(2) proceedings in October 1997 against all existing Swedish schemes which could be the
basis for state aid in the motor vehicle sector as from 1 January 1998. During the proceedings the
Swedish authorities accepted the Commission’s position. The proceedings were therefore closed by
decision taken on 21 January.

Germany

a) Daimler-Chrysler, Ludwigsfelde 112

On 9 December the Commission decided not to object to the granting of regional investment aid worth
DEM 218 million (ECU 111.2 million) to Daimler-Chrysler for the production of a new commercial
vehicle at its plant in Ludwigsfelde in the Land of Brandenburg, an area assisted under Article 87(3)(a).
The Commission concluded that the aid, with an intensity of 35% of investment costs, met the
requirements of the framework for state aid to the motor vehicle industry.

b) Opel Restrukturierungsgesellschaft mbH, Kaiserslautern 113

On 9 December the Commission decided not to object to the granting of regional investment aid worth
ECU 44.4 million to Opel Restrukturierungsgesellschaft mbH for the production of direct injection
engines at its Kaiserslautern plant. The Land of Rheinland-Pfalz, where the assisted investment would
be made, was eligible for regional aid under Article 87(3)(c). The Commission concluded that the
regional aid, with an intensity of 18% of eligible costs, could be authorised as ‘transformation’ aid
within the meaning of point 3.2 of the framework for state aid to the motor vehicle industry and that
the requirements of this framework as regards regional aid were met.

110 C 55/97.
111 C 66/97 (OJ C 122, 21.4.1998).
112 N 550/98.
113 N 354/98.

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228 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

France

Toyota, Valenciennes-Onnaing 114

On 16 December, having found that the requirements of the framework for aid to the motor vehicle
industry were met, the Commission decided not to object to the granting of regional investment aid
totalling ECU 51.72 million to the Toyota group’s new plant at Valenciennes-Onnaing.

Portugal

AutoEuropa 115

The Portuguese authorities collaborated fully with the Commission in recovering training aid received
by AutoEuropa (a Ford/VW joint venture company based in Setubal and producing multi-purpose
vehicles) in excess of that allowed under the motor vehicle framework. The company had been created
in 1991, when the Commission had also approved investment and training aid under the framework.
The assisted training consisted in intensive pre-production courses at an independent training centre,
jointly financed by the Portuguese authorities and AutoEuropa. During the monitoring process it had
been noted that AutoEuropa was receiving public funds for training purposes even after the launch of
production in 1995.

Sweden

Volvo Truck Corporation 116

On 25 March the Commission decided to terminate Article 88(2) proceedings initiated against Sweden
in respect of transport aid granted to the Volvo Truck Corporation plant in Umea˚ . The decision
reflected the fact that the Swedish authorities had accepted the Commission’s proposal that the aid be
phased out between 1998 and 2003. The phasing-out of the aid would be monitored by the Commission
to ensure that the conditions were met.

United Kingdom

LDV Ltd 117

On 11 November the Commission decided not to object to the granting of regional investment aid
totalling ECU 38 million to the motor vehicle manufacturer LDV Ltd for the production at its
Birmingham plant of a new range of medium and heavy vans in a joint venture with Daewoo. It had
been agreed that LDV would produce vans in the United Kingdom and supply Daewoo with both vans
and spare parts, while Daewoo would provide LDV with the technical support and assistance required
to achieve optimum product quality and optimum use of production capacities. The Commission
concluded that the aid was compatible with the common market after noting that it met the conditions
laid down in the framework on state aid to the motor vehicle industry.

114 N 438/98.
115 NN 36/97, Competition Policy Newsletter 2/98, p. 83.
116 C 48/97 (OJ C 215, 10.7.1998).
117 N 420/98.

COMPETITION REPORT 1998

2.5. Synthetic fibres

Belgium

Decochim SA 118

STATE AID 229

On 25 November the Commission decided to initiate proceedings under Article 88(2) of the EC Treaty
in respect of aid worth some ECU 8.2 million to the newly created synthetic fibres producer Decochim
SA in connection with a ECU 27.2 million investment to produce flame-retardant polyester yarn.
Although the Belgian Government sought to justify the investment by pointing to the high-tech nature
of the product in a market segment that was operating at below capacity, the Commission doubted
whether the product was genuinely innovative and needed to be satisfied that there was actually a
structural shortage in the production of this type of polyester yarn at Community level.

Germany

Saxonylon Textil GmbH 119

On 28 October the Commission decided to initiate proceedings under Article 88(2) of the EC Treaty in
respect of planned investment aid for Saxonylon Textil GmbH in the form of grants totalling
ECU 21.56 million intended to assist the construction of a new synthetic yarn production line. The code
on aid to the synthetic fibres industry was also applicable to developing regions. The Commission had
serious doubts about compliance with the requirements of this code, which was also applicable in the
new La¨nder, especially as regards the required significant reduction in production capacity in view of
the overcapacity in the industry.

Spain

Brile´n SA 120

On 25 March the Commission decided to initiate Article 88(2) proceedings in respect of a proposal by
the Spanish authorities to grant state aid amounting to ECU 1.2 million to the synthetic fibres producer
Brile´ n SA,
located in Barbastro, Huesca (Aragon). The investment project concerned the
technological modernisation and upgrading of the company’s polyester yarn production plant.
According to the Spanish authorities, the investment would not result in any overall increase in
production capacity. Instead there would be a switching of production from staple fibre to polyester
textile filament yarn. The Commission had to examine the proposal in the light of the code on aid to
the synthetic fibres industry. Since the project appeared to involve an increase in capacity for polyester
filament yarn, a product of which there was no structural shortage of supply, the Commission had
doubts about whether the proposed aid would be compatible.

118 N 263/98.
119 N 362/98.
120 C 25/98 (ex N 851/97) (OJ C 199, 25.6.1998).

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230 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Sniace 121

On 28 October the Commission decided to terminate with a partly negative decision proceedings
initiated under Article 88(2) of the EC Treaty in respect of aid granted to the Spanish synthetic fibres
manufacturer Sniace SA, of Torrelavega, Cantabria. As regards the aid in the form of non-market-
related interest rates for the rescheduling of social security debts totalling ECU 21.79 million and for
agreements concluded with the wage guarantee fund (Fogasa) worth ECU 10.2 million,
the
Commission concluded that these advantages constituted aid that was unlawful and incompatible
with the common market since it did not meet the conditions laid down in the code on aid to the
synthetic fibres industry. It therefore ordered the aid to be recovered with interest. The Commission’s
decision did not specify the amount of aid but stated that it was at least equivalent to the difference
between market-related interest rates and the interest rates agreed with the social security authorities
and Fogasa.

As for the other measures, namely a guarantee on a loan of ECU 6 million, other financial measures
relating to the construction of a waste processing plant, and a partial debt write-off, the Commission
considered that they did not constitute state aid within the meaning of Article 87(1) of the EC Treaty
and terminated the proceedings in relation to them. Lastly, the Commission would be taking a separate
decision on the compatibility with the EC Treaty of Sniace’s non-payment of environmental protection
levies between 1987 and 1995.

Austria

Lenzing Lyocell GmbH & Co. KG 122

On 14 October the Commission decided to initiate proceedings under Article 88(2) in respect of
various aid measures which had either already been granted or which were to be granted to Lenzing
Lyocell GmbH & Co. KG, some of them under approved aid schemes or aid schemes which existed
prior to accession. The company was part of the Austrian group Lenzing, one of the largest synthetic
fibre producers in the world. The aid, intended for investment, environmental protection, training and
probably as operating aid, totalled at least ATS 1 034.7 million (ECU 74.7 million), some of the
amounts not yet being clear (new investment aid, state guarantee and, probably, a substantial amount
of operating aid). On the basis of the information available, the Commission had serious doubts about
the compatibility of this aid with the common market. As regards the aid granted under existing or
approved schemes, it was not able to establish whether the conditions and ceilings laid down by these
schemes had been complied with and it therefore decided to adopt a decision requiring the Austrian
Government to provide it with all the necessary information to enable it to take a position on the
matter.

Portugal

Cordex SA 123

On 4 February the Commission decided to terminate Article 88(2) proceedings initiated in March 1997
in respect of the Portuguese authorities’ proposal to award aid under the PEDIP II programme to the

121 C 68/97 (ex NN 118/97).
122 C 61/98 (ex NN 189/97) (OJ C 9, 13.1.1999).
123 C 17/97 (ex N 639/96).

COMPETITION REPORT 1998

STATE AID 231

rope and cord manufacturer Cordex SA, located in Esmoriz (Ovar). The aid - granted in support of the
company’s plans to expand and modernise its range of products made of natural and synthetic fibres, as
well as of polyurethane foam for use in a number of products (mattresses and sofa materials, etc.) - was
authorised under Article 87(3)(a) of the EC Treaty. The Commission had initiated the formal
investigation on the grounds that part of the proposed aid appeared to infringe the Community code
on state aid to the synthetic fibres industry. During the course of the Article 88(2) proceedings, the
Portuguese authorities substantially modified their original notification. In particular, they agreed to
omit from the list of eligible investment costs those activities falling within the scope of the code,
namely support for the installation of new capacity in polypropylene yarn. The amount of proposed aid
including part-financing from the
was reduced from ECU 3.47 million to ECU 2.69 million,
Community Structural Funds.

Companhia de Teˆxteis Sinte´ticos SA (Cotesi) 124

On 14 October the Commission decided to initiate proceedings under Article 88(2) of the EC Treaty in
respect of investment aid worth ECU 10 million for Cotesi, a synthetic fibres producer located in Grijo´
in the region of Carvalhos. The purpose of the aid was to modernise Cotesi’s production process. In
order for the aid to be compatible with the common market, the investment had to comply with the
conditions laid down by the code on aid to the synthetic fibres industry even if it was made in an area
eligible for regional aid under Article 87(3)(a) of the EC Treaty. The Commission had serious doubts in
this respect, in particular as regards the obligation to reduce production capacity significantly in
exchange for the aid.

2.6. Financial services

France

a) Societe´ Marseillaise de Cre´dit (SMC) 125

On 14 October the Commission decided to terminate proceedings initiated under Article 88(2) and to
approve a total of ECU 953 million in restructuring aid for the privatisation of SMC. The aid was
approved on condition that SMC refocused its activities on its commercial banking network and that
the restructuring plan presented by the private-sector purchaser, Banque Chaix, a subsidiary of Cre´dit
Commercial de France, was implemented.

The Commission considered that, provided the efforts to make its operations more profitable
continued, SMC was viable. It had sufficient own funds to meet its statutory obligations. It did not have
own funds in excess of what was strictly necessary for the aid to be approved. The Commission
considered that it was necessary for SMC to compensate competitors for the distortions of competition
with which they were faced, chiefly by permanently divesting itself of five banking and financial
businesses developed over the last ten years alongside its commercial banking business.

124 C 60/98 (ex N 196/98) (OJ C 405, 24.12.1998).
125 C 42/96 (ex NN 194/95).

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232 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

b) Cre´dit Lyonnais 126

On 20 May the Commission approved supplementary aid granted by France to Cre´ dit Lyonnais in
addition to the aid instalments of ECU 6.8 billion (FRF 45 billion) and of some ECU 600 million
(FRF 4 billion) authorised in 1995 and 1996 respectively. The additional aid related to an increase in
the losses of Consortium de Re´ alisations (CDR), modification of the interest rate conditions attaching
to the Cre´ dit Lyonnais loan to Etablissement public de financement et de restructuration (EPFR) and
abandonment of the subscription by EPFR to a zero-coupon bond issue which Cre´ dit Lyonnais was to
finance. The additional aid totalled between an estimated ECU 8 and 15 billion (FRF 53 and 98 billion)
given the uncertainty surrounding the future losses of CDR.

The Commission considered that very significant quid pro quo measures had to be taken to
compensate competitors for the overall distortion of competition. Accordingly, the aid was approved
on condition that Cre´ dit Lyonnais reduced its balance sheet by FRF 310 billion (ECU 47 billion) in
Europe and worldwide, over and above the reductions imposed on the bank in 1995, i.e. that it
achieved a total reduction in its balance sheet of more than a third as from 31 December 1994.
Moreover, Cre´ dit Lyonnais would have to reduce the number of its branches in France to 1 850 by the
year 2000. The French Government had committed itself to privatising Cre´ dit Lyonnais by October
1999. After privatisation, the bank’s expansion would remain limited to 3.2% per year up to 2001 and
the bank would have to distribute 58% of its net surplus in the form of dividends until the year 2003.

c) Societe´ de Banque Occidentale (SDBO) 127

On 22 July the Commission decided to terminate Article 88(2) proceedings initiated on
18 September 1996 and extended on 2 April 1997 in respect of recapitalisation measures and the
reversion of part of SDBO to Cre´ dit Lyonnais. It concluded that the increase in capital totalling some
ECU 36.4 million granted by the French State via Consortium de Re´ alisations (CDR) to SDBO prior
to the healthy part of its activities reverting to Cre´ dit Lyonnais constituted unlawful state aid and was
incompatible with the Treaty.

Italy

a) Banco di Napoli 128

On 29 July the Commission approved aid for the reform, restructuring and privatisation of Banco di
Napoli provided for in Decree Law No 163 of 27 March 1996, converted into Law No 588 of
19 November 1996. The aid comprised in particular an increase in the capital of Banco di Napoli
provided by the Treasury, advances from Banca d’Italia under the arrangements laid down in the
Ministerial Decree of 27 September 1974 to cover the losses of Societa` per la gestione di attivita` , and
tax-relief measures. The estimated net cost to the State was somewhere between ECU 1.14 billion and
ECU 6.1 billion. The measures in question were authorised subject inter alia to Italy’s abiding by the
undertaking that the bank would sell or close by the end of 1998 18 branches in northern and central
Italy, in addition to the already completed sales of 59 branches and of seven branches or offices abroad,
together with the Madrid subsidiary. However, the advances granted by Banca d’Italia to cover the
winding-up of the banking subsidiary Isveimer would not be considered aid to Banco Di Napoli on

126 C 47/96 (ex NN 113/96) (OJ L 221, 8.8.1998).
127 C 44/96.
128 C 40/96.

COMPETITION REPORT 1998

condition that the bank did not repurchase any of Isveimer’s assets, unless it proved impossible to sell
them to other parties or to realise them on more advantageous terms by liquidation.

STATE AID 233

b) Banco di Sicilia and Sicilcassa 129

On 11 March the Commission decided to initiate Article 88(2) proceedings in respect of restructuring
aid to Sicilcassa and/or Banco di Sicilia. The Commission asked the Italian authorities for further
information in order to determine whether the creation of a regional banking hub in Sicily was
financed by state aid which was compatible with the Community competition rules. It was particularly
concerned about measures to support the taking-over by Banco di Sicilia of the assets and liabilities of
the bank Sicilcassa, which was put into compulsory liquidation in September 1997. The Commission
requested further information regarding Banco di Sicilia’s restructuring plan and the integration of
Sicilcassa in particular, in view of the position of both institutions on the Sicilian banking market. It
also asked for information on Banco di Sicilia’s profit forecasts and the assumptions on which they
were based.

2.7. Transport

a) Air transport

On 21 January the Commission adopted a negative final decision in respect of two grants of ECU 24 407
and 6 696 respectively (BEF 984 600 and 270 116) to be paid by the Flemish Region to the airline Air
Belgium and the tour operator Sunair in exchange for their using Ostend airport. None the less, the
Commission did not oppose the payment to Sunair of a sum of ECU 111 500 (BEF 4.5 million)
corresponding to the financing by the Flemish Region of a campaign to promote Ostend and Antwerp
airports.

On 3 June the Commission decided not to object to payment of the second instalment, worth
ECU 258.23 million (ITL 500 billion), of aid to Alitalia. This decision followed the positive decision
adopted on 15 July 1997 with regard to a capital increase for the company totalling ECU 1.42 billion
(ITL 2 750 billion) payable in three instalments provided certain conditions were met, ensuring in
particular that the restructuring plan was monitored, that arrangements for its implementation were
transparent and that Alitalia’s problems were not passed on to its competitors. While stressing the
importance of making good the delays in cost reductions, particularly with regard to crews, the
Commission noted that the restructuring plan had been implemented satisfactorily and that Italy had
given further undertakings intended both to ensure that the aid would not be used to finance
promotional campaigns and to enable competing airlines to benefit from traffic rights to non-EEA
countries.

Following the annulment by the Court of First Instance of the Commission decision of 27 July 1994
authorising the recapitalisation of Air France to the tune of ECU 3.05 billion (FRF 20 billion), owing
to insufficient reasoning on two points, one relating to the purchase of new aircraft and the other to the
competitive position of Air France on routes outside the European Economic Area, the Commission
decided on 22 July to adopt a new decision authorising the same amount and clarifying its position
regarding the two points raised by the Court. It stressed first of all that the aid was granted in the
context of a restructuring plan considered convincing by the Court, that the air transport sector was
expanding rapidly, that there was no change in the number of seats offered by Air France and that all

129 C 16/98 (ex NN 10/98) (OJ C 297, 25.9.1998).

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234 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

the aid granted to the airline was intended to reduce its debt burden and not to finance the purchase of
new aircraft. Secondly, the Commission pointed out that the general conditions laid down offered
sufficient guarantees in themselves with regard to the non-EEA routes, in particular since they
involved a reduction in market share throughout the world, since the aid had a much greater effect on
the competitive situation for intra-EEA routes than for other routes, and since too tight a restriction on
Air France’s capacity on non-EEA routes would essentially benefit the airlines of non-member
countries.

On 29 July, pursuant to Article 87(2)(a), the Commission authorised social aid to residents of the
Canary and Balearic islands for intra-archipelago flights. A similar decision was adopted on 27 August
in respect of aid granted to residents of Madeira for flights between the island and the rest of Portugal.

On 14 August the Commission authorised restructuring aid to Olympic Airways comprising loan
guarantees, a reduction in the airline’s debt and a capital injection. This aid, initially authorised in
October 1994, had been partially frozen for more than two years owing to the Greek Government’s
failure to comply with certain conditions of the authorisation decision. The Commission was satisfied
that the Greek authorities were now acting in accordance with the undertakings given and that the aid,
which was part of a revised restructuring plan extended until 2002, was compatible with the
competition rules. However, it reduced the authorised capital injection from GRD 54 billion to
GRD 40.8 billion, extended until 2002 the conditions initially laid down and made its decision subject
to compliance with further conditions.

On 11 November, under the Community guidelines on state aid for environmental protection, the
Commission authorised a grant of NLG 332 637 awarded by the Netherlands to Martinair for the
installation of new equipment designed to reduce pollutant emissions.

b) Sea transport

On 18 February the Commission initiated Article 88(2) proceedings in respect of aid granted by Spain
to the shipping company Transmediterra´ nea under a public service contract which the company had
concluded with the Spanish State. The Commission had doubts about the terms of the contract and the
circumstances in which it was awarded.

On 7 April the Commission initiated Article 88(2) proceedings in respect of several aid measures
connected with the restructuring of the French shipping company Brittany Ferries owing, firstly, to
serious doubts about the positive effect of the measures on the company’s viability and, secondly, to
the risk of distortion of competition between shipping companies from different Member States.

On 9 December the Commission decided to extend the Article 88(2) proceedings to include a plan to
grant FRF 80 million more in aid to Brittany Ferries and any other additional aid granted in
connection with the company’s restructuring.

Also on 9 December the Commission initiated Article 88(2) proceedings in respect of various
presumed aid measures aimed at the French company Corsica Marittima, a subsidiary of SNCM, a
shipping company with public service obligations to provide transport between Corsica and mainland
France.

On the same day the Commission adopted a negative final decision in respect of measures planned by
the Irish Government to reduce the labour costs borne by shipowners as a consequence of employing

COMPETITION REPORT 1998

Community seafarers on board their ships. Contrary to the requirements of the Community guidelines
on state aid to maritime transport, ships other than only those registered in a Member State would
benefit from the measures and the Commission therefore considered them to be incompatible with
Article 87 of the Treaty.

STATE AID 235

c) Port services

On 22 December the Commission initiated proceedings under Article 88(2) of the Treaty in respect of
aid measures to reduce operating costs for port companies in Italy. The Commission had serious doubts
about the compatibility of the measures, which supplemented those intended for the restructuring of
the Italian port sector, themselves the subject of a parallel investigation under Article 88(2) of the
Treaty.

d) Rail transport

On 22 December the Commission decided not to object to a plan to grant aid notified by the British
authorities and involving additional measures to finance the construction, maintenance and
management of the Channel Tunnel Rail Link (CTRL), the rail infrastructure for high-speed trains
between London and the Channel Tunnel. In assessing the notified aid, the Commission drew a clear
distinction between aid to the infrastructure manager and aid to the train operator. Since the CTRL
forms part of the Paris-Brussels-Cologne-Amsterdam-London line, one of the 14 priority projects in
the context of the development of trans-European networks, the Commission considered that the
measures to assist the infrastructure manager were compatible with the common market pursuant to
Article 87(3)(b) of the Treaty. Regarding the aid for the train operator, the Commission took account
of the fact that the aid was intended to offset infrastructure utilisation charges, and it therefore
authorised the aid pursuant to Article 3(1)(b) of Regulation (EEC) No 1107/70.

e) Road transport

On 4 February the Commission decided to initiate proceedings under Article 88(2) of the Treaty in
respect of a toll-relief system on the Tauern motorway in Austria, since the measures constituted
operating aid.

On 25 March it decided to initiate proceedings in respect of aid to road haulage and combined
transport in Italy, given its doubts about the admissibility of the measures under Article 87(3)(c) of the
Treaty.

On 1 July the Commission adopted a partly negative final decision on a Spanish aid scheme for the
purchase of industrial vehicles. It considered that the aid granted to public bodies and public service
providers at local level and to natural persons and SMEs in sectors other than transport which
conducted local or regional business only did not constitute aid within the meaning of Article 87(1) of
the Treaty. All other aid granted by the Spanish authorities was declared unlawful and the Commission
therefore ordered its recovery.

On 28 October the Commission decided to initiate proceedings in respect of the extension of the same
scheme for 1997.

COMPETITION REPORT 1998

236 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

f) Combined transport

On 9 December the Commission decided, pursuant to Article 87(3)(c), not to object to aid granted by
the Dutch authorities to increase the capacity of the combined transport terminal at Born.

On 22 December the Commission decided that measures designed to finance the construction of a new
combined transport terminal in Wales did not constitute aid within the meaning of Article 87 of the
Treaty.

g) Inland waterways

On 2 October the Commission authorised an amendment made by the French authorities to the
economic and social plan for inland waterway transport for 1997 and 1998, which had been approved
on 1 October 1997.

On 14 October the Commission authorised investment aid which the Dutch Government planned to
grant for the setting-up of a coordination centre for inland container transport (barge control centre) in
the port of Rotterdam. However, it initiated proceedings in respect of aid intended to cover the
project’s operating costs, since this was considered to be operating aid.

2.8. Agriculture

Acting under the general ban on Member States’ granting pure operating aid, the Commission decided
to initiate proceedings under Article 88(2) in respect of a Greek law writing off and consolidating debts
for a significant number of agricultural holdings (over 200 beneficiaries) through the Agricultural Bank
of Greece. The overall debt to be written off amounted to at least GRD 158.6 billion (about ECU 450
million) and the debt consolidation involved GRD 4.2 billion (about ECU 12 million). The debt was
mainly incurred as a result of operational losses made by the holdings concerned; where this was the
case, the Commission considered the aid measures to be operating aid, and thus not permitted under
the state aid rules; they also seemed to be incompatible with the relevant provisions of the common
market organisations. Other debts appeared to be linked to an ‘interventionist policy’ by the Member
State; not knowing the exact details of this policy, the Commission had serious doubts about its
compatibility with the common agricultural policy. Other financially less significant debts related to the
setting-up and operation of infrastructures and to the reconstruction of assets affected by natural
disasters. The Commission also initiated proceedings under Article 88(2) of the Treaty in respect of
other aid measures included in the law, such as rebates on social security payments made by
cooperatives, sales of public assets, investment aid, measures to support livestock production and
assistance to one cooperative to pay wages. Following the adoption of a law subjecting national
approval of the write-off to prior clearance by the Commission in accordance with Article 88(3), the
Commission decided not to issue a suspension order against Greece. In October, on application by
Greece, the case was referred to the Council under the procedure laid down in the third subparagraph
of Article 88(2). This kind of application has the effect of suspending proceedings initiated by the
Commission until the Council has made its attitude known. The Council may, acting unanimously,
decide that the aid is to be considered compatible with the common market, in derogation from the
provisions of Article 87, if such a decision is justified by exceptional circumstances. If, however, the
Council does not make its attitude known within three months of the application by the Member State,
the Commission must give its decision on the case.

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STATE AID 237

The Commission decided to initiate Article 88(2) proceedings in respect of what also seemed to be
operating aid granted by Ireland, in a case involving aid issues relating both to agriculture and
transport. In particular, it involved payment of IEP 1 million (about ECU 1.298 million) in aid to the
Irish company Gaelic Ferries for the operation of a ferry service open to transport of livestock from
Ireland to continental Europe. The State’s intervention was triggered by the decision of a private ferry
operator to discontinue its transport service for livestock for commercial reasons related to pressure
from animal welfare groups. In its decision to initiate proceedings, the Commission noted that the
professed objective and the effect of the state aid was to guarantee access to the continental market for
Irish producers of livestock. By the same token, the exporters could be considered to be favoured
within the meaning of Article 87(1) of the Treaty. The rates charged by Gaelic Ferries, although
corresponding to the ones the exporters had had to pay previously, would have had no practical
significance as it was only the additional payment by the Irish State that had induced a new carrier to
start a service for livestock. For this reason the Commission considered that the aid might constitute
operating aid since it relieved the exporters of a part of the transport costs which they would have had
to bear had the State not intervened.

Concerning state aid for ‘exceptional occurrences’ under Article 87(2)(b) of the EC Treaty, a decision
in a Belgian case (Wallonia) created a precedent for state aid to be granted in connection with mad
cow disease outside the United Kingdom. For the first time the Commission deemed compensatory aid
for damage suffered in the beef and veal sector as a result of the BSE crisis to be compatible with the
common market under Article 87(2)(b), even though the damage had occurred outside the United
Kingdom, on which an embargo had been imposed. The Commission took the same approach in a case
concerning state aid granted by Italy.

In line with a trend already apparent in previous years, in 1998 the Commission continued to receive a
substantial number of notifications from various Member States concerning aid granted in connection
with natural disasters and exceptional occurrences. In a particularly interesting Greek case, the
Commission adopted a negative final decision in respect of aid for lentil producers in Lefkada aimed at
compensating them for damage caused by drought in 1996. While the Greek authorities had
undertaken to apply the criteria of the Commission’s decision-making practice in relation to events
which did not apparently fall directly under Article 87(2)(b), in this specific case compensation was
calculated on the basis of
lentils, which certainly would have lead to
overcompensation. The Commission also decided to initiate Article 88(2) proceedings in respect of
aid planned for melon and watermelon producers in the Thessaloniki region in order to compensate
them for damage caused by field mice. The Commission took the view that this situation could not be
described as an exceptional occurrence within the meaning of Article 87(2)(b) and that it did not meet
the criteria of the Commission’s decision-making practice in similar cases.

the market value of

In the area of aid for the processing and marketing of agricultural products, the Commission adopted a
negative final decision against Germany in respect of aid which might be granted under existing
regional aid schemes. In 1995 the Commission had proposed to the German authorities, and to the
other Member States, guidelines and appropriate measures for state aid in connection with investments
in the processing and marketing of agricultural products. These guidelines provided for a maximum aid
rate of 75% for investments in Objective 1 areas and 55% in other parts of the Community. They also
provided that no aid could be granted for investments falling within the scope of the sectoral
restrictions laid down by Commission Decision 94/173/EC on the selection criteria to be adopted for
improving the processing and marketing conditions for agricultural and forestry products. These
sectoral restrictions, which were laid down by the Commission following an analysis of representative
markets, generally precluded aid for investments in sectors subject to overcapacity at Community level.
In their reply to the Commission’s proposal, the German authorities accepted the application of the

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238 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

sectoral restrictions to aid measures granted under sectoral aid schemes, but stated that they could not
accept the application of the sectoral limitations in the case of regional aid schemes. The German
authorities considered that they should be able to avoid the sectoral limitations imposed by CAP policy
objectives where this was justified by regional policy development objectives. Following the initiation
of proceedings under Article 88(2) in July 1996 and having considered the comments made by the
German Government, the Commission was unable to accept their arguments. The Commission noted
that the sectoral restrictions already took account of regional policy objectives in that they permitted
certain types of investment which would be prohibited elsewhere in the Community. In other cases, the
Commission considered that investments in sectors which were in overcapacity at Community level
would be unlikely to bring about lasting regional development, but could have an adverse effect on
trade. Furthermore, the Commission noted that the distinction that the German authorities sought to
make between sectoral and regional aid would enable the competent authorities to circumvent
Community policy by reclassifying an aid measure under the relevant scheme. For these reasons, the
Commission required the German authorities to amend their current regional aid schemes so as to
ensure that no aid was given for investment in sectors covered by the restrictions laid down in Decision
94/173/EC.

In a case involving aid granted by Italy for the processing and marketing of agricultural products, the
Commission decided that the sectoral limits did not apply to national aid for investments in the retail
sector or to investments planned by undertakings whose turnover from wholesale trading (sales to
other traders) accounted for no more than 20% of their total turnover and whose turnover from trade
in the agricultural products referred to in point 2 of the Annex to Decision 94/173/EC did not exceed
20% of their total turnover. These traders included, for example, large distribution outlets selling
generally large quantities to final users, i.e. either families or professional users (service providers such
as restaurants, doctors, hairdressers, etc.) and occasionally small shopkeepers. In taking this decision
the Commission considered that such aid could be deemed to contribute to the development of the
sector, in particular by improving conditions for the distribution of agricultural products, and that it
was in line with the logic of the system introduced by the selection criteria referred to in the Annex to
Decision 94/173/EC.

Concerning aid for rescue and restructuring, in 1997 the Commission had adopted a negative final
decision regarding rescue aid in the form of a state guarantee for a debt consolidation loan granted to
the publicly owned cereal trading company EPAC. The Portuguese authorities did not comply with this
decision requiring that the aid be abolished, and the matter was now before the ECJ. Subsequently,
Portugal had notified a restructuring and privatisation plan for EPAC involving the granting of
additional aid to the firm amounting to PTE 15.5 billion (about ECU 77.5 million). At the same time,
the Portuguese authorities notified a capital injection in SILOPOR aimed at covering a major part of
the debts owed by this company to EPAC and currently amounting to PTE 31.35 billion (ECU 157
million). A programme to privatise the management of cereal silos accompanied this capital injection.
Under this programme, the port silos would remain public property, but their operation would be
transferred to private companies. The Commission decided to initiate the proceedings provided for in
Article 88(2) in respect of these notifications since at that stage it was not possible to conclude that the
aid to EPAC complied with the guidelines on restructuring firms in difficulty or that the capital
injection in SILOPOR could be justified in the light of the private investor principle, as the Portuguese
authorities claimed.

With regard to aid for restructuring firms in difficulty the Commission decided not to approve aid to
Jaen Hijos de Andre´ s Molina SA (HAMSA), Andalusia, and ordered that the aid paid out be
recovered. The recipient company, which had five production divisions (meat-based products,
slaughterhouses, pig units, cheese making and animal feedingstuffs) and a workforce of 450, had been

COMPETITION REPORT 1998

STATE AID 239

in financial difficulties since 1993. The Instituto de Fomento de Andalucia (IFA) had controlled the
company since 1995 and in 1997 acquired an 80% shareholding. HAMSA had received assistance from
the Spanish Government between 1993 and 1998 through IFA, in the form of guarantees totalling ECU
10.05 million and loans totalling ECU 36.6 million and in the form of remission of debts owed to state
agencies (social security, taxes), worth ECU 8.18 million. The Commission took the view that this aid
was unlawful and incompatible with the common market under Article 87(1) and did not qualify for
exemption under Article 87(2) and (3). In particular the aid concerned was not in conformity with the
Community guidelines on state aid for rescuing and restructuring firms in difficulty. 130 As a result of
the Commission’s decision concerning this aid, Spain had to terminate the loan contracts, revoke the
guarantees which were still in effect and take the necessary steps to recover the aid already disbursed
by way of the reimbursement procedure.

Concerning non-notified aid, having received many complaints from 1996 onwards, in 1998 the
Commission initiated proceedings under Article 88(2) in respect of aid granted by the German
Government under the Indemnification and Compensation Act. The Act provided for the setting-up of
a scheme for the purchase of land at reduced prices in the former East Germany which amounted to
state aid in the case of some of the beneficiaries. The Commission argued that while, for the categories
made up of resettled farmers and legal entities with at least one resettled farmer as a partner,
benefiting from a reduced-price purchase might be deemed compensation for a loss suffered (the
expropriation of land and/or the possible deterioration of the farm’s assets), this did not apply to the
newly settled farmers, the other legal entities and possibly other beneficiaries not included in the law in
question. For the latter category the aid could constitute state aid under Article 87(1), given that they
had not suffered expropriation or similar damage. The aid rate seemed too high by comparison with
those which the Commission could normally accept for the purchase of farmland in ordinary areas (i.e.
those not classified as less favoured). In addition, the aid in question appeared to be discriminatory and
thus to infringe Articles 6, 40(3) and 45 given the condition that certain beneficiaries had to have been
resident in the former East Germany on 3 October 1990, a condition that in practice could only be met
by (East) German nationals.

Complaints were also at the origin of an investigation into non-notified aid measures possibly taken by
the Italian Government as part of the operation and privatisation of the Centrale del Latte di Roma.
The Commission decided to initiate proceedings under Article 88(2) as it seemed that, since 1992, the
Centrale del Latte di Roma had had operational losses amounting to ITL 215.1 billion (about ECU 110
million) written off under a “public service” scheme. In initiating proceedings, the Commission
considered that a “public service” argument could not be used to justify the writing-off of losses in a
fully competitive market covered by a common market organisation. An investigation was also
ordered into the support given to Lazio milk producers through the operation and subsequent
privatisation of the Centrale del Latte. The Centrale del Latte was privatised in 1997. Since the original
owner (the municipality of Rome) decided to proceed with the privatisation without organising a
formal public tender procedure and included in the purchase contract a number of onerous conditions
(maintenance of workforce, investment plan, supply from local producers), the Commission could not
rule out the possibility that aid had also been given to the buyer.

As regards agrimonetary compensatory aid, four cases were notified in 1998. The Swedish authorities
notified a modification of the ECU 17.7 million scheme that the Commission had approved in 1997,
involving a transfer of ECU 3.3 million from the beef to the milk sector, within the maximum losses
recorded for each sector. The United Kingdom submitted two schemes in 1998, one concerning the
beef sector and one the sheep sector. The beef scheme involved the granting of ECU 95.2 million to

130 OJ C 368, 23.12.1994.

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240 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

suckler cow producers (50 % of total beef output) for one year only. At the end of 1998 the United
Kingdom notified an amendment to the approved scheme in order to grant a second instalment of
ECU 63.3 million. Although the scheme concentrated aid to the beef sector on a restricted group of
animals, the Commission considered that the aid was not distorting competition to an extent contrary
to the common interest since the aid level did not overcompensate for the income losses suffered by
suckler cow farmers for agrimonetary reasons. The sheep scheme involved compensating for the loss of
CAP direct aid premiums as a result of the reduction of the green rate applied for CAP direct
payments. The aid amount of ECU 15.4 million was distributed in respect of all animals having
received the sheep premium in 1997 (18.8 million).

Unlike other Member States, Italy decided to grant ECU 247.3 million in Community aid for a
programme consisting of three agricultural economy measures: (a) investment aid for processing and
marketing agricultural products, pursuant to Council Regulation (EC) No 951/97 (20 % of the total
amount); (b) investment aid for improving the effectiveness of agricultural structures, pursuant to
Council Regulation (EC) No 950/97 (14 % of overall funds); and (c) a rebate on premiums for
insurance against accidents at work (66 % of total aid).

Concerning promotional aid financed through parafiscal taxes, the Commission decided to initiate
proceedings under Article 88(2) in respect of non-notified aid given by the Flemish Government for
the promotion of agricultural products. The aid involved making a direct grant to a promotion agency
(VLAM) and giving it the right to raise a parafiscal tax on primary products. The Commission decided
to initiate proceedings because some of the promotional activities undertaken by VLAM appeared to
place excessive emphasis on the origin of the products and thus constitute an infringement of Article
28 of the Treaty and of the framework for national aid for the advertising of agricultural products. 131
The proceedings concerned in particular three labels or logos under which Flemish products were
promoted: Flandria, Van Vlaanderen (From Flanders), and Duke of Flanders. Furthermore, the
parafiscal levies for some of the products did not exclude levies on imports. For practical purposes the
duties on cattle, sheep, goats, horses and pigs were collected at the slaughterhouse. The duties were
divided into two parts: a part that had to be paid by the producer and a part that had to be paid by the
buyer of the meat. On cattle, sheep, goats, horses and pigs that were imported no charges were levied
on the producer. However, the buyer still had to pay his part of the levies on imported animals.
According to the Court of Justice (see judgment in Case 47/69 France v Commission [1970] ECR 487),
aid may not be financed by parafiscal charges which are also levied on products imported from other
Member States. Such a method of financing has a protective effect which goes beyond actual aid in
that, even if the rules ensure equal treatment for national and imported products, in practice the
arrangements are bound to favour national producers, given that the measures are tailored to national
specificity, needs and shortcomings. Consequently, at the stage the proceedings had so far reached, it
appeared that the aid could not be considered compatible with the common market in view of the fact
that it was financed from obligatory contributions which were also imposed on products imported from
other Member States.

Concerning parafiscal taxes, in a decision on a Danish state aid case taken in 1998, the Commission
confirmed its favourable approach towards parafiscal taxes levied to meet environmental objectives.
When the case was examined in 1995 the Commission had declared increases in the Danish pesticide
tax rates to be compatible with the rules on state aid with reference to Article 87(3)(c). Revenue from
the Danish pesticide tax, although channelled through the general budget, was reserved for the benefit
of the agricultural sector. In 1995 the Commission approved the basic pesticide tax system, involving an
increase in the tax rates from 3% to 25 % on average at the wholesale level (up to 37% at the retail

131 OJ C 302, 12.11.1987.

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STATE AID 241

level). Despite the fact that this parafiscal tax was levied on imported products, which in principle
makes parafiscal taxes incompatible with the state aid rules, the Commission authorised the system on
account of its environmental objectives which were explicitly in line with Community environmental
policy and in particular the programme of policy and action in relation to the environment and
sustainable development. 132 According to the Commission’s 1995 decision, without imposing the tax
on all pesticides used in Denmark the system could not have met its essentially environmental
objective. The tax revenue was partly used for aid aimed at reinforcing the reduction in pesticide use. A
condition for the Commission’s approval in 1998 was the continued compliance with the relevant
Community tax rules, notably that the tax was levied in a non-discriminatory manner on both domestic
and imported products.

Concerning aid for promotion and advertising, the Commission adopted in July a negative final
decision with respect to the aid measures provided for by Law No 5/97 of the Region of Sicily (Italy),
to the extent that the measures for the support and promotion of citrus fruit production in Sicily were
to be implemented using mass media such as television, press, radio and posters. The three reasons for
initiating proceedings under Article 88(2) were: (1) the absence of assurances of compliance with the
guidelines contained in the Commission communication concerning state involvement
in the
promotion of agricultural and fisheries products; 133 (2) the aid rate of 100%; and (3) the lack of
adequate information on the nature of the intermediary operators or representatives of market
operators responsible for implementing the advertising campaigns in the mass media. Aid for publicity
campaigns in the mass media was subject to the provisions of the Community framework for national
aids for the advertising of agricultural products and certain products not listed in Annex II to the EEC
Treaty, excluding fishery products. 134 During the Article 88(2) proceedings, the Italian authorities
argued in particular that the measures concerned were to disseminate scientific knowledge through the
mass media and that therefore the framework was not applicable. However, the Commission
concluded that for the framework not to be applicable, it was essential that the promotional measures
referred to the product in totally impartial and general terms and that the campaign did not contain
any reference to the origin or particular designation of any product, which, on the basis of the
information available, was not guaranteed in this specific case. On the subject of the intermediaries
responsible for carrying out the advertising campaigns in the mass media, the Commission took the
view that the comments submitted by the Italian authorities during the proceedings were not such as to
the aid measures with Directive 92/50/EEC 135 and
remove doubts about
consequently their compatibility with the common market. The Italian authorities provided no
information that would enable verification of the status (public or private sector) of the intermediaries
referred to in Law No 5/97 or of the system used by the Italian authorities to determine the costs of the
proposed measures in the event that the above Community directive was not applicable. Thus it could
not be ruled out that there would be overcompensation and consequently that aid would be granted to
intermediaries.

the conformity of

In April the Commission initiated Article 88(2) proceedings in respect of Article 2 of Italian Law
No 341/1995 and the relevant implementing rules as applied to products listed in Annex II to the EC
Treaty. The Commission initiated proceedings in respect of the following measures: guarantees and
interest-rate rebates on debt consolidation operations, guarantees for equity loans, and guarantees for
contributions from banks and other public or private institutions to the capital of SMEs. The aid

132 OJ C 138, 17.5.1993.
133 OJ C 272, 28.10.1986.
134 OJ C 302, 12.11.1987.
135 Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public

service contracts (OJ L 209, 24.7.1992).

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242 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

measures in the form of debt consolidation and equity investments could be combined. The
Commission initiated proceedings in respect of the guarantees for loans and interest-rate rebates or a
combination of these measures intended for the consolidation of the debts of recipient undertakings
for the following reasons: (a) in the case of viable undertakings, the aid seemed to be operating aid as
prohibited under the Treaty since it could not be considered to assist the development of agriculture to
an extent compatible with the common market, causing as it did distortions in the sectors concerned
through funding which did not seem to be justifiable under Article 87(3)(c); and (b) in the case of
undertakings in difficulty, the measures in question did not appear to be compatible with Community
rules laid down in the Community guidelines on state aid for rescuing and restructuring firms in
difficulty. Concerning the aid measures in the form of guarantees for equity loans granted by banks and
for public or private equity investments in undertakings, the Commission decided to initiate
proceedings for the following reasons: (a) in the case of firms not in difficulty, the information
available suggested that the aid measures did not only cover investments but could also take the form
of operating aid, which was not allowed under the competition rules; and (b) in the case of firms in
difficulty, the aid measures did not seem compatible with the Community rules on aid for firms in
difficulty as laid down in the guidelines mentioned above.

Concerning new projects, it is interesting to note that a total reform of the Dutch pig-farming sector
was in the process of being implemented which involved notification of various state aid measures to
the Commission. Such reform must also be seen within the context of the implementation of Council
Directive 91/676/EEC of 12 December 1991 concerning the protection of waters against pollution
caused by nitrates from agricultural sources. 136 On 1 September the law on restructuring pig farming
entered into force in the Netherlands. Upon the entry into force of this law, each pig farmer was
allocated a number of pig rights, and within this amount a number of breeding sow rights. These rights
were based on the number of pigs and breeding sows respectively held in 1996 or 1995. The law on the
restructuring of pig farming provided for a reduction of 25% in the pig rights. This 25% reduction
would occur in two stages: a 10% reduction as of 1 September 1998 and a 15% reduction as of 1
January 2000. The law further provided that pig rights would be reduced by 40% in 1998 and by 60% in
1999 upon each transfer of such rights. As of the year 2000, the reduction upon transfer would amount
to 25%. No compensation would be granted for this reduction. Within the context of the reform of the
Dutch pig-farming sector the following measures had been notified to the Commission: (a) pig levy:
system of parafiscal taxes for combating diseases in the pig sector; (b) buying-out scheme: buying of
manure production rights at market prices in areas affected by swine-fever; (c) socio-economic plan for
pig farming: a project group had prepared a project plan, which provided for collective information
(courses, seminars, etc.) together with individual assistance and information through company audits,
help with drawing up operating plans, education, conversion and placements for individual farmers; (d)
financial allowance for abandoning pig farming: pig rights would be reduced by 40% in 1998 and by
60% in 1999 upon each transfer of such rights; as of the year 2000, the reduction upon transfer would
amount to 25%. The scheme aimed to provide financial compensation for the larger reductions in pig
rights upon transfer in 1998 and 1999, i.e. 15% in 1998 and 35% in 1999; and (e) existing scheme for pig
farmers located in certain areas: the aim was to improve the environment by reducing the manure
output of intensive pig farming located in or near valuable nature reserves. Pig farmers located in these
sensitive areas could cease all activities or transfer their activities to other areas. The cessation of pig
farming activities led to the cancellation of pig rights. The transfer of activities led to a reduction in pig
rights, pursuant to the new Dutch law on the restructuring of pig farming which entered into force on 1
September. To stimulate such moves, pig farmers located in these areas were entitled to compensation
upon terminating or transferring their activities. Apart from the measure at (e), which was still under
examination, the Commission approved all the other measures.

136 OJ L 375, 31.12.1991.

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STATE AID 243

The Commission decided to close proceedings initiated in respect of investment aid for the company
Agrana Sta¨ rke GmbH. It found that the notified measure constituted state aid which was incompatible
with the common market and therefore decided that it could not be granted. Agrana Sta¨ rke GmbH,
which had its registered office in Vienna, was a producer of starch and starch products. The planned
investments, which were to increase its production capacity, were intended to allow Agrana to adapt to
the changed economic environment after Austria’s accession to the European Union. In view of the
existence of large structural surpluses in the starch sector, for which restitution had to be granted in
order to allow exports to third countries, the Commission did not normally allow aid to this sector. A
clause in the Austrian Act of Accession stipulated that the Commission should act flexibly with respect
to transitional national aid schemes designed to facilitate restructuring in the agricultural products
processing sector. In accordance with this clause, the Commission had previously allowed several cases
of investment aid for restructuring Austrian production in the starch sector which did not entail an
increase in capacity. However the investments involved in this case entailed a significant increase in
starch production by the company concerned. For this reason, the Commission was unable to accept
the Austrian arguments that the Commission should clear the aid in accordance with the flexibility
clause. Article 87(3)(c) required the Commission to exercise discretion in determining whether state
aid was in the common interest. After undertaking an investigation in accordance with the procedure
laid down by Article 88(2), and considering the comments submitted by the Austrian Government and
third parties, the Commission concluded that the provision of aid which would have the effect of
further increasing capacity in the starch sector could not be considered compatible with the common
interest. Furthermore, the Commission took account of the fact that the company had already made
the investments and that the production facilities had become operational without state aid having
been granted or a positive decision having been taken. The Commission concluded that the aid was
therefore not necessary for the investments to be undertaken and the development of the sector to be
facilitated. In fact, the free play of market forces had brought about the same result.

Concerning another new Member State, the Commission decided to give its approval to a Swedish
state aid scheme involving a five-year (plus two possible extensions of two years) energy tax exemption
granted to Agroetanol AB for the production each year of 50 000 litres of bioethanol worth between
SEK 80 and 150 million (about ECU 9-17 million). It recommended that Sweden modify the scheme so
that it would be possible to monitor the production cost differential of bioethanol and fossil fuels
during the first five years of the exemption period and during any extension period so that it would be
possible to react to changes in this differential, if necessary, by reducing the tax exemption so that state
aid would not be granted to the company in excess of the extra production costs it incurred in
producing bioethanol by comparison with the production costs of fossil fuels. Bioethanol is produced
from renewable resources (cereals) and blended at low levels with traditional motor fuels. The mixture
can be used in ordinary vehicles without any modifications having to be carried out. By comparison
with fossil fuels bioethanol is more environmentally friendly, especially as regards its emissions impact;
it is basically carbon dioxide neutral. In its decision the Commission reiterated the common interest in
the development of renewable forms of energy, the future competitiveness of which would lead inter
alia to a reduced import dependency on fossil energy sources and a reduction in emissions of
greenhouse gases, of which carbon dioxide was the main one. In view of the assurances given by the
Swedish authorities that they would monitor and evaluate the scheme and in view of the time-limit on
the tax exemption as well as the relative volume of production by comparison with that of total fuel
consumption in Sweden, the Commission accepted that the aid constituted a pilot project. This was a
precondition for exempting such schemes from tax under Council Directive 92/81/EEC of 31 October
1992 on the harmonisation of the structures of excise duties on mineral oils. As regards the intensity of
the aid, the Commission, which only had limited procedural powers under the state aid rules, applied
the principle spelled out in the 1994 Community guidelines on state aid for environmental protection
that state aid for renewable energy sources should not exceed the extra production costs involved by

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244 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

comparison with fossil fuels. While the tax exemption was not likely to result in overcompensation for
the time being, the possibility could not be ruled out that the company might improve its cost efficiency
by, say, increasing the use of production capacity, technological development or selling an increased
share of bioethanol as an additive to petrol in relation to the share sold as diesel. In accordance with
Article 88(1), the Commission therefore decided to recommend that Sweden modify its aid measure in
order to take these factors into account.

Finally, as regards the recovery of state aid which is incompatible with the common market, it is worth
noting that in a case concerning aid for promotion in the sheepmeat sector granted by France in breach
of Article 28 of the EC Treaty, following the Commission’s 1997 negative decision requiring that the
disbursed aid be recovered (with interest from the date on which it was granted and calculated on the
basis of commercial rates), in 1998 the French authorities provided evidence of the recovery, so that
the case can now be considered closed.

2.9. Other industries

Chemicals

Germany

Infraleuna Infrastruktur und Service GmbH 137

On 25 November the Commission decided to terminate proceedings initiated under Article 88(2) in
respect of grants that the German authorities planned to make to Infraleuna Infrastruktur und Service
GmbH, a company set up not long previously on the Leuna chemical site whose production facilities
had been privatised and sold to one hundred or so different investors. The objective of Infraleuna,
whose shares were mostly owned by the public sector, was to set up and manage all the infrastructure
for the site for the benefit of the companies located there. It had also been given the task of clearing
the site, which was the responsibility of the public authorities, the latter having sold the plots at the
market price for a developed site. The Commission found that, since it was impossible to find a private
investor for the infrastructures, setting up Infraleuna was the only alternative to the various tasks being
injection for the company of
carried out by the public authorities and that the initial capital
DEM 1 018 million (ECU 521.63 million) therefore did not constitute state aid pursuant to
Article 87(1). Although an unquantifiable part of the grant for environmental protection totalling
DEM 150 million (ECU 76.86 million) did constitute state aid, this was compatible with the
Community guidelines on state aid for environmental protection. The Commission also noted that no
aid was granted to the companies newly arrived on the site, which were paying the normal price for the
services provided by Infraleuna and in this way ensuring its subsequent funding.

137 C 18/97.

COMPETITION REPORT 1998

Textiles

France

Nouvelles Filatures Lainie`res de Roubaix

STATE AID 245

On 4 November the Commission decided to terminate the proceedings which it had initiated under
Article 88(2) in respect of aid unlawfully disbursed to Les Filatures de Roubaix in the form of a grant
and an equity loan. 138 It concluded that, of the grant of FRF 22 million (ECU 3.35 million), only the
FRF 7.7 million (ECU 1.17 million) which corresponded to the regional ceiling of 35% for SMEs could
be justified as regional investment aid and that the equity loan of FRF 18 million (ECU 2.74 million)
contained an operating aid element totalling FRF 1.46 million (ECU 0.22 million), i.e. the difference
between the rate applied and the market rate. It therefore decided to authorise the portion of the grant
amounting to FRF 7.77 million (ECU 1.17 million) and to order that the other aid be abolished by
means of the recovery of FRF 14.23 million (ECU 2.17 million) with interest and the application to the
equity loan of a rate corresponding at least to the reference rate of 8.28% applicable at the time the
loan was granted.

Paper

France

Preferential conditions granted by EDF to certain companies operating in the paper industry 139

On 20 May, following a complaint, the Commission decided to initiate Article 88(2) proceedings in
respect of presumed aid granted to the paper mills Condats, Cascades, Lancey, Gromelle and Sibille in
the form of preferential conditions of electricity supply from the publicly owned company Electricite´
de France (EDF). As an incentive to acquire electrical infra-red drying equipment, the paper mills
concerned were granted an advance from EDF when they installed a dryer. This advance corresponded
to a rebate on the quantity of electricity which the dryer was estimated to consume during the period of
validity of the supply contract, which was usually six years. The discounted total value of the rebates
was at least ECU 6.45 million. In initiating these proceedings, the Commission hoped to clarify a
number of questions which it could not answer on the basis of the information in its possession, namely
(i) whether, by offering these rebates, EDF was covering the marginal cost and at least part of its fixed
costs; (ii) whether, in so doing, EDF was not seeking to attract new customers from among the users of
other energy sources; (iii) whether other electricity consumers in a comparable situation were being
discriminated against; and (iv) whether there was any distortion of intra-Community competition
between manufacturers of electrical and non-electrical drying equipment, between suppliers of
electricity and suppliers of other forms of energy and between the paper mills benefiting and those not
benefiting from an EDF advance.

138 C 50/97.
139 C 39/98 (ex NN 53/98).

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246 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Household appliances and electronics

Spain

Magefesa and its successors

On 14 October the Commission decided to terminate with a negative decision the proceedings it had
initiated on 16 July 1997 under Article 88(2) in respect of aid received by the companies which were
members of the Magefesa group and some of the companies which succeeded them. 140 It concluded
that the aid was incompatible with the common market and ordered its recovery. The Magefesa group
had already received aid which was declared incompatible in 1989. In its 1998 decision, the
Commission noted first of all that its 1989 decision had not been implemented in that the incompatible
aid had not been claimed from the companies which had received it. This second negative decision was
taken in respect of aid received by the companies in the group, after the adoption of the 1989 decision,
in the form of systematic non-payment of taxes and social security contributions amounting to
ESP 13 150 million (ECU 78.82 million) until those firms were declared insolvent or definitively ceased
activity. Although some of the aid measures concerned might be in line with regional aid schemes, the
cumulative effect of the non-recovered aid caught by the 1989 decision and the new aid would
adversely affect trading conditions to an extent contrary to the common interest.

Italy

Seleco SpA 141

On 4 February the Commission decided to extend the Article 88(2) proceedings which it had initiated
in 1994 in respect of aid granted to Seleco, a consumer electronics manufacturer. The proceedings were
extended in respect of new financial transactions from which Seleco had benefited since 1994 and
which might contain aid elements since they involved the public companies Italtel, Friulia SpA and
Rel. These transactions were namely the acquisition of shares by Italtel and Friulia SpA, loans worth at
least ECU 12.3 million and Seleco’s redemption for ECU 10.28 million of a debt to Rel totalling
ECU 33.85 million.

Copper, lead and zinc

Italy

Enirisorse 142

On 25 November the Commission decided to terminate with a negative decision proceedings initiated
under Article 88(2) of the EC Treaty in respect of new aid in the form of a capital injection worth
ECU 68.67 million granted by the Italian authorities to the Enirisorse group, which was chiefly active
in the copper, lead and zinc industries. The Commission found that the capital injection constituted
state aid since the Italian authorities did not act as a normal private investor operating in a market
economy would have acted, given the plans to wind up Enirisorse and the fact that no return could thus

140 C 44/97.
141 C 46/94 (OJ C 155, 20.5.1998); for the opening of the original proceedings see 1994 Competition Report, p. 559.
142 C 90/97.

COMPETITION REPORT 1998

be expected from the capital injection. It therefore concluded that the aid was incompatible and
ordered that it be recovered, with interest running from the date on which it was granted.

STATE AID 247

State stationery and coinage

Italy

Instituto Poligrafico e Zecca dello Stato and the firms it controlled 143

On 28 October the Commission decided to initiate proceedings under Article 88(2) of the EC Treaty in
respect of aid to the Poligrafico group, i.e. Instituto Poligrafico e Zecca dello Stato (Poligrafico) and
the firms it controlled, which were engaged in the production of ordinary paper and paper for
banknotes, the production of official stamps and collectors’ stamps, and the publication of official
government documents and cultural and literary works of national interest. Without the aid, the
recipient firms within the group would have incurred significant losses and been in difficulty. The aid
consisted both in capital increases totalling ECU 156.5 million injected by Poligrafico into a group
member, Cartieri Miliani, and in the payment of significantly excessive prices in connection with
exclusive contracts concluded between the State and Poligrafico involving profits of between ECU 66
and 139 million, in particular with the company Verres. In order to be deemed compatible with the
common market, the aid would have to comply with the conditions laid down in the guidelines on aid
to firms in difficulty.

Energy

Denmark

Measures to assist the natural gas sector in Denmark 144

On 29 July the Commission approved a tax-relief measure in favour of the Danish natural gas sector.
The five natural gas distribution companies and the publicly owned company Dangas had been
benefiting from the relief measure in question since they began distributing natural gas in the early
eighties. The price of natural gas paid by households corresponded to the price of oil but the regional
companies and Dangas could retain what amounted to a ‘shadow tax’ as natural gas was not taxed. The
tax concession was necessary in order to enable the construction and expansion of the natural gas
system. None the less, the five regional companies and Dangas built up a heavy debt burden of
ECU 2.35 billion (DKK 17.4 billion) owing to the fall in oil prices and the lower rate of households’
conversion from oil to gas. The Danish authorities had undertaken to renotify the system when the
directive on gas liberalisation was implemented in 2000. In any event, the Commission would receive
notification of
the tax-relief measure in 2000, as its main component would expire on
31 December 2000. The Commission decided to approve the aid on the ground that the regional
companies and Dangas had been entrusted by an official act with the operation of a public service
(within the meaning of Article 86(2) of the EC Treaty), namely the construction of the natural gas
network and the distribution of natural gas. The scrutiny carried out by the Commission departments
had shown that the five regional companies and Dangas had not received and would not be receiving
during the period up to 2000 any overcompensation as a result of the tax-relief measure. Finally,
emphasis was placed on the fact that the measures would be subject to review before liberalisation of

143 NN 95/97.
144 N 449/97 A and NN 50/98 (OJ C 308, 8.10.1998).

COMPETITION REPORT 1998

248 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

the gas market started and that, by introducing the notified measures, the Danish Government had in
fact reduced the economic benefit to the five regional companies and Dangas.

Germany

Lignite-fired heating plant in Cottbus 145

On 9 December the Commission decided to terminate proceedings initiated under Article 88(2) and to
authorise aid worth DEM 49.5 million (ECU 25.2 million) for the construction of a lignite-fired heating
plant for the town of Cottbus. The project applied new technology permitting the use of lignite as a fuel
and had benefited from additional Community aid under the Thermie programme. The Commission
found that it had a beneficial effect on regional development and employment, while its impact on the
fuels market was negligible, and therefore concluded that it was compatible with the common market.

Ireland

Extension of the Irish natural gas network 146

On 6 May the Commission approved investment aid of ECU 72.3 million (IEP 57 million) for
extending the Irish natural gas network by some 355 km, adding almost 50% to the existing network.
The aid did not exceed the maximum levels acceptable for the relevant assisted areas in Ireland and
was accordingly compatible with the common market.

Netherlands

Aid for 624 Dutch petrol stations situated near the German border 147

On 3 June the Commission initiated proceedings in respect of aid worth ECU 56.57 million granted by
the Dutch Government to 624 Dutch petrol stations located near the German border in order to
compensate their owners for the losses resulting from an increase in the excise duty on diesel from
1 January. The aid was based on the quantity of diesel sold and was in inverse proportion to the
distance between the station and the border with Germany. The Commission doubted whether the de
minimis rule was applicable since the Dutch Government had not shown that the stations receiving aid
were all distinct undertakings and that the aid could not therefore have a cumulative effect, and
considered that the measure was likely to have an effect on trade and competition between
Member States.

Finland

Electricity cable from Sweden to A˚ land, Finland 148

On 14 October the Commission decided not to object to the granting of aid worth FIM 48 million
(ECU 8 million) for laying a new electricity cable between Sweden and the A˚ land Islands in Finland to

145 C 59/97.
146 N 704/97 (OJ C 253, 12.8.1998).
147 C 43/98 (ex 558/97) (OJ C 307, 7.10.1998).
148 N 18/98 (OJ C 392, 16.12.1998).

COMPETITION REPORT 1998

replace the old cable in order to meet the islands’ requirements for the next twenty years. The aid was
granted to the semi-public electricity company Kraftna¨ t A˚ land, the owner of the cable, which was
responsible for building the network, connecting consumers and supplying electricity. The Commission
took account of the fact that the public service obligation on Kraftna¨ t A˚ land was covered by the
concept of a service of general economic interest under Article 9086(2) of the Treaty and that the
development of trade would not be affected to an extent contrary to the common interest since the
new cable would be available to all suppliers and consumers wishing to purchase electricity in Sweden.

STATE AID 249

Sweden

Aid schemes for R&D within the energy sector 149

On 11 March the Commission approved three aid schemes with a total budget of ECU 607 million for
various R&D measures in the energy sector. These measures formed part of a wide-ranging
reorganisation of Swedish energy policy designed to improve the sustainable development of
environmentally friendly energy sources. The schemes were intended to support basic research and
precompetitive research projects by enterprises, research institutes and universities for the
development of various renewable energy sources.

Tourism

Austria

Kurzentrum Bad Windischgarsten GmbH&Co KG 150

On 22 April the Commission approved investment aid of ECU 4.8 million for the construction of a
sanatorium in Windischgarsten, a resort situated in an assisted area. The Commission came to its
conclusion having found that there was no overcapacity in this specific market in this area or in
neighbouring areas but that there was a lack of beds and that the aid did not exceed the maximum
allowable aid intensities for this region.

Italy

Sicilian Regional Law No 25/93 151

On 3 June the Commission decided to terminate proceedings initiated under Article 88(2) of the
EC Treaty in respect of Sicilian Regional Law No 25/93 on measures to promote employment
(Articles 51, 114, 117 and 119). Regarding in particular the grants for the promotion of tourist
transport to Sicily awarded to tour operators and to Italian and foreign travel agencies, the
Commission found that, given the scheme’s arrangements, the direct effects of the aid in terms of
financial advantages were effectively passed on, via the recipient agencies, to consumers, i.e. tourists.
Despite this, the Commission was not able to rule out the existence of aid to the tourist industry as a
whole in the region of Sicily within the meaning of Article 87(1) of the EC Treaty. It decided to
approve the aid in question in view of Sicily’s eligibility for exemption under Article 87(3)(a) of the

149 N 710/97, N 711/97, N 712/97 (OJ C 169, 4.6.1998).
150 N 507/96 (OJ C 290, 18.9.1998).
151 C 21/97.

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250 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

EC Treaty, and of the fact that the information provided by the Italian authorities demonstrated the
inadequate development of the tourist industry in Sicily.

United Kingdom

Tourism challenge fund 152

On 22 December, having found that the regional aid ceilings were not exceeded, the Commission
authorised the implementation of an aid scheme designed to support investments in tourism in
Northern Ireland. The budget allocated to the scheme for the period 1998-2003 was ECU 135 million.

Health care

Italy

Rescue aid to Case di Cura Riunite srl 153

On 18 February the Commission decided to raise no objections to the Italian authorities’ proposal to
grant a state guarantee to Case di Cura, a public provider of medical services, on new loans for a
maximum amount of ECU 20.5 million. The guarantee would be paid under market conditions with a
yearly charge of 1.35%. The Commission considered that the measure in question did not fall under
Article 87(1) because it did not confer any economic advantage on the firm but only reduced some of
the financial disadvantages which the State itself had caused it by not repaying its outstanding debts.
Moreover, the Commission considered that there was limited distortion of competition, trade between
Member States in the medical services market being negligible.

Telecommunication services

Belgium

Hermes Europe Railtel 154

On 7 April the Commission decided to initiate Article 88(2) proceedings in respect of a state guarantee
to be given by the Flemish authorities in order to cover 50% of loans amounting to ECU 50 million
granted by private banks to Hermes Europe Railtel (HER). HER, a joint venture between the
American telecommunications services company GTS and the Dutch HIT Rail BV, aimed to become
one of the leading pan-European carriers in a market which was liberalised only recently. HER
intended to supply, via its network, a wide range of high-technology trans-frontier telecommunications
services. HER would set up and operate along Europe’s rail system an optical fibre network which, by
mid-1998, would interconnect six EU countries and Switzerland and, by the end of the project, would
be operating all over Europe. The overall investment costs in non-assisted areas in Flanders would run
to ECU 64 million. The Commission doubted whether the guarantee would be awarded under market
conditions. If not, the Commission noted furthermore that the aid was not being granted to an SME
and that the area concerned was not depressed or characterised by high unemployment. If these two

152 N 533/98.
153 N 461/97 (OJ C 149, 15.5.1998).
154 C 29/98 (ex N 544/97) (OJ C 291, 19.9.1998); Competition Policy Newsletter 2/98, p. 83.

COMPETITION REPORT 1998

conditions had been met, the Commission would have been able to take a more favourable view of the
state guarantee in question.

STATE AID 251

Postal services

Italy

Ente Poste Italiane 155

On 14 July the Commission decided to initiate Article 88(2) proceedings in respect of aid granted to
the Italian national postal operator (Amministrazione delle Poste e Telecommunicazioni, later Ente
Poste Italiane and, since February, Ente Poste SpA). Aid appeared to have been granted in various
forms over the years. Ente Poste had no analytical accounting system allowing separation of the costs
and revenues of reserved and competitive activities respectively. The Commission estimated that the
resources granted by Italy to the postal operator over the last
thirty years might exceed
ECU 20 000 million. At least part of this aid might be compatible with the common market in that
it either offset genuine extra costs incurred as a result of the postal operator’s public service
obligations, or was granted before the liberalisation of the postal services. Having learned since
initiating proceedings that Ente Poste had benefited from additional assistance in the form of a debt
write-off worth ECU 2.65 billion, the Commission decided on 16 September to extend the proceedings
to include this assistance.

Civil engineering

Italy

Societa` Italiana per Condotte SpA 156 and Italstrade SpA 157

On 16 September the Commission decided to terminate the proceedings it had initiated under
Article 88(2) of the EC Treaty in respect of aid received between 1995 and 1997 by the civil
engineering firms Societa` Italiana per Condotte d’Acqua SpA and Italstrade SpA. The companies
were subsidiaries of the Iritecna/Fintecna group and, under the restructuring plan for the group, had
previously been granted authorised aid totalling ECU 56 million and ECU 231 million respectively.
However, in breach of the Commission decision in respect of Iritecna, new aid had been granted to the
two firms between 1995 and 1997 in connection with their privatisation, amounting to ECU 84 million
in Condotte’s case and ECU 91 million in Italstrade’s. The Commission had taken the view that the
compatibility of this new aid could only be assessed in the context of an overall examination of all aid
granted and therefore that a re-assessment of the compatibility of the aid previously authorised was
required.

In terminating the proceedings, the Commission concluded that, notwithstanding the breach of the
decision concerning Iritecna, both the aid measures previously authorised and the new aid measures
could be considered compatible with the common market since they complied with the requirements of
the guidelines on aid to firms in difficulty and were such as to allow restoration of the long-term

155 C 47/98 (ex NN 41/98) (OJ C 367, 27.11.1998).
156 C 38/97.
157 C 39/97 (ex NN 59/97).

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252 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

profitability of the two firms. The Commission therefore authorised the aid on condition, however, that
the privatisation of the two firms via the sell-off of Fintecna’s last holdings in their capital, was
completed within the specified deadline and that Italy provided regular reports on their economic and
financial situation and on the progress made towards privatisation.

Cinema and television

France

Aid scheme for film production 158

On 3 June the Commission approved a new scheme to support French film production under
Article 87(3)(d). The scheme had an annual budget of some ECU 60 million and granted automatic
entitlement to aid to any film produced in France that was of cultural interest. The scheme, based on
simplified and harmonised rules, facilitated international co-productions. The Commission assessed the
notified scheme on the basis of three general criteria which struck a balance between the goal of
cultural creation and the development of the audio-visual industry:

— the aid intensity should not exceed 50%, so as to promote commercial incentives which were usual

in a market economy and to prevent outbidding by Member States;

— the aid should, as far as possible, avoid bias towards specific activities connected with film

production and should not, therefore, provide bonuses for given activities;

— the producer had to be free to spend part (at least 20%) of the film’s budget in one or more other

Member States without losing any aid on that part.

Netherlands

Aid scheme for film production 159

On 25 November the Commission decided not to object to an aid scheme for film production. The
scheme, which involved a low intensity of aid, met the general criteria for approving aid to film
production as laid down by the Commission in May in its decision on a French scheme, i.e. the intensity
of the aid should not exceed 50% per film and the producer should be free to spend at least 20% of the
production budget in other Member States without losing any of the aid. The scheme would apply for a
period of five years and had a budget of NLG 15 million (ECU 6.275 million).

158 N 3/98 (OJ C 279, 8.9.1998).
159 N 486/97.

COMPETITION REPORT 1998

STATE AID 253

Books

France

Aid for Coope´rative d’Exportation du Livre Franc(cid:224)ais 160

On 10 June the Commission decided to terminate Article 88(2) proceedings initiated in respect of aid
granted by the French Government to Coope´ rative d’Exportation du Livre Franc(cid:224)ais (CELF) by
approving the aid on the basis of the cultural derogation laid down in Article 87(3)(d). The aid was
granted to CELF to enable it to handle small orders placed by foreign bookshops, thereby allowing
readers in non-French-speaking countries to obtain works in French at reasonable prices. The
Commission applied the above cultural derogation in view of its conclusion, following a thorough
assessment of the relevant market and of CELF’s activities, that the aid was granted exclusively for
cultural purposes and not in order to subsidise any other of CELF’s commercial activities.

Betting and gaming

France

Pari Mutuel Urbain 161

On 6 May the Commission decided to renew the investigation it had opened in 1991 in respect of a
series of measures granted by France to Pari Mutuel Urbain and to racecourse undertakings. This
decision followed the partial annulment by the Court of First Instance of the final decision taken by the
Commission in 1993. At the time, the Commission had approved some of the aid on the basis of
Article 87(3)(c) and had decided that some of the other measures did not constitute aid within the
meaning of Article 87(1). 162 The Court’s judgment confirmed the first part of the Commission’s
decision but set aside the second part. In the light of the judgment, the Commission decided to extend
the proceedings initiated in 1991 in respect of these measures.

Arms

Belgium

Aid for the civilian activities of the Herstal group 163

On 3 June the Commission approved aid of ECU 4 million for the civilian activities of the Herstal
group, a military and civilian arms and ammunition manufacturer. The aid was intended for the
downsizing plan connected with the reorganisation of the group’s activities and was compatible with
the guidelines on aid for firms in difficulty.

160 C 39/96 (ex NN 127/92); for the initiation of proceedings see 1996 Competition Report, p. 243.
161 C 51/90 (ex 100/90) (OJ C 253, 12.8.1998); for the opening of the original proceedings see 1991 Competition

Report, point 339.

162 Case T-67/94 Ladbroke Racing Ltd v Commission [1998] ECR II-1; for the Commission’s final decision see 1993

Competition Report, point 542.
163 N 227/98 (OJ C 277, 5.9.1998).

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254 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

3. Cross-industry schemes

3.1. Environmental protection and energy saving

Belgium

Sidmar 164

On 25 March the Commission authorised environmental protection aid for the steel company Sidmar.
The aid took the form of a ECU 26.2 million grant towards ECU 179 million worth of investment in
four projects designed to reduce the environmental impact of Sidmar’s activities in order to comply
with new environmental standards.

Germany

a) Relief of Georgsmarienhu¨ tte GmbH from environmental obligations 165

On 29 July the Commission took a final decision on the relief of Georgsmarienhu¨ tte GmbH from its
environmental obligations with regard to the recycling and disposal of industrial dust. In this decision,
the Commission considered the non-notified aid of ECU 31.52 million (DEM 61.64 million) granted
between 1994 and 1995 to be illegal and incompatible with the common market and therefore required
that it be reimbursed. The Commission found that Georgsmarienhu¨ tte did not recycle the dust and was
not going to do so since it had concluded that it was not economically viable.

b) Riedel-de Hae¨n 166

On 22 December the Commission decided to terminate with a negative decision proceedings initiated
under Article 88(2) in respect of investment aid totalling DEM 8 million (ECU 4 million) which had
been unlawfully granted to the chemicals firm Riedel-de-Hae¨ n. Since the firm was a large company
which was not located in an assisted area and therefore could not benefit from general investment aid,
the German authorities presented the aid as environmental protection aid. The Commission found that
the compatibility criteria laid down in the guidelines on environmental aid were not met since this was
a new investment project and there was no evidence that some of the costs were incurred for purely
environmental rather than economic considerations which would have prompted the recipient to
undertake the investment in any case. It therefore decided to order that the aid be recovered, with
interest running from the date on which it was granted.

Italy

a) Servola SpA 167

On 1 July the Commission decided to terminate Article 88(2) proceedings initiated in respect of aid
totalling ECU 11.36 million (ITL 22 billion) which the Italian Government planned to grant to Servola

164 N 675/97.
165 C 46/97 (ex NN 86/97); for the initiation of proceedings see 1997 Competition Report, p. 213.
166 C 63/97 (ex NN 104/97).
167 C 22/96.

COMPETITION REPORT 1998

in environmental protection. In its decision to initiate proceedings,

the
SpA for investment
Commission had raised doubts as to the compatibility of aid of up to ECU 7.23 million
(ITL 14 billion), given that this amount was intended for investment which was not eligible under
the Community guidelines on state aid for environmental protection. Since the Italian Government
withdrew the aid for this part of the investment, the Commission was able to terminate the proceedings
and to approve the rest of the aid.

STATE AID 255

b) Cartiere del Garda 168

On 29 July the Commission authorised ECU 1.9 million in aid to Cartiere del Garda for investment in
environmental protection. The firm, located in a tourist resort, had decided to invest ECU 6.5 million
in the purification of effluent discharged into Lake Garda and in action to reduce production-induced
noise pollution. These measures enabled the firm to achieve higher levels of environmental protection
than required by law without for all that increasing its productivity. The Commission therefore
concluded that the aid was in line with the guidelines on state aid for environmental protection.

Netherlands

a) Green electricity 169

On 6 May the Commission approved an aid scheme aimed at stimulating the use of electricity
generated from renewable energy sources. The scheme introduced a temporary (until 1 January 2003)
zero rate instead of the standard energy tax. It would encourage energy distribution companies to offer
green electricity to their customers. Green electricity included electricity generated by wind power,
solar power, small-scale water power stations or installations running on biomass. The annual budget
was estimated at ECU 13.5 million.

b) Investment aid for the Nerefco refinery for the reduction of CO2 emissions 170

On 17 June the Commission decided to initiate Article 88(2) proceedings in respect of ECU 6.7 million
worth of investment aid for the installation of a process-integrated gas turbine at the Nerefco refinery.
Using such gas turbines in heat-power stations considerably improves energy efficiency and produces
lower CO2 emissions than the conventional, separate generation of heat and power. However, the
Commission had serious doubts about whether the aid complied with the Community guidelines on aid
for environmental protection, which stipulated that the aid had to be strictly confined to the extra
investment costs necessary to meet environmental objectives. Furthermore, it would have to assess
whether the energy savings due to the new system had been duly taken into account in the calculation
of the aid to be granted.

c) Waste disposal system for car wrecks 171

On 29 July the Commission declared that the waste disposal system for car wrecks did not constitute
state aid within the meaning of Article 87(1). The aim of this system for end-of-life vehicles was to

168 N 658/97 (OJ C 308, 8.10.1998).
169 N 752/97 (OJ C 244, 4.8.1998).
170 C 44/98 (ex N 708/97) (OJ C 334, 31.10.1998).
171 N 656/97 (OJ C 308, 8.10.1998).

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256 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

ensure that car wrecks were disposed of with a minimum of environmental damage. The system was
confined to the disposal of materials for which there was currently no environmentally friendly
recycling system that was commercially viable. No gratuitous benefits were conferred on the recycling
companies, which merely received a fair remuneration for their activities.

Austria

a) Schmid Schraubenwerke 172

The decision, taken on 17 June, concerned financial support of ECU 350 000 for rehabilitation of the
Schmid Schrauben Hainfeld Ges.m.b.H. site, which had suffered past environmental damage as a result
of the operation of a chromium-plating plant between 1965 and 1992. Tests carried out in April 1996
showed the soil to be severely contaminated. The Commission assessed the measures and came to the
conclusion that the polluter pays principle, the basic tenet of Community policy on state aid for
environmental protection, could not apply because the polluter had been liquidated. The site’s current
owner had no control over the property at the time the damage occurred and the economic benefit
resulting from the polluting activity had not passed to it. Furthermore, the new owner did not purchase
the site on the basis that he knew about the pollution in question and would take responsibility for
cleaning it up. Nor was there any reason to consider that the purchase should have been conducted on
such a basis. In accordance with point 3.2.2 of its environmental aid guidelines, there being no benefit
to Schmid Schrauben Hainfeld, the Commission decided that the measures did not constitute state aid
within the meaning of Article 87.

b) Kiener Deponie Bachmanning 173

On 9 December the Commission decided to terminate Article 88(2) proceedings initiated in respect of
aid granted to Atlas, the owner of a contaminated site in Upper Austria. The aid involved the State’s
meeting the cost (amounting to some ECU 23 million in total) of the site’s decontamination by the
specialised firm ASA, which was to coordinate the operation. The Commission found that the cost of
the decontamination and ASA’s fee for the work were in line with market conditions. It therefore
concluded that the financing provided by the State to meet the decontamination costs did not
constitute state aid, provided that the amount was recovered from Atlas (the site owner) by all
available legal means.

United Kingdom

Non-fossil fuel obligation for renewables 174

On 29 July the Commission approved the fifth non-fossil fuel obligation for renewables in England and
Wales, extending the scheme in force, first authorised in 1990. The aid was provided through a contract
between public electricity suppliers (containing a series of obligations relating to the purchase of
electricity generated from renewables) and generators of electricity from renewables. The aid took the
form of a subsidy and was limited to the difference between the cost of purchasing electricity generated
from renewables and what that electricity would have cost had it been generated by a fossil-fuel
generator. The Commission concluded that the aid in question was operating aid, but it was satisfied

172 N 856/97 (OJ C 409, 30.12.1998).
173 C 24/98 (ex N 663/97) (OJ C 201, 27.6.1998).
174 N 153/98 (OJ C 300, 29.9.1998).

COMPETITION REPORT 1998

that it would be progressively reduced, that the scheme would be renotified within five years from the
date of the decision and that it complied with the Community guidelines on state aid for environmental
protection. The scheme’s budget
for the financial years 1997/98 and 1998/90 amounted to
ECU 383 million.

STATE AID 257

3.2. Research and development

Germany

a) Sican Group and project partners, Lower Saxony 175

On 11 March the Commission decided to initiate Article 88(2) proceedings in respect of aid which the
Sican group and its project partners had been receiving since 1990 for R&D activities in the
microelectronics sector. The Commission doubted whether the aid in question fulfilled the conditions
set out in the framework for aid for R&D, since, with the level of information then available, it was not
possible to say to which research projects aid had been granted, to determine the stage of research
financed, to quantify the amount and intensity of the aid or to demonstrate its necessity and incentive
effect.

b) Marine research programme 176

On 11 March the Commission authorised a programme relating to the coordination of the various
marine research activities being pursued in Germany and contributing to the development of a
common conceptual framework with regard to such activities. The programme supported mainly basic
research carried out by universities. Project-related support was also envisaged for enterprises, mainly
SMEs. The programme’s budget was to amount to ECU 43.3 million, of which ECU 11.5-12.8 million
was earmarked for project support.

c) Modification and extension of the scheme “Aid for market-oriented non-university research

institutes”, Land of Saxony177

On 1 July the Commission decided to authorise the extension up to the end of 1999, and the alignment
with the new R&D framework, 178 of a scheme (first approved in 1995) to improve the efficiency of
non-university business-oriented research bodies in Saxony by modernising scientific equipment and
technical
infrastructure. The overall budget of the scheme for the years 1996-99 amounted to
ECU 10.5 million.

175 C 20/98 (ex NN 166/97, NN 169/97 and NN 170/97 (OJ C 307, 7.10.1998); Competition Policy Newsletter 2/98, p.

86.

176 NN 19/97 (OJ C 156, 21.5.1998).
177 NN 31/98.
178 OJ C 45, 17.2.1996.

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258 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

d) Modification and extension of the scheme “Innovative technology-oriented collaboration

projects”, Land of Saxony179

On 1 July the Commission authorised the extension of the above scheme up to the end of 1999, and its
alignment with the rules of the new R&D framework and with the new definition of SMEs, 180 with a
view to stimulating effective cooperation in R&D between firms and public research bodies in order to
contribute to the development of new products and processes in the field of future technologies. The
overall budget for the years 1996-99 was ECU 90 million.

e) Aid to help increase SME’s capacity for innovation 181

On 16 September, having found that the requirements of the framework for aid to R&D had been met,
the Commission decided not to raise any objection to the introduction of an aid scheme promoting the
innovation capacity of SMEs. The scheme would apply until 2003 and the total budget planned was
ECU 510 million. Up to 75% of the grants would go to companies, most of them SMEs, with the
balance being awarded to research institutes working in cooperation with the companies concerned.

Spain

R&D regional aid scheme, Castile-Leon 182

On 18 February the Commission approved an aid scheme for R&D activities corresponding to all the
stages of research delineated in the relevant Community framework. The scheme covered the years
1998-2000 and had an annual budget of ECU 12 million.

France

a) Tubes and shapes 183

On 18 February the Commission approved R&D aid to the “Tubes and Shapes” research centre for the
development of a process for designing and manufacturing steel parts using the hydroforming
technique with steel tubes and hollow steel profiles (non-ECSC steel). The research project was at the
precompetitive development stage. The aid took the form of a repayable advance of ECU 1.74 million
(FRF 11.4 million) with an intensity of 19.5%.

b) MEDEA T 601, Eureka 1535 184

On 6 May the Commission authorised ECU 14.95 million in state aid for R&D granted by France for
the installation, under a Eureka programme, of pilot production lines for integrated circuits on
300 millimetre wafers, which are expected to become the manufacturing standard in microelectronics
from 2002. Other Member States taking part in this Eureka project were Germany and the

179 NN 30/98 (ex N 412/97).
180 OJ L 107, 30.4.1996.
181 N 357/98 (OJ C 363, 25.11.1998).
182 N 766/97 (OJ C 111, 9.4.1998).
183 N 721/97 (OJ C 396, 19.12.1998).
184 N 38/98 (OJ C 244, 4.8.1998).

COMPETITION REPORT 1998

Netherlands. The companies receiving aid which were involved in the project were SGS-Thomson, Air
Liquide, GRESSI, Incam and RECIF.

STATE AID 259

c) Eureka 1711 — ADTT Phase II 185

On 29 July the Commission approved a scheme to develop improved-quality digital television systems
in two fields of electronics production: films and video communications. The scheme would run until
the end of 1998 with a budget of ECU 15.5 million, the eligible costs being ECU 39.5 million. The
recipients were Thomson Multime´ dia, Philips Electronique Grand Public, Philips Composants,
Thomcast-Matra Communication, Enertec-Schlumberger Industries and Cril Inge´ nierie.

d) Recmes 186

On 22 December, having found that the requirements of the framework for aid for R&D were met, the
Commission decided not to raise any objections to the granting of subsidies totalling ECU 220 million
to a programme of basic and industrial research involving industrial firms and publicly owned research
laboratories. The programme, entitled Recherche coope´ rative en micro-e´ lectronique silicum - Recmes,
was intended to develop new generations of electronic circuits. The main industrial firms involved in
the research were STMicroelectronics and Air Liquide, along with TCEC, SETEC and Alcatel.

France and the Netherlands

Commend (Eureka 1549) 187

On 7 April the Commission approved aid in connection with the Commend R&D project, adopted as
Eureka project 1549 in July 1996. Commend’s objective was research into the interconnection for
consumers of various kinds of digital equipment, networks and services (e.g. TV, PCs, digital video
broadcasting, telecommunications networks, advanced cable networks and digital recordings). The
research was to study the feasibility of those systems and to produce a proposal for a European
standard, protocols and management structures. It was an industrial research project. The innovative
aspect of Commend consisted in taking as the actual point of departure for research the
interconnection of different categories of equipment, networks and services. Five countries were
involved in the project (France, the Netherlands, Germany, Austria and Belgium). It would run until
the year 2000, with the overall costs for the various partners estimated at ECU 126 million. The
Commission approved the following aid amounts: for France, ECU 13 million for Thomson
Multime´ dia and ECU 13.6 million for Philips Electronique Grand Public; for the Netherlands,
ECU 13.4 million for Nederlandse Philips Bedrijven BV. The aid would take the form of direct grants
up to a maximum of 50% of eligible costs.

185 N 640/97 (OJ C 308, 8.10.1998).
186 N 264/98.
187 N 664/97 France, N 506/97 the Netherlands (OJ C 192, 19.6.1998).

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260 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Italy

Tax measures to promote R&D within industrial undertakings 188

On 11 March the Commission approved a scheme of aid mainly for SMEs nationwide, designed to
promote industrial and precompetitive R&D activities within industrial undertakings. The aid was to
be provided in the form of tax credits, with a budget of ECU 178 million per year. The scheme would
run from 1998 to 1999.

Netherlands

a) Oce´ NV 189

On 11 March the Commission decided to initiate Article 88(2) proceedings in respect of the Dutch
Government’s proposal to grant aid of ECU 23 million to Oce´ NV for the development of colour ink-
jet printers. In 1994 Oce´ had received a grant of ECU 3.2 million for an ink-jet project for the period
1994-96 under the “Business-oriented technology stimulation scheme”. 190 The new project, to run
from 1997 to 2001 and presented as being largely R&D, did not appear to be eligible for public funding
under the R&D aid rules. The work described seems to correspond to a product-development work
programme aimed at developing prototypes to maturity and preparing them for series production. The
proposed aid did not have any demonstrable incentive effect, i.e. an inducement for the company to
carry out research which it would not otherwise have pursued.

b) Fokker 70 project 191

On 17 June the Commission decided to close the file on R&D aid for the Fokker 70 project. The
Commission took this decision because, following Fokker’s state of suspension of payments on 23
January 1996 and the company’s insolvency two months later, the Dutch Government undertook to
recover, in accordance with the rules of Dutch law, the total of ECU 103 million in aid granted to the
Fokker 70 project. The aid had been given to support the development of a civil transport aircraft (the
Fokker 70, a derivative of the Fokker 100) whose total R&D costs had been estimated in 1993 at
ECU 163 million.

c) MEDEA T601 (Eureka 1535)/Atlas 192

On 29 July the Commission approved aid of ECU 88 million for the MEDEA T601 (Eureka 1535/
Atlas) project. The objective of the aid was to stimulate the participation of Dutch companies in this
international collaborative R&D project. The recipients were ASML, ASMI and Philips Semicon-
ductor. The aid took the form of grants and loans. The overall budget amounted to ECU 43.4 million
for grants and ECU 45 million for loans.

188 N 655/97 (OJ C 236, 28.7.1998).
189 C 18/98 (ex N 939/96) (OJ C 270, 29.9.1998).
190 1994 annual report on the PBTS scheme, letter from the Dutch authorities dated 28 February 1996.
191 NN 28/94.
192 N 135/98 (OJ C 308, 8.10.1998).

COMPETITION REPORT 1998

STATE AID 261

Austria

Siemens Bauelemente OHG 193

On 7 January the Commission decided to initiate Article 88(2) proceedings in respect of a plan to grant
an aid package to Siemens for the conversion of its semiconductor production plant in Villach (situated
in a non-assisted area) to power semiconductor production. The notified package of ECU 27 million
comprised ECU 25.5 million for R&D and some ECU 1.7 million (ATS 23 million) for environmental
and training measures. In the Commission’s view, the Austrian authorities had not demonstrated the
incentive effect of the proposed R&D aid, the necessity of the aid or the eligibility of the project for
funding as “precompetitive development activity”. As regards the environmental aid, the Austrian
authorities would have to demonstrate that it was being granted for action extending beyond legal
requirements. Furthermore, the nature of the training project (specific versus general vocational)
remained to be established.

United Kingdom

Rolls-Royce large engine programmes 194

On 25 March the Commission authorised R&D aid which the UK authorities proposed to grant to
Rolls-Royce for the development of a new generation of three high-thrust aero engines, derivatives of
the existing Trent engines. The aid took the form of a reimbursable advance of ECU 297 million
(GBP 200 million) to be granted over four years (1988-2001). The total cost of the R&D programmes
was ECU 1 095 million (GBP 736 million). A precondition for obtaining government funding was
achievement by the company of a number of performance milestones. Significant failures in key parts
of the R&D programme could result in the withdrawal of further government funding. The
Commission found that the terms of the planned investment would be as commercial as possible. On
the other hand, it recognised that, given the risk of partial failure of the R&D programmes, the
investment could not be considered as fully commercial. The Commission was satisfied with the aid’s
incentive effect, considering that without government support the company would be unable to raise
the moneys on the capital markets and proceed with the R&D programme.

3.3. Rescue and restructuring aid

Belgium

Sunparks International NV

On 30 September the Commission decided not to raise any objections to restructuring aid for Sunparks
International NV, an operator of all-weather holiday parks. 195 The restructuring plan for the company
was based on cost-reduction measures, a new strategic repositioning of the parks and financial
restructuring. The Belgian authorities would provide a guarantee of 75% for two loans. The aid
intensity was set at BEF 360 million (ECU 8.8 million). The Commission took into account the large
contribution from the private sector and the viability of the restructuring plan. The Belgian authorities

193 C 84/97 (ex N 509/96) (OJ C 203, 30.6.1998).
194 N 17/98 (OJ C 228, 21.7.1998); Competition Policy Newsletter 2/98, p. 85.
195 N 205/98 (OJ C 384, 10.12.1998).

COMPETITION REPORT 1998

262 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

had given assurances that this would be the last time restructuring aid would be granted to the
company.

Germany

a) Brockhausen Holze GmbH 196

On 4 February the Commission decided to initiate Article 88(2) proceedings in respect of aid worth
ECU 2.5 million in the form of a sleeping partnership and a guarantee granted to the Brockhausen
Holze foundry in Saxony. On the basis of the information in its possession, the Commission had serious
doubts about the compatibility of the aid. Although granted under schemes previously approved by the
Commission, it appeared not to comply with the conditions of those schemes.

b) Kranbau Eberswalde GmbH 197

On 11 March the Commission decided to initiate Article 88(2) proceedings in respect of aid - including
ECU 30 million granted in 1997 and ECU 4.76 million which had not yet been disbursed - to Kranbau
Eberswalde GmbH, a manufacturer of cranes and lifting equipment based in the Land of
Brandenburg. On the basis of the information available, the Commission had serious doubts about
the compatibility of the aid with the guidelines on state aid for rescuing and restructuring firms in
difficulty, in particular with respect to the validity of the restructuring programme and the reduction of
overcapacity.

c) Weida Leder GmbH and its subsidiary Schloßmu¨ hlenweg 198

On 11 March the Commission decided to initiate Article 88(2) proceedings in respect of aid worth
ECU 18.5 million for the restructuring of Weida Leder GmbH and its subsidiary Schloßmu¨ hlenweg,
both operating in the tanning industry and based in the Land of Thuringia. On the basis of the
information at its disposal, the Commission had serious doubts about the compatibility of the aid with
the guidelines on aid for rescuing and restructuring firms in difficulty.

d) Wildauer Kurbelwelle GmbH 199

On 7 April the Commission decided to initiate Article 88(2) proceedings in respect of aid totalling
ECU 47 million for the privatisation and restructuring of Wildauer Kurbelwelle GmbH, a foundry
located in the Land of Brandenburg. On the basis of the information available, the Commission had
serious doubts as to the compatibility of the aid, firstly with respect to the application of the Treuhand
arrangements, and secondly with regard to its compliance with the guidelines on aid for rescuing and
restructuring firms in difficulty, in particular as far as the restoration of the firm’s viability was
concerned.

196 C 5/98 (ex NN 54/97) (OJ C 144, 9.5.1998).
197 C 22/98 (ex NN 9/98) (OJ C 353, 19.11.1998).
198 C 19/98 (ex NN 30/97) (OJ C 256, 14.8.1998).
199 C 30/98 (ex NN 18/98, ex N 771/97) (OJ C 377, 5.12.1998).

COMPETITION REPORT 1998

STATE AID 263

e) SHB Stahl- und Hartgußwerke Bo¨ sdorf AG 200

On 22 April the Commission decided to terminate Article 88(2) proceedings it had initiated in respect
of restructuring aid totalling ECU 5.5 million granted to the by then insolvent SHB Stahl- und
Hartgußwerke Bo¨ sdorf AG, a foundry located in the Land of Saxony. The Commission found that the
conditions laid down by the guidelines on aid for rescuing and restructuring firms in difficulty had not
been met, in particular as regards the devising and implementation of the restructuring plan. It
therefore concluded that the aid was incompatible and required that it be recovered.

f) Triptis Porzellan GmbH 201

On 22 April the Commission decided to terminate Article 88(2) proceedings it had initiated in respect
of aid in the form of debt relief worth ECU 4.1 million and state guarantees on up to 90% of loans
totalling ECU 13 million to the by then insolvent Triptis Porzellan GmbH, a porcelain producer
located in the Land of Thuringia. The Commission concluded that the aid was incompatible with the
guidelines on aid for rescuing and restructuring firms in difficulty, in particular as regards the devising
of the restructuring plan.

g) SKET — Herborn & Breitenbach, 202 SKET EDV 203

On 13 and 20 May the Commission authorised restructuring aid for Herborn & Breitenbach and SKET
EDV. In both cases, the Commission judged that the aid could be considered compatible with the
guidelines on aid for rescuing and restructuring firms in difficulty. Herborn & Breitenbach (H&B)
grouped together several companies which had belonged to the SKET Schwermaschinenbau
Magdeburg GmbH (SKET SMM) group. H&B operated in the mechanical engineering sector. When
‘Gesamtvollstreckung’ proceedings (insolvency proceedings for firms in the new German La¨nder)
were initiated against SKET SMM, H&B — a subsidiary of SKET SMM — was separated from the
SKET SMM group and transferred to the Bundesanstalt fu¨ r vereinigungsbedingte Sonderaufgaben
(BvS). The Commission initiated Article 88(2) proceedings in respect of aid which had been granted to
SKET SMM before the ‘Gesamtvollstreckung’ and took a negative final decision in 1997. This decision
did not concern aid to H&B, which was not the subject of ‘Gesamtvollstreckung’ proceedings. The
state aid proceedings were split following the negative decision and pursued so that the aid granted to
H&B could be assessed separately. The Commission adopted a positive final decision in respect of
grants of ECU 11 million and guarantees totalling ECU 1.6 million which had been provided during
the restructuring process under H&B’s successive plans and which were due to cease with privatisation
in 1998.

SKET EDV was set up after the ‘Gesamtvollstreckung’ proceedings were initiated. It was a
continuation, as a separate legal entity, of the SKET SMM group’s data processing systems division. It
was privatised by the BvS in the summer of 1997. The Commission decided not to raise any objections
to grants of ECU 2.4 million intended to support a major restructuring of the company.

200 C 9/97 (ex NN 2/97, ex N 645/96); for the initiation of proceedings see 1997 Competition Report, page 245;

Competition Policy Newsletter 2/98, p. 86.

201 C 35/97 (ex NN 129/96); for the initiation of proceedings see 1997 Competition Report, p. 247; Competition

Policy Newsletter 2/98, p. 87.

202 C 16c/95 (ex C 16a/95, ex NN 50/94, NN 46/93, NN 95/93).
203 NN 126/97.

COMPETITION REPORT 1998

264 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

h) CD Albrechts GmbH 204

On 3 June the Commission decided to initiate Article 88(2) proceedings in respect of aid of
ECU 185 million granted for the restructuring of CD Albrechts GmbH, a manufacturer of compact
discs and electronic equipment based in the Land of Thuringia. The information at the Commission’s
disposal gave rise to serious doubts about the compatibility of the aid with the guidelines on aid for
rescuing and restructuring firms in difficulty, particularly with regard to the restoration of the
company’s viability.

i) Graphischer Maschinenbau GmbH 205

On 29 July the Commission decided to initiate proceedings in respect of restructuring aid in the form of
a grant of ECU 4.65 million (DEM 9.31 million) to Graphischer Maschinenbau GmbH, Berlin, a
subsidiary of Koenig & Bauer-Albert AG. Graphischer Maschinenbau GmbH manufactured printing
machinery for newspapers. At that stage, the Commission doubted whether the measures proposed in
the restructuring plan would ensure the firm’s long-term viability and whether some of them were
absolutely necessary for its restructuring. And it considered that the proposed restructuring grant was
not in proportion to the eligible costs and might not exclusively benefit a firm in difficulty within the
meaning of the guidelines for rescue and restructuring aid. A detailed examination was accordingly
required to assess the overall compatibility of the proposed aid with the common market.

j) Ingenieur und Maschinenbau GmbH

On 16 September the Commission decided not to object to the granting of rescue and restructuring aid
for the engineering firm Ingenieur und Maschinenbau GmbH (IMG), Rostock, in connection with its
privatisation. 206 IMG, which specialised in automation systems for shipyards, belonged to the Bremer
Vulkan group from 1993 to 1996, but was separated from the group following the latter’s insolvency. It
had received aid in the form of state guarantees worth DEM 15 million (ECU 7.5 million) and a debt
write-off worth DEM 13.5 million (ECU 7 million). The Commission concluded that this aid was
compatible with the common market pursuant to the guidelines on aid for rescuing and restructuring
firms in difficulty and given that the new owners would from then on be responsible for funding the
firm’s activities.

k) Rawe GmbH & Co 207

On 30 September the Commission decided not to raise any objections to the granting of aid to the
textile firm Rawe GmbH & Co in connection with its restructuring. The Commission found that the
conditions laid down in the guidelines on aid for firms in difficulty were met. The aid would take the
form of a state guarantee covering a loan of DEM 15.4 million (ECU 7.7 million).

204 C 42/98 (ex NN 54/97) (OJ C 390, 15.12.1998).
205 C 54/98 (ex N 101/98) (OJ C 336, 4.11.1998).
206 NN 23/98 (OJ C 351, 18.11.1998).
207 N 394/98 (OJ C 384, 10.12.1998).

COMPETITION REPORT 1998

STATE AID 265

l) Rackwitz Aluminium GmbH

On 11 November the Commission decided not to raise any objections to restructuring aid to be granted
to Rackwitz Aluminium GmbH. 208 The company was located in eastern Germany and was active in
the field of pressing and casting recycled aluminium. In 1993 it was privatised by the Treuhandanstalt.
At the beginning of 1997 insolvency proceedings were initiated against it. In December 1997 Norsk
Hydro Deutschland GmbH, a wholly owned subsidiary of the Norwegian firm Norsk Hydro ASA and
a major aluminium producer, agreed to take over Rackwitz. The insolvency proceedings were
suspended following the reaching of a composition arrangement. Norsk Hydro Deutschland developed
a restructuring plan which would lead Rackwitz back to long-term viability. The investor would
contribute a total of ECU 35 million (DEM 69.6 million) until 2001. The Bundesanstalt fu¨ r
vereinigungsbedingte Sonderaufgaben and the Land of Saxony waived claims against Rackwitz
totalling ECU 5.5 million (DEM 10.8 million). The capacity of the pressing plant would be reduced by
55%; the aid measures were limited to the absolute minimum necessary to restore viability.

m) Draiswerke GmbH 209

On 25 November the Commission decided to terminate proceedings initiated under Article 88(2) and
to authorise restructuring aid granted to Draiswerke GmbH, Mannheim. The aid comprised a
ECU 0.4 million (DEM 0.8 million) loan provided by the municipality of Mannheim and a 50% state
guarantee on a ECU 3 million loan granted by the publicly owned bank Landeskreditanstalt Baden-
Wu¨ rttemberg. The firm concerned produced specialised machinery in a niche market and supplied the
chemical, coating, food, paper, pharmaceutical, detergent and ceramic industries. The Commission
considered the aid to be compatible with the guidelines on rescue and restructuring aid. The German
Government had submitted a feasible restructuring plan, and Draiswerke had reduced its capacity and
its product range and had viable long-term prospects.

n) Addinol Mineralo¨ l GmbH, in Gesamtvollstreckung (insolvency) proceedings, and Addinol Lube

Oil GmbH & Co. KG210

On 25 November the Commission decided to terminate proceedings initiated under Article 88(2) in
respect of further aid to Addinol Mineralo¨ l GmbH (Addinol Old), in insolvency proceedings, and the
new firm Addinol Lube GmbH & Co KG, which was set up to take over Addinol Old’s lubricant
distribution activities after the insolvency proceedings were initiated in respect of that company. The
measures concerned comprised aid of up to DEM 7 million (ECU 3.6 million) already granted and
planned aid totalling DEM 40.05 million (ECU 20.52 million). The Commission found that the aid did
not meet the requirements of the guidelines on aid for firms in difficulty, in particular as regards the
long-term viability of the recipients and the contribution from private shareholders, which was known
to be insufficient by comparison with the State’s contribution. The Commission therefore ordered that
the DEM 7 million be recovered with interest and prohibited the granting of the planned DEM 40.05
million. Given the existence of this new aid, the Commission also decided to reassess the compatibility
of previously approved rescue aid to Addinol Old. It concluded that there was no reason to question
the compatibility of that aid.

208 NN 76/98.
209 C 27/98 (ex NN 41/97).
210 C 11/98.

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266 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

o) Maschinenfabrik Sangerhausen GmbH 211

On 9 December the Commission decided to terminate with a negative decision proceedings initiated
under Article 88(2) in respect of aid totalling DEM 2 million (ECU 1 million) granted to
Maschinenfabrik Sangerhausen GmbH with a view to ensuring the firm’s continued operation. It
concluded that the aid did not meet the requirements of the guidelines on aid for firms in difficulty and
ordered its recovery by all available legal means, with interest running from the date on which it was
granted.

Spain

a) Babcock Wilcox Espan˜ a 212

On 7 April the Commission initiated Article 88(2) proceedings in respect of aid granted unlawfully to
the public undertaking Babcock Wilcox Espan˜ a, which supplied turnkey factories and industrial and
environmental equipment. The aid,
in the form of two capital contributions by public holding
companies, amounted to a total of ECU 122 million. The Commission had serious doubts about its
compatibility with the guidelines, particularly with regard to the restoration of the firm’s viability.

b) Fabricantes Vascos de Herramientas SA 213

On 14 July the Commission took a partially negative final decision in relation to restructuring aid
granted to Fabricantes Vascos de Herramientas SA (Favahe´ ), a Basque manufacturer of hand tools
which had filed for insolvency in 1995. The aid was granted in 1992 in the form of a state guarantee
worth ECU 5 million. This guarantee was not notified to the Commission. In addition, the Commission
suspected that aid could have been involved in the insolvency proceedings. In the course of the Article
88(2) proceedings, the Spanish authorities provided evidence that Favahe´ ’s insolvency had been
carried out in accordance with the applicable legislation. The Commission concluded that, in that
respect, no aid was involved. As far as the guarantee granted in 1992 amounting to ECU 5 million was
concerned, however, the Commission concluded that this measure constituted state aid which had been
awarded illegally and which could not be considered compatible with the common market, notably
since the Spanish authorities had not submitted a sound restructuring plan which allowed, on the basis
of realistic assumptions, the long-term restoration of the firm’s viability. Given the financial difficulties
of the enterprise, the overall amount of money covered by the guarantee had to be considered aid. The
Commission ordered the Spanish authorities to recover the whole sum with interest.

c) Porcelanas del Norte SAL 214

On 14 July the Commission took a partially negative decision in relation to restructuring aid granted to
Porcelanas del Norte SAL (Ponsal), a porcelain producer in Pamplona. Ponsal was liquidated in 1995
and a new company Comercial Europa de Porcelanas SAL (Comepor) continued Ponsal’s activities.
The measure in respect of which the Commission had initiated Article 88(2) proceedings consisted of a
debt write-off of ECU 18.6 million granted by the authorities on the occasion of Ponsal’s insolvency,
investment grants of ECU 3 000 per job created and a loan amounting to ECU 4.5 million. In the

211 C 7/95.
212 C 33/98 (ex NN 33/98) (OJ C 249, 8.8.1998).
213 C 52/96 (ex NN 43/95, NN 44/95); for the initiation of proceedings see 1996 Competition Report, p. 239.
214 C 32/97 (ex NN 188/95); for the initiation of proceedings see 1997 Competition Report, p. 255.

COMPETITION REPORT 1998

STATE AID 267

course of the Article 88(2) proceedings the Commission came to the following conclusions. In respect
of the debt-write-off of ECU 18.6 million, there was no illegal aid involved since Spanish insolvency
legislation had been fully complied with and alternative liquidation procedures would have entailed
higher losses for Spain. The investment grants of ECU 3 000 per job created were based on an
approved aid scheme and therefore involved existing aid. Concerning the ECU 4.5 million loan,
however, the aid could not be considered compatible since it was not certain that the enterprise would
see its viability restored in the long term. The Commission therefore ordered the Spanish authorities to
recover the loan with interest.

France

a) Societe´ franc(cid:224)aise de production 215

On 21 January the Commission decided to terminate Article 88(2) proceedings initiated in respect of
state aid granted to Societe´ franc(cid:224)aise de production (SFP) to support its restructuring. The aid
consisted of ECU 182 million for industrial restructuring and ECU 197 million for financial
restructuring. The Commission found that SFP would in future be run under market conditions and
that the restructuring plan would restore the viability of SFP by the year 2000. Nevertheless, the aid
was approved subject to conditions, one of them being the giving by the French authorities of an
assurance that staff reductions would proceed as planned in the restructuring programme.

b) Restructuring aid for Gooding Electronique (GESA) 216 and aid to Cofidur for the takeover of

GESA 217

On 25 February the Commission decided to initiate Article 88(2) proceedings in respect of
restructuring aid totalling ECU 5.44 million granted in 1994 to Gooding Electronique (GESA), which
had been undergoing reorganisation under court supervision since 1995. Proceedings were also
initiated in respect of ECU 0.69 million in aid granted to Cofidur for the takeover of the old GESA
plant in the context of the same court-supervised reorganisation. In both cases, the Commission
doubted whether the conditions for granting restructuring aid to firms in difficulty, as set out in the
guidelines, had been met.

Italy

Restructuring aid for Keller SpA and Keller Meccanica SpA 218

On 1 July the Commission took a negative final decision in relation to a ECU 17.48 million
(ITL 33 839 million) soft loan granted to Keller SpA and a ECU 3.36 million (ITL 6 500 million) soft
loan granted to Keller Meccanica SpA and requested the Italian authorities to recover the aid element
contained in these soft loans. Unlike the Italian authorities, the Commission considered that both soft
loans had been granted outside the scope of approved regional aid schemes. The Commission therefore
considered them to be new individual measures not covered by approved schemes. The soft loans could
not be authorised as restructuring aid under the Community guidelines: completion of existing orders
could not be considered a restructuring plan because it did not constitute a feasible, coherent and far-

215 C 13/97 (ex NN 12/97) (OJ L 205, 22.7.1998).
216 C 14/98 (ex NN 19/95) (OJ C 179, 11.6.1998); Competition Policy Newsletter 2/98, p. 84.
217 C 12/98 (ex N 445/97) (OJ C 198, 24.6.1998); Competition Policy Newsletter 2/98, p. 84.
218 C 14/97 (ex NN 15/97).

COMPETITION REPORT 1998

268 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

reaching plan to restore a firm’s long-term viability. The aim of the measures was to maintain both
companies in activity during a limited transitional period while a private purchaser was found.
Moreover, the aid could not be authorised as rescue aid since it was not limited to a minimum period
during which the companies’ future could be assessed.

Austria

Rescue aid to Actual Maschinenbau AG 219

On 1 July the Commission adopted a negative final decision on the extension of a rescue loan of
ECU 1.1 million to Actual Maschinenbau AG, initially approved in 1997 for a period of six months
only. Actual Maschinenbau was a large machine-tool manufacturer located in Ansfelden, a non-
assisted area. Contrary to what was specified in the initial approval decision, the rescue loan had not
been repaid by the end of July 1997. Furthermore, the Commission had insufficient evidence to
conclude that exceptional circumstances might justify an extension of the rescue loan or that an
extension would definitely allow the company to devise an appropriate restructuring plan. The
Commission also had to take into consideration the fact that the relevant machine tools market was
highly competitive internationally and had a high export content. Given the financial difficulties of the
enterprise, the overall amount of the loan had to be considered as aid. The Commission therefore
requested the Austrian authorities to recover the loan with interest.

Portugal

a) State guarantee scheme for bank loans 220

On 20 May the Commission approved an aid scheme (known as the SGEEB), comprising state
guarantees for bank loans, designed to facilitate the funding of financial consolidation and industrial
restructuring of firms in difficulty. The aid took the form of a state guarantee on bank loans to firms
showing a financial imbalance, granted in the context of a restructuring plan which should ultimately
put the firm back on a sound financial footing. Specifically, firms which had had a degree of financial
independence below 15% for the last two financial years, financial charges of more than 6% of
turnover for the last two financial years and/or accumulated losses for the last five financial years were
eligible. Depending on the composition of the bank loans, the proportion guaranteed by the State
would represent between 25% and 50% of the amount of the loan (principal and interest) not backed
by security, up to a limit of ECU 5 million per recipient. The proportion guaranteed by the State might,
however, be increased to 75% in the case of loans of less than ECU 0.5 million to small or medium-
sized enterprises. The Commission considered that the scheme was genuinely directed at firms unable
to recover on their own, whether by using funds obtained from their shareholders or by borrowing on
market terms, and that the scheme was in keeping with the Community guidelines on state aid for
rescuing and restructuring firms in difficulty.

219 C 62/97 (ex N 494/97) (OJ L 316, 25.11.1998); for the initiation of proceedings see 1997 Competition Report,

p. 254.

220 N 82/98 (OJ C 363, 25.11.1998).

COMPETITION REPORT 1998

b) Aid scheme for the modernisation of companies 221

STATE AID 269

On 22 December the Commission approved an aid scheme for the modernisation of companies
(SIRME) designed to facilitate the financial consolidation and industrial restructuring of firms in
difficulty by promoting their acquisition either by sound companies or by their own managers or
workers. The aid available generally took the form of acquisitions of holdings in the firms acquiring the
firms in difficulty under a contract for financial consolidation and industrial restructuring which should
set the struggling firm back on a sound financial footing. The aid was limited to ECU 5 million per
recipient. In addition, the holdings were acquired on a temporary basis (maximum eight years), were
minority holdings (no more than 25% of the share capital and one third of permanent funds) and had
to be accompanied by an equivalent capital injection made by the acquiring firms. The Commission
considered that the scheme, designed to supplement the SGEEB scheme, met the conditions for
authorisation of restructuring aid as laid down by the Community guidelines on state aid for rescuing
and restructuring firms in difficulty.

3.4. Employment and training aid

Belgium

Techspace Aero and Cockerill Mechanical Industries

On 16 September the Commission decided to raise no objections to training aid for the employees of
Techspace Aero and Cockerill Mechanical Industries facing unemployment owing to the companies’
conversions from military to civil activities. 222 Techspace Aero was to receive BEF 12 500 391
(ECU 325 679) and Cockerill, BEF 22 587 681 (ECU 588 488), part financed by the European Social
Fund and the Walloon Region. The Commission considered that the planned training measures would
principally benefit the employees, offering them additional qualifications that could also be used in
other companies.

Denmark

Aid scheme to promote the employment of people experiencing difficulty entering the labour
market 223

On 6 May and 14 July the Commission authorised, on the basis of the guidelines on aid to employment,
aid schemes of unlimited duration with a total budget for 1998 of ECU 127 million designed to support
measures to help people experiencing particular difficulty to enter the labour market.

221 NN 100/98 (ex N 393/98).
222 N 563/97.
223 N 111/98 (OJ C 270, 29.9.1998), N 117/98 (OJ C 314, 13.10.1998).

COMPETITION REPORT 1998

270 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Italy

a) Aid scheme to promote employment in Sicily 224

On 25 February the Commission decided to approve an aid scheme for businesses operating in Sicily
which comprised exemptions from social security contributions designed to promote net job creation
and the transformation of insecure jobs into permanent ones. The average aid amount was ECU 22 000
per job created or stabilised. The budget allocation for the scheme was ECU 76.5 million. The
Commission found that aid for the net creation of new jobs in an assisted region was in line with the
Community guidelines on aid to employment. As for the aid for stabilising insecure jobs, while it was
not expressly provided for in the above guidelines, the Commission considered that it accorded with
the principle of job stability enshrined in the guidelines and also in the conclusions of the European
Council meeting on employment held in November 1997. On the basis of these considerations and
bearing in mind the added value of the measures in terms of the net creation of secure jobs which did
not previously exist, the Commission considered that they were compatible with the common market.

b) Subsidy scheme for safeguarding employment 225

On 25 November the Commission approved the extension for 2000 and 2001 of an Italian aid scheme
granting reductions in social security contributions so as to safeguard the jobs of employees at risk. The
scheme would be open to companies located in any of six regions (Calabria, Sicily, Sardinia, Basilicata,
Apulia and Campania) and would provide subsidies for low-skilled workers only. The resources
allocated for the scheme’s extension totalled ITL 1 700 billion (ECU 876 million), thus bringing to
ITL 3 700 billion (ECU 1 910 million) the total amount allocated to the scheme originally authorised in
1997.

Sweden

a) Measures to promote employment 226

On 16 December the Commission decided not to raise any objections to a scheme which promoted
employment by granting subsidies to encourage firms to take on long-term unemployed workers. It
concluded that the measure in question did not constitute state aid within the meaning of Article 87(1)
since it was applicable to all sectors and since any firm which met the criteria was automatically
entitled to the subsidy.

b) Measures to promote training 227

Also on 16 December and for the same reasons the Commission decided that a Swedish scheme to
promote training did not constitute state aid.

224 N 692/97 (OJ C 130, 28.4.1998); Competition Policy Newsletter 2/98, p. 82.
225 N 562/98 (OJ C 409, 30.12.1998).
226 N 52/98.
227 N 53/98.

COMPETITION REPORT 1998

STATE AID 271

3.5. Aid for small and medium-sized enterprises

Germany

a) Tax-free depreciation reserve for start-ups 228

On 29 July the Commission partially approved a scheme directed at SMEs and providing the incentives
of a tax-free depreciation reserve and interest-free deferment of tax payment in order to encourage
start-up investment. The revenue foregone for the years 1997-99 was estimated at ECU 104 million.
However, the Commission also decided to initiate Article 88(2) proceedings in respect of the
application of the scheme to sensitive sectors. Due to its character as a general tax provision, there
were serious doubts about whether the German authorities had the legal means under their national
law to effectively exclude enterprises in such sectors from the scheme.

b) Past misuse of the Thuringia programme for investments by SMEs 229

On 26 November 1993 the Commission had decided to authorise the Land of Thuringia to set up a
programme supporting investments by SMEs. The granting of aid under this programme to firms in
difficulty was formally excluded. Having doubts about whether the scheme had been properly applied
in the past, the Commission, in its decision of 8 April authorising the scheme’s extension, formally
requested the German Government to provide it with all the information necessary to carry out a
check in this connection. In the absence of a satisfactory reply from the German authorities, the
Commission decided on 25 November to initiate proceedings under Article 88(2) of the EC Treaty in
respect of the scheme’s past application and instructed the German Government to provide it with all
the information necessary for it to check whether the scheme had been misused in the past.

Greece

Operational Programme for Industry (regions in decline) and Community Initiative for SMEs 230

On 29 July the Commission authorised two aid schemes implementing measures under Structural Fund
programmes in favour of SMEs in Greece in order to boost their technological innovation and
administrative reorganisation. At the same time, the Commission decided to initiate Article 88(2)
proceedings in respect of state aid for the setting-up and operation of distribution centres in any
country outside the European Union. In the Commission’s view, this aid was prohibited export aid.

228 C 56/98 (ex NN 42/98) (OJ C 334, 31.10.1998).
229 C 69/98 (ex NN 118/98).
230 C 50/98 (ex N 607a/97).

COMPETITION REPORT 1998

272 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

3.6. Aid for foreign direct investment

Netherlands

Investment facility for emerging economies 231

On 6 May the Commission approved the scheme “Investment facility for emerging economies”
designed to encourage Netherlands-based SMEs to invest in emerging markets and thus to contribute
to the development of lasting economic cooperation with local enterprises. The aid took the form of
subordinated loans provided by the Nationale Investeringsbank, a state-owned specialised financial
institution. Credits might range between ECU 45 000 and ECU 2.2 million. The State provided a credit
guarantee for 90-95% of the unsettled amount. The NIB compensated the Government for the
guarantee by paying an annual provision of 1% of the guaranteed sum. The scheme had an overall
budget of ECU 116 million.

Austria

LiftgmbH 232

On 14 October the Commission decided to terminate proceedings it had initiated under Article 88(2)
of the EC Treaty in respect of aid planned for LiftgmbH, a subsidiary of the internationally active
Austrian group Doppelmayr, and to prohibit the subsidised loan of ECU 1.8 million, of which the aid
element would have amounted to ECU 0.13 million, which was to be granted to that firm under the
‘ERP Internationalisierungsprogramm’
in China. The Commission
concluded that the aid was incompatible with the common market since it was to be granted to a
large company whose competitors were all European and which was already firmly established in
China; it thus failed to meet the necessity criterion, particularly since LiftgmbH had already begun
production using rented facilities. Given the strategic nature of the Chinese market, the aid was liable,
despite the limited amount involved, to distort competition between Member States to an extent
contrary to the common interest.

for an investment project

3.7. Aid in the form of tax measures

Ireland

Tax measures 233

In July the Commission addressed a series of appropriate measures to Ireland under Article 88(1) of
the EC Treaty following an examination of various aspects of the Irish corporate tax system. The
Commission concluded that the special corporation tax regimes in the Dublin International Financial
Service Centre (IFSC) and in the Shannon Customs-Free Airport Zone (SCAZ) constituted operating
aid which could no longer be authorised following Ireland’s loss of 87(3)(a) status. Furthermore, the
Commission concluded that the preferential treatment of manufacturing over service companies in the

231 N 503/97 (OJ C 257, 15.8.1998).
232 C 77/97 (ex N 99/97).
233 E 1/98 and E 2/98 (OJ C 395, 18.12.1998).

COMPETITION REPORT 1998

STATE AID 273

wider Irish corporation tax (ICT) system, which it had previously considered a general measure, not
only constituted state aid but also ranked as operating aid and therefore needed to be eliminated.

The measures proposed for the elimination of the various aspects of the Irish corporate tax regime
recognised the rights acquired through legitimate expectation by existing companies. These rights
would continue until 2010 for those benefiting from the preferential rate for manufacturing under the
ICT and until 2005 for the IFSC and SCAZ. In addition, the measures provided for transitional
arrangements under which limited numbers of new entrants to the schemes were allowed; however,
they could benefit only until 2002.

B — New legislative provisions and notices adopted or proposed by the

Commission

1

2

Notice from the Commission on the application of the competition rules to the
postal sector and on the assessment of certain state measures relating to postal
services

OJ C 39,
6.2.1998, p. 2

Commission communication amending the Community framework for state aid
for research and development

OJ C 48,
13.2.1998, p. 2

3 Guidelines on national regional aid

OJ C 74,
10.3.1998, p. 9

Commission communication concerning extension of the guidelines on state
aid for rescuing and restructuring firms in difficulty

OJ C 74,
10.3.1998, p. 31

4

5

Communication from the Commission to the Member States on the links
between regional and competition policy

6 Multisectoral framework on regional aid for large investment projects

7

8

9

Proposal for a Council Regulation (EC) amending Council Regulation (EC)
3094/95 thereby further prolonging the relevant provisions of the seventh
Council Directive on aid to shipbuilding

Proposal for a Council Regulation (EC) establishing new rules on aid to
shipbuilding

Proposal for a Council Regulation (EC) laying down detailed rules for the
application of Article 93 of the EC Treaty

10 Council Regulation (EC) No 994/98 of 7 May 1998 on the application of

Articles 92 and 93 of the Treaty establishing the European Community to
certain categories of horizontal state aid

11 Council Directive 98/29/EC of 7 May 1998 on harmonisation of the main

provisions concerning export credit insurance for transactions with medium
and long-term cover

12 Council Regulation (EC) No 1540/98 establishing new rules on aid to

shipbuilding

13

Framework on training aid

14 Council Regulation (EC) No 2468/98 of 3 November 1998 laying down the
criteria and arrangements regarding Community structural assistance in the
fisheries and aquaculture sector and processing and marketing of its products

15 Commission notice on the application of the state aid rules to measures relating

to direct business taxation

16 National ceilings for regional aid coverage under the derogations provided for

in Article 92(3)(a) and (c) for the period 2000 to 2006

17 Commission notice on the extension of the period of validity of the code on aid

to the synthetic fibres industry

COMPETITION REPORT 1998

OJ C 90,
26.3.1998, p. 3

OJ C 107,
7.4.1998, p. 7

OJ C 114,
15.4.1998, p. 13

OJ C 114,
15.4.1998, p. 14

OJ C 116,
16.4.1998, p. 13

OJ L 142,
14.5.1998, p. 1

OJ L 148,
19.5.1998, p. 22

OJ L 202,
18.7.1998, p. 1

OJ C 343,
11.11.1998, p. 10

OJ L 312,
20.11.1998, p. 19

OJ C 384,
10.12.1998, p. 3

OJ C 16,
21.1.1999, p. 5

OJ C 24,
29.1.1999, p. 18

274 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

C — List of state aid cases in sectors other than agriculture, fisheries,

transport and the coal industry

1. Measures which the Commission considered compatible with the common market

without opening a formal investigation under Article 88(2) of the EC Treaty or Article
6(5) of Decision 2496/96/ECSC

Germany

N 285/97

N 551/97

07/01/98 Establishment and growth section of the economic

incentives scheme of North Rhine-Westphalia
07/01/98 Guidelines on promotion of demonstration projects to

set up a closed substance cycle waste management
(Bremen)

OJ C 257, 15.8.1998

OJ C 47, 12.2.1998

N 793/97

07/01/98 Aid for SMEs of particular importance for economic

OJ C 70, 6.3.1998

N 274/97, N 276/97

N 277/97, N 278/97,
N 279/97, N 282/97,
N 283/97, N 284/97
N 420/97, NN 106/97

N 717/97

N 718/97

N 280/97

NN 109/97

N 758/97, NN 3/98

N 466/97

N 370/97

N 709/97

N 764/97

N 320b/97

N 748/97

NN 3/97
N 803/97

N 7/98
N 493/97

and labour market policy (Hamburg)

21/01/98 Aid scheme of the Land of Berlin for business start-
ups by the unemployed and for job-creation measures
in the environmental field (N 274/97) and to promote
job creation in SMEs (N 276/97), jointly financed by
the ESF under Objective 2

21/01/98 Aid scheme of the Land of North-Rhine Westphalia to

promote job creation, jointly financed by the ESF
under Objective 2

OJ C 89, 25.3.1998

OJ C 89, 25.3.1998

21/01/98 Increase in the budget of the Consolidation Fund of

OJ C 89, 25.3.1998

Mecklenburg-Western Pomerania

21/01/98 Loan guarantee for Alexandra Pusch and Irene Watler

(Berlin)

28/01/98 Promotion of attendance by SMEs in the new La¨ nder

OJ C 188, 17.6.1998

at trade fairs in Germany

03/02/98 Aid scheme of the Land of Bremen for the

OJ C 188, 17.6.1998

occupational reintegration of unemployed workers,
part-financed by the ESF under Objective 2
04/02/98 Financial assistance from the BvS for Vogtla¨ ndische

Kabelwerk GmbH (VOKA)

04/02/98 Aid to Finow-Rohrleitungssystem- und Anlagenbau

GmbH

17/02/98 Aid programme of the Land of Thuringia for R&D

establishments directly serving industry

17/02/98 Increase in the budget of the Consolidation Fund of
the Land of Thuringia for firms in difficulty

17/02/98 Measures to promote innovative, economy-related

research, development and demonstration plans for
the building-up of an information community in Berlin
17/02/98 Measures encouraging protection against the effects of
air pollution due to energy production in Brandenburg

18/02/98 KfW subsidised loan scheme to promote holdings in
firms situated in Saarland and North Rhine-
Westphalia and affected by the crisis in the coal
industry

OJ C 89, 25.3.1998

OJ C 130, 28.4.1998

OJ C 130, 28.4.1998

OJ C 130, 28.4.1998

OJ C 111, 9.4.1998

OJ C 111, 9.4.1998

OJ C 111, 9.4.1998

18/02/98 Privatisation of Ingenieur und Anlagenbau GmbH

OJ C 130, 28.4.1998

(IAB)

18/02/98 Aid for Stentex GmbH
25/02/98 Aid to shipbuilding : restructuring and privatisation of
Volkswerft GmbH Stralsund (second tranche of aid)

25/02/98 Rescue aid to Hagenuk Telecom GmbH
02/03/98 Change to, and extension of, the R&D aid scheme of

the Land of Saxony to promote the recruitment of
research assistants

OJ C 156, 21.5.1998

OJ C 192, 19.6.1998
OJ C 281, 10.9.1998

COMPETITION REPORT 1998

N 485/97

N 591/97

N 515/97

NN 19/97
NN 157/97

N 578/97

NN 88/96

NN 90/96
N 587/97
NN 132/97

N 367/97

N 418/97

N 484/97
NN 126/97

N 79/98

N 108/98

N 142/98
N 208/98
N 30/98
NN 15/98
N 113/98
N 794/97
N 34/98

N 96/98

N 207/98

04/03/98 Directive for promoting technological research by

firms in the Land of Thuringia

04/03/98 Extension and modification of the regional

programme of the Land of North Rhine-Westphalia
10/03/98 Guidelines on promotion of investment to set up a

closed substance cycle waste management (Bremen)

STATE AID 275

OJ C 188, 17.6.1998

OJ C 130, 28.4.1998

OJ C 169, 4.6.1998

11/03/98 Marine research programme
11/03/98 Restructuring aid to Gebru¨ der Leonhardt GmbH &

OJ C 156, 21.5.1998
OJ C 156, 21.5.1998

Co., Sparte Blema Kircheis iGV, Aue
19/03/98 Modification of the aid scheme aiming at the

improvement of the marketing conditions for forestry
products (Thuringia)

25/03/98 Measures in favour of combined heat and power

generation

25/03/98 Renewable energies programme - wind
25/03/98 Aid to Opel Bochum
25/03/98 Additional financial measures of the BvS for Plasta

Erkner Kunstharzfabrik GmbH

27/03/98 Programme for the rational use of energy and

utilisation of renewable ernergy sources in the Land of
North Rhine-Westphalia

OJ C 159, 26.5.1998

OJ C 188, 17.6.1998

OJ C 188, 17.6.1998
OJ C 213, 9.7.1998
OJ C 236, 28.7.1998

OJ C 192, 19.6.1998

27/03/98 Guidelines for project-related promotion by

OJ C 159, 26.5.1998

Foundation for Innovation, Hamburg

20/05/98 Aid to Stahlwerk Thu¨ ringen GmbH
20/05/98 Restructuring aid to SKET Maschinenbau EDV

GmbH

27/05/98 Increase in the budget for, and changes in, the

Consolidation Fund of the Land of Brandenburg

03/06/98 Investment aid to Rohrwerke Muldenstein GmbH

(non-ECSC steel)

03/06/98 Privatisation of Maschinenbau Halberstadt GmbH
03/06/98 Extension of shipbuilding aid schemes for 1998
03/06/98 Work and technology
03/06/98 Restructuring aid to Autek Schaltangenbau GmbH
08/06/98 R&D aid to Rheinland-Pfalz
10/06/98 SME interest subsidy programme
10/06/98 Promotion guidelines of ’Deutsche Bundesstiftung

Umwelt’

17/06/98 Aid scheme of the Land of Mecklenburg-Western
Pomerania to promote apprenticeships
30/06/98 Innovative Technologies and Systems for Virtual

Product Generation (VIP)

OJ C 253, 12.8.1998

OJ C 281, 10.9.1998

OJ C 392, 16.12.1998

OJ C 392, 16.12.1998

OJ C 257, 15.8.1998
OJ C 392, 16.12.1998
OJ C 257, 15.8.1998
OJ C 257, 15.8.1998
OJ C 257, 15.8.1998

OJ C 371, 1.12.1998

NN 104/96, NN 140/96
NN 30/98

01/07/98 Aid to Umformtechnik Erfurt GmbH (UTE)
01/07/98 Amendment and extension of the R&D aid scheme of

NN 31/98

N 197/98
N 256/98

N 175/98

NN 6/98

N 283/98

N 317/98 N 318/98

the Land of Saxony: collaborative projects oriented
towards innovative technologies

01/07/98 Amendment and extension of the R&D aid scheme of

the Land of Saxony: aid to market-oriented non-
university research institutes

01/07/98 Environmental aid to Thyssen Krupp Stahl AG
03/07/98 Programme for the promotion of environmental

technology - R&D collaboration programme
(Bremen)

09/07/98 Programme of the Land of Saxony-Anhalt to promote
cooperation between small and medium-sized
enterprises

14/07/98 Additional financial measures (Vertragsmanagement)

in favour of Fortschritt Landmaschinen GmbH

15/07/98 Guidelines for the regional programme to support

training for the economy of Bremen

15/07/98 Participation capital for SME R&D, programme

section: additional investment for market introduction

OJ C 392, 16.12.1998#
OJ C 371, 1.12.1998#

OJ C 300, 29.9.1998#

OJ C 308, 8.10.1998#

COMPETITION REPORT 1998

276 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

N 134/98
N 733/97

N 802/97

N 152/98
N 228/98

N 279/98

N 383/98

N 255/98

N 329/98
N 289/98

N 357/98
NN 23/98

NN 32/98

N 299/98

N 394/98
N 150a/98

N 254/98
NN 51/98

N 269/98

N 543/98

N 567/98

NN 76/98
N 853/97
N 32/98
N 354/98

N 550/98
N 628/98

N 519/98
N 130/98
N 220/98
NN 80/98

Austria

N 824/97
N 28/98
N 520/97
N 809/97
N 812/97
N 51/98

22/07/98 SME promotion programme of Saarland
29/07/98 Environmental protection aid to DK Recycling und

OJ C 308, 8.10.1998#
OJ C 289, 17.9.1998#

Roheisen GmbH

29/07/98 Restructuring and privatisation of MTW-Schiffswerf

Wismar: second tranche of aid

29/07/98 Investment aid to Flensburger Schiffbau Gesellschaft OJ C 409, 30.12.1998#
29/07/98 Restructuring and privatisation of Island Polymer

Industries GmbH

OJ C 409, 30.12.1998#

OJ C 300, 29.9.1998#

"OJ C 363, 25.11.1998#
OJ C 363, 25.11.1998#

OJ C 363, 25.11.1998#
OJ C 351, 18.11.1998#

OJ C 314, 13.10.1998#

OJ C 363, 25.11.1998#

OJ C 384, 10.12.1998#

OJ C 384, 10.12.1998#

OJ C 351, 18.11.1998#

29/07/98 Aid to CGF (Grossenhainer Gesenk- und

Freiformschmiede GmbH)

29/07/98 Development assistance according to Article 4(7) of
the seventh Directive on aid to shipbuilding

03/09/98 Programme for the promotion of environmental

technology - pilot installations
08/09/98 Research for the environment
16/09/98 Public guarantees to promote shareholding in SMEs in

industry (North Rhine-Westphalia)

16/09/98 Innovative competence of SMEs
16/09/98 Aid for the rescue and reprivatisation of Ingenieur

und Maschinenbau GmbH (IMG) (Rostock)

16/09/98 Modification and prolongation of an R&D scheme

(Saxony)

17/09/98 Bavarian regional promotion scheme for the industrial

sector

30/09/98 Aid to Rawe GmbH & Co.
05/10/98 Guidelines of the Land of Saxony-Anhalt on the

award of grants for promoting the endogenous
regional development of rural areas

08/10/98 Promotion of SMEs (Bremen)
14/10/98 Financial assistance to Niles Werkzeugmaschinen

GmbH

29/10/98 Modification of a R&D scheme of the Land of
Thuringia providing support to market oriented
research institutes

29/10/98 Promotion of attendance by SMEs in the new La¨ nder
(including East Berlin) at trade fairs and exhibitions in
1999

10/11/98 Changes to the small business programme of the Land

of Saxony

11/11/98 Aid to Rackwitz Aluminium GmbH (Saxony)
16/11/98 ERP innovation scheme
25/11/98 Aid to Lausitzer Teppichfaserwerk GmbH
09/12/98 Aid to Opel Restrukturierungsgesellschaft mbH

(Kaiserslautern)

09/12/98 Aid to Daimler-Benz Ludwigsfelde: NCV1 project
09/12/98 Extension of the guarantee scheme of the Land of

Brandenburg for investment projects in Poland

21/12/98 Informatics systems
22/12/98 Aid to SWM Werkzeugmaschinen GmbH & Co. KG
22/12/98 Aid to Sysma Antriebstechnik GmbH
22/12/98 Aid to Watis Bau GmbH

07/01/98 Seed-financing programme
10/02/98 Aid by the FGG study fund
19/02/98 Lower Austrian participation model start-up aid
27/03/98 Seed-financing programme 2002
07/04/98 Aid to employment
15/04/98 Viennese structural improvement programme

OJ C 70, 6.3.1998
OJ C 257, 15.8.1998
OJ C 159, 26.5.1998
OJ C 159, 26.5.1998
OJ C 192, 19.6.1998
OJ C 192, 19.6.1998

COMPETITION REPORT 1998

N 507/96

N 837/96
NN 20/97

N 109/98
N 253/98

N 611/97
N 292/98
N 482/98
NN 43/98
N 494/98

Belgium

N 550/97

N 554/97

N 608/97

N 905/96

N 334/97
N 84/98

N 675/97
N 469/97

N 227/98
NN 177/97
N 233/98

N 131/98

N 563/97

NN 178/97
N 777/97
N 205/98
N 240/98
N 248/98

Denmark

N 483/97
N 45/98

N 845/97
N 111/98
N 61/98

N 229/98

22/04/98 Aid to Kurzentrum Bad Windischgarsten GmbH &

Co. KG

STATE AID 277

OJ C 290, 18.9.1998

06/05/98 Aid to Fahrzeug- und Motoren-Akustik F&E GmbH OJ C 208, 4.7.1998
06/05/98 Guidelines for the promotion of the use of biomass for

OJ C 228, 21.7.1998

energy purposes (Vorarlberg)
27/05/98 Guidelines for regionalisation
14/07/98 Investment aid to Voest-Alpine Stahlrohr Kindberd

GmbH (non-ECSC steel)

OJ C 257, 15.8.1998
OJ C 392, 16.12.1998

29/07/98 Aid to Siemens SGP Verkehrstechnik GmbH (Graz) OJ C 308, 8.10.1998
OJ C 363, 25.11.1998
18/09/98 Kplus centres of competence programme
28/10/98 Regional aid map for 1999
OJ C 396, 19.12.1998
25/11/98 Aid to TIS GmbH
22/12/98 Aid to O¨ sterreichische Salinen AG for the Saltmine

Hallstatt project

07/01/98 Minor changes to the ACE scheme of investment aid

for business start-ups (Hainaut)

04/02/98 State aid to Opel Belgium in support of its training

project in Antwerp

17/02/98 Interreg II operational programme (1994-99) to

support the development of firms (Walloon Region)

19/02/98 Investment aid scheme for enterprises in the social
market economy (Meuse-Vesdre, Walloon Region)

19/02/98 Investment aid for the area of Ittre and Tubize
04/03/98 Start-up, Diversification and Development Fund

Ardenne-Famenne (Faddaf)

25/03/98 Environmental aid to Sidmar
15/05/98 Authorisation and financing of ""entreprises

d’insertion"" (Brussels Region)
03/06/98 Restructuring aid to the Herstal Group
01/07/98 Aid to the Louis de Poortere group
03/09/98 Amendments to the Order of 1 July 1993 (Brussels

Region)

14/09/98 Modification of the aid scheme aimed at the

promotion of R&D in large companies and SMEs
(Limburg and Turnhout)

16/09/98 Training aid to Techspace Aero and Cockerill

Mechanical Industries, part-financed by the ESF
under the Konver II programme 1994-97

16/09/98 Aid to Verlipack (Walloon Region)
30/09/98 Subsidy scheme for joint research centres
30/09/98 Restructuring aid for Sunparks International NV
30/09/98 Support for SMEs in the Brussels Region
18/12/98 Konver Brussels - Sabca projects

OJ C 65, 28.2.1998

OJ C 208, 4.7.1998

OJ C 111, 9.4.1998

OJ C 130, 28.4.1998

OJ C 392, 16.12.1998
OJ C 300, 29.9.1998

OJ C 277, 5.9.1998

OJ C 308, 8.10.1998

OJ C 371, 1.12.1998
OJ C 384, 10.12.1998
OJ C 384, 10.12.1998

21/01/98 Measures to assist firms employing elderly workers
04/02/98 Aid to shipbuilding: extension of three aid schemes for
1998 (1 Interest aid; 2 State guarantee; 3 Guarantees
for the last ship)

31/03/98 Measures in favour of R&D within energy saving
06/05/98 Measures in the social services sector
08/06/98 Measures in favour of development of cleaner

products

OJ C 70, 6.3.1998
"OJ C 409, 30.12.1998

OJ C 192, 19.6.1998
OJ C 270, 29.9.1998
OJ C 257, 15.8.1998

10/06/98 Amendment to energy efficiency measures

OJ C 257, 15.8.1998

COMPETITION REPORT 1998

278 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

N 42/98
N 117/98

30/06/98 Measures in favour of renewable energy sources
14/07/98 Measures to assist the training of persons experiencing

OJ C 257, 15.8.1998
OJ C 314, 13.10.1998

N 449a/97 NN 50/98

29/07/98 Measures in favour of the natural gas sector

difficulties in returning to the job market

OJ C 308, 8.10.1998
Article 90 & 92 of the
EC Treaty

Spain

N 189a/97, N 189b/97

N 266/97

N 422/97

N 153/97

N 187/97

N 72/98

N 388/97

N 766/97
NN 83/97

N 191/97

N 148a/98

N 404/97
N 270/97

N 398/97

N 186/98
NN 150/97
N 370/98

N 371/98

N 345/98
N 488/97
N 295/98

N 296/98

12/01/98 Investment aid scheme providing SMEs with grants

for contributions and commission payments in
connection with guarantee operations with mutual
credit institutions (Andalusia)

21/01/98 Changes to regional investment aid scheme (N 551/94)
with a view to improving competitiveness (Castile-La
Mancha)

04/02/98 Aid scheme for SMEs in the tourism sector

(Andalusia)

04/02/98 Changes to the investment aid scheme (N 348/95) for

promoting industry

04/02/98 Investment aid scheme for promoting business start-
ups and for extending and modernising existing firms
in the special development area of Franja pirı´tica de
Huelva (Andalusia)

17/02/98 Extension of the investment aid scheme (N 102/97) for
the conversion of declining industrial areas in certain
assisted regions (Andalusia, Asturias, Cantabria,
Castile-Leon, Extremadura, Galicia, Murcia, Basque
Country)

18/02/98 Aid scheme for SMEs in the tourist sector in Don˜ ana

(Andalusia)

18/02/98 R&D regional aid scheme (Castile-Leon)
25/03/98 Aid scheme for business development and promotion

(Andalusia)

07/04/98 Regional aid scheme for the development of the

mining industry (Andalusia)

06/05/98 Regional aid scheme to promote environmental

protection (Cantabria)

06/05/98 Aid to FASA Renault - Valladolid
15/05/98 Investment aid scheme for business start-ups and for
extensions to and modernisation of existing firms in
the special action area in the province of Jae´n
(Andalusia)

15/05/98 Investment aid scheme for business start-ups and for
extensions to and modernisation of existing firms at
the Andalusia Technology Park, Malaga

02/06/98 Aid for R&D (Madrid)
29/07/98 Restructuring aid to Productos Tubulares
03/09/98 Investment aid scheme for SMEs in the distributive

sector (Ceuta-Melilla)

03/09/98 Investment aid scheme for SMEs in the tourism sector

(Ceuta-Melilla)

OJ C 58, 24.2.1998

OJ C 103, 4.4.1998

OJ C 99, 1.4.1998

OJ C 99, 1.4.1998

OJ C 99, 1.4.1998

OJ C 130, 28.4.1998

OJ C 111, 9.4.1998

OJ C 111, 9.4.1998
OJ C 192, 19.6.1998

OJ C 198, 24.6.1998

OJ C 213, 9.7.1998

OJ C 208, 4.7.1998
OJ C 213, 9.7.1998

OJ C 213, 9.7.1998

OJ C 257, 15.8.1998

OJ C 308, 8.10.1998

OJ C 308, 8.10.1998

23/09/98 Measures to assist firms based in Aragon
30/09/98 Regional aid scheme for SMEs (Extremadura)
30/09/98 Extension of investment aid scheme for business start-

OJ C 363, 25.11.1998
OJ C 396, 19.12.1998
OJ C 396, 19.12.1998

ups and for expanding and modernising existing
businesses in the special action area of Bahı´a de Ca´ diz
and Jerez de la Frontera (Andalusia)

30/09/98 Extension of investment aid scheme for business start-

ups and for expanding and modernising existing
businesses in the special action area of Campo de
Gibraltar (Andalusia)

OJ C 396, 19.12.1998

COMPETITION REPORT 1998

14/12/98 Measures to stimulate business activity (Madrid)
22/12/98 Extension of the regional investment aid scheme (N

529/96) (Basque Country)

22/12/98 Promotion of stable employment (Aragon)

STATE AID 279

17/02/98 Aid in favour of renewable energies
03/06/98 Aid for plants producing electricity from wood or

wood-based fuels and aid for small power plants

OJ C 156, 21.5.1998
OJ C 264, 21.8.1998

17/09/98 Changes to two aid schemes for promoting the

OJ C 330, 28.10.1998

development of SMEs - Measure 1: Aid for small
traders; Measure 2: Development aid for SMEs

14/10/98 Aid for investment in an electricity cable from Sweden

to A¨ land

09/12/98 Investment aid to Ricdon OY
09/12/98 Accelerated depreciation scheme
18/12/98 Prolongation of the contracted-related aid scheme for

shipbuilding for 1998

OJ C 392, 16.12.1998

04/02/98 Renewal for 1998-2002 of the parafiscal charge levied

on certain petroleum products for the benefit of the
French Petroleum Institute (IFP)

OJ C 192, 19.6.1998

18/02/98 R&D aid for ’tubes and shapes’ (non-ECSC steel)
07/04/98 Aid to Commend (Eureka 1549)
15/04/98 Interreg II financial engineering scheme for Hainaut,

OJ C 396, 19.12.1998
OJ C 192, 19.6.1998
OJ C 188, 17.6.1998

Nord/Pas-de-Calais and Picardy
06/05/98 Aid to R&D: Medea T 601 Eureka 1535
03/06/98 Support for cinema production
22/07/98 Renewal for 1999-2003 of the Decree introducing a

parafiscal charge on mechanical engineering products

29/07/98 Aid to R&D: Eureka 1711 ADTT Phase II
30/09/98 R&D aid to Sollac (ECSC steel)
16/12/98 Aid for the installation of the Toyota plant at

Valenciennes - Onnaing

22/12/98 Recmes programme: collaborative research in

microelectronics

22/12/98 Reimbursable advance to Ae´ rospatiale for the Airbus

A 340-500/600 programme

OJ C 244, 4.8.1998
OJ C 279, 8.9.1998

OJ C 308, 8.10.1998

N 347a/98
N 298/98

N 399/98

Finland

N 741/97
N 66/98

N 278/98

N 18/98

N 462/98
N 583/98
N 602/98

France

N 672/97

N 721/97
N 664/97
N 132/98

N 38/98
N 3/98
N 349/98

N 640/97
N 485/98
N 438/98

N 264/98

N 369/98

Greece

NN 135/97 NN 136/97
NN 139/97
N 212/98

18/02/98 Aid to Halyvourgia Thessalias
07/04/98 Aid to the steel firm Sidenor
08/06/98 Prolongation of shipbuilding aid legislation until 31

OJ C 392, 16.12.1998

December 1998

N 162/98

25/09/98 Modernisation and improvement of the international

OJ C 308, 8.10.1998

N 344/98

N 249/98
NN 137/97
NN 59a/98

competitiveness of trading SMEs and SMEs in the
services sector

11/11/98 Investment aid to the shipyard Elfesis Shipbuilding

and Industrial Enterprises SA

09/12/98 Aid to industrial areas
16/12/98 Aid to the Sovel steelworks
22/12/98 Regional development law 2601/98

COMPETITION REPORT 1998

280 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Ireland

N 704/97

06/05/98 Extension of the Irish natural gas network

OJ C 253, 12.8.1998

Italy

N 659a/97

N 264/97

N 657/97
N 734/97
N 807/97

N 461/97
N 692/97

N 58/98
N 655/97

N 666/97

N 97/98

N 726/97

N 54/98

N 26/98

N 98/98
N 658/97
N 169/98
N 346/98

N 280/98
N 291/98

N 77/98
N 151a/98 N 151b/98

N 784/97

N 786/97
N 157/98
N 158/98
N 159/98
N 161/98
N 163/98
N 818/97
N 50/98
N 419/98

N 170/98

07/01/98 Aid in support of investment in new industrial

machines

21/01/98 Measures under programming document 1997-1999

(Lazio)

21/01/98 Measures to support new enterpreneurs (Trento)
21/01/98 Community initiative Resider II
17/02/98 Refinancing of Regional Law 26/95 laying down

measures to promote industrial investment (Friuli-
Venezia Giulia)

18/02/98 Rescue aid to Case di Cura Riunite Srl
25/02/98 Regional Law 30/97 - Measures to promote

employment

OJ C 70, 6.3.1998

OJ C 103, 4.4.1998

OJ C 130, 28.4.1998
OJ C 103, 4.4.1998
OJ C 111, 9.4.1998

OJ C 149, 15.5.1998
OJ C 130, 28.4.1998

10/03/98 Extension of validity, Konver CIP
11/03/98 Tax measures to support innovation within industrial

OJ C 188, 17.6.1998
OJ C 236, 28.7.1998

undertakings

27/03/98 Extension of and amendment to Regional Law No 25
of 9 June1994 on standards in the agricultural tourism
industry

31/03/98 Extension until 31 December 1999 of the scheme for

exempting from social security contributions firms
that create new jobs

07/04/98 Aid to Isotta Fraschini Fabbrica Automobili SpA

(IFFA)

06/05/98 Intervention programmes in favour of waste recycling

and disposal. Approval of public announcement to
grant aid to private entrepreneurs

14/07/98 New measure in favour of employment: Replacement

of the Legge Marcora

OJ C 188, 17.6.1998

OJ C 188, 17.6.1998

OJ C 240, 31.7.1998

OJ C 253, 12.8.1998

OJ C 308, 8.10.1998

15/07/98 Facilities for SMEs
29/07/98 Aid for the firm Cartiere del Garda
29/07/98 Investment aid to Capello Tubi SpA
16/09/98 Regional Law 39/97 - Article 13: assistance for the

OJ C 308, 8.10.1998
OJ C 308, 8.10.1998
H1
OJ C 314, 13.10.1998

service cooperative CATA Hotels

17/09/98 Services for SMEs (Trento)
17/09/98 Measures to promote SMEs, environmental protection

and R&D (Friuli-Venezia Giulia)

18/09/98 Leader II (Veneto)
25/09/98 Measures to promote employment (Friuli-Venezia

Giulia)

30/09/98 Regional investment aid for the Nuovi Cantiere

Apuiana shipyard

30/09/98 Regional investment aid for the Vittoria shipyard
30/09/98 Regional investment aid for the Visentini shipyard
30/09/98 Regional investment aid for the Orlando shipyard
30/09/98 Regional investment aid for the CRN shipyard
30/09/98 Regional investment aid for the De Poli shipyard
30/09/98 Aid to Novalis Fibres Srl
05/10/98 Aid for investment by businesses (Umbria)
09/10/98 Automatic aid
09/10/98 CIP Interreg II Italy-Slovenia. Measure 3 2 ’Services

for firms’

14/10/98 Investment aid to Inox Tech SpA (non-ECSC steel)

OJ C 363, 25.11.1998
OJ C 363, 25.11.1998

OJ C 314, 13.10.1998
OJ C 371, 1.12.1998

OJ C 409, 30.12.1998

OJ C 409, 30.12.1998
OJ C 409, 30.12.1998
OJ C 409, 30.12.1998
OJ C 409, 30.12.1998
OJ C 409, 30.12.1998
OJ C 384, 10.12.1998
OJ C 396, 19.12.1998

OJ C 396, 19.12.1998

COMPETITION REPORT 1998

STATE AID 281

N 187/98

N 340a/96
N 226/98
N 272/98
N 103/98

N 469/98

N 67a/98

N 562/98

N 566/98

NN 171/97, NN 67/98

22/10/98 Article 6b of Law No 6 of 30 January 1998 on

measures to assist firms in the tourism sector

OJ C 396, 19.12.1998

28/10/98 Regional Law 33/96 to promote employment (Sicily) OJ C 396, 19.12.1998
OJ C 396, 19.12.1998
28/10/98 Establishment of a guarantee fund for SMEs
10/11/98 Aid for hotels and lodging (Sardinia)
OJ C 396, 19.12.1998
11/11/98 Shipbuilding aid schemes for 1998 and special
guarantee fund for shipping credit

16/11/98 Single programming document, Objective 2 - Measure

1 4, aid for investment by SMEs in the fields of
environmental protection and safety (Marche)

23/11/98 Application of the new definition of SMEs to existing

aid schemes: industrial firms

25/11/98 Premium for safeguarding employment in Article

92(3)(a) areas

03/12/98 Reimbursable advances for investments by SMEs

(Piedmont)

09/12/98 Aid to businesses in areas affected by the earthquake;

aid to compensate for damage caused by natural
disasters

OJ C 396, 19.12.1998

OJ C 409, 30.12.1998

N 810/97

22/12/98 Increase of the budget for and extension to the

N 433/98

Luxembourg

N 595/97

Netherlands

N 513/97, N 754/97,
N 755/97
N 502/97

N 624/97

N 506/97
N 840/97
N 20/98

N 119/98

N 503/97
N 752/97

N 55/98

N 813/97
N 95/98

N 753/97

N 330/98

N 262/98

N 342/98

tourism sector of the aid scheme introduced by Law
488/92

22/12/98 Recovery of the economic activities affected by the

earthquake in Umbria

04/02/98 Comet research programme - Phase 2; aid for two
steel firms ProfilArbed SA and Ares SA

OJ C 211, 7.7.1998

04/02/98 Amendments to the environmental tax law

OJ C 156, 21.5.1998

20/02/98 International industry-oriented technology

programmes

25/03/98 Aid to Hoogovens Staal - R&D project ""Cyclone

converter furnace""

07/04/98 Aid to Commend (Eureka 1549)
07/04/98 CO2 reduction scheme
07/04/98 Extension of the subsidy for rinsing water in the Law

on environmental taxes

27/04/98 Modification of the employment aid scheme -

Flevoland 1997

06/05/98 Investment facility for SMEs in emerging markets
06/05/98 Measures to stimulate the use of electricity generated

by renewable energy sources

03/06/98 Investment subsidy for non-industrial residual heat

infrastructure

17/06/98 Integrated waste-processing units
17/06/98 Biomass combined heat and power plant project at

Lelystad

14/07/98 Exemption regulating energy taxes for waste-

processing units

15/07/98 Modification of central investment aid scheme for the

North of the Netherlands

22/07/98 Stimulating enterprises in the North of the

Netherlands 1998

22/07/98 Energy-efficiency and environmental consultancy

services

OJ C 156, 21.5.1998

OJ C 211, 7.7.1998

OJ C 192, 19.6.1998
OJ C 198, 24.6.1998
OJ C 257, 15.8.1998

OJ C 169, 4.6.1998

OJ C 257, 15.8.1998
OJ C 244, 4.8.1998

OJ C 257, 15.8.1998

OJ C 264, 21.8.1998
OJ C 257, 15.8.1998

OJ C 308, 8.10.1998

OJ C 279, 8.9.1998

OJ C 300, 29.9.1998

OJ C 300, 29.9.1998

COMPETITION REPORT 1998

282 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

N 716/97

N 750/97
N 129/98
N 135/98
N 303/98

N 415/98

N 473/98

N 206/98
N 486/97
NN 136/98

N 751/97, NN 184/97
N 65/98

N 107/98

N 589a/98

Portugal

NN 36/97
N 89/98
N 90/98
N 128/98
N 82/98
N 232/98

N 202/98
N 388/98

N 203/98
N 201/98
N 363/98
N 577/98

NN 100/98

United kingdom

N 616/97
NN 161/97

N 17/98
N 141/98
N 115/98
NN 2/98

N 230/98
N 153/98

29/07/98 Aid for CO2 reduction: Gamma Utility Centre

Europoort project

29/07/98 Free depreciation scheme - Lelystadt (Flevoland)
29/07/98 Job creation premium Twente
29/07/98 Aid to R&D: Medea T601 (Eureka)/Atlas project
16/09/98 Development assistance to China according to Article

4(7) of the seventh Directive on aid to shipbuilding
17/09/98 Prolongation of shipbuilding aid legislation until 31

December 1998

OJ C 308, 8.10.1998

OJ C 279, 8.9.1998
OJ C 396, 19.12.1998
OJ C 308, 8.10.1998
OJ C 409, 30.12.1998

17/09/98 Modification of the investment aid scheme for the

North of the Netherlands

28/10/98 Investment aid to the shipyard Barkmeijer Stroobos
25/11/98 Support for cinema production
09/12/98 Compensation for damage caused by extreme heavy

rain

22/12/98 Zero-tariff for residual fuels
22/12/98 Subsidy scheme for energy supplies in the non-profit

and special sectors

22/12/98 Development aid to Indonesia according to Article
4(7) of the seventh Directive on aid to shipbuilding

22/12/98 Extension of regulatory CO2/Energy tax

11/03/98 Autoeuropa (Ford/VW) - Training aid
11/03/98 Restructuring aid to M. Carmona & Irma˜os, SA
25/03/98 Restructuring aid to Confinca SA
25/03/98 Restructuring aid to Subvidouro Crl
20/05/98 System of state guarantees for bank loans (SGEEB) OJ C 363, 25.11.1998
OJ C 308, 8.10.1998
30/06/98 Amendment to Community initiative operational

OJ C 208, 4.7.1998

programme to assist SMEs

01/07/98 Aid to Exporplas SA
03/09/98 Pedip II: Extension of the scope of Measure 3 5

(support for small business modernisation projects) to
regions covered by the SIR (regional incentives
scheme)

30/09/98 Aid to Verto Portugal
09/12/98 Aid to Fitor SA
09/12/98 Restructuring aid to Dragapor SA
09/12/98 Change to Measure 2 of the Retex operational

programme

22/12/98 Aid scheme for the modernisation of businesses

(SIRME)

OJ C 264, 21.8.1998
OJ C 308, 8.10.1998

OJ C 384, 10.12.1998

10/03/98 Expert help programme for Scotland
25/03/98 Use of discretionary resources by Training and
Enterprise Councils (TECs) and Chambers of
Commerce, Training and Enterprise (CCTEs)

25/03/98 Aid to Rolls Royce: Large engine programmes
20/05/98 Market entry guarantee scheme (Northern Ireland)
27/05/98 SMART Wales
01/07/98 Welsh Development Agency : Mortgage Guarantee

Scheme

OJ C 159, 26.5.1998
OJ C 236, 28.7.1998

OJ C 228, 21.7.1998

OJ C 264, 21.8.1998

27/07/98 Continuation of SMART and SPUR in Scotland
29/07/98 Non-fossil fuel obligation for renewables (NFFO)

OJ C 300, 29.9.1998
OJ C 300, 29.9.1998

COMPETITION REPORT 1998

N 218/98

N 210/98
N 365/98
N 374/98
NN 117/97
N 420/98
N 410/98
N 533/98

Sweden

N 65/97
N 77/97
N 710/97
N 711/97
N 712/97
N 110/98

N 843/97

N 116/98
N 52/98
N 53/98
N 650/98

29/07/98 Regional and training aid to Jaguar Cars Ltd in

support of an investment project at Halewood
(Merseyside)

STATE AID 283

OJ C 270, 29.9.1998

30/09/98 Aid to R&D - Seagate Strategic Research Programme OJ C 384, 10.12.1998
30/09/98 Investment aid to the shipyard Kvaerner Govan Ltd
30/09/98 Employment aid: New Deal
14/10/98 R&D aid to British Steel (ECSC steel)
11/11/98 Regional investment aid to LDV Limited
22/12/98 Employment loan fund
22/12/98 Tourism challenge fund (Northern Ireland)

OJ C 384, 10.12.1998

21/01/98 Map of areas eligible for regional aid
02/02/98 Measures to assist SMEs
11/03/98 Measures in favour of R&D within the energy sector OJ C 169, 4.6.1998
OJ C 169, 4.6.1998
11/03/98 Energy Technology Fund
OJ C 169, 4.6.1998
11/03/98 Measures in favour of energy technology
OJ C 300, 29.9.1998
17/06/98 Modification and prolongation of the regional aid
scheme for the structural change areas
22/07/98 Local investment projects aiming at increasing the

OJ C 89, 25.3.1998
OJ C 130, 28.4.1998

OJ C 300, 29.9.1998

ecological sustainability of society

27/07/98 Aid in favour of SMEs
16/12/98 Measures to stimulate employment
16/12/98 Measures to promote training
22/12/98 Aid to small enterprises

OJ C 308, 8.10.1998

2. Cases in which the Commission found, without opening a formal investigation, that

there was no aid element within the meaning of Article 87(1) of the EC Treaty or Article
1(2) of Decision 2496/96/ECSC

Germany

N 337/98

N 276/98

NN 83/98

Austria

N 546/97
N 856/97

Belgium

01/07/98 Injection of risk capital to the equity of Stahlwerke

Bremen GmbH by its public shareholder Hanseatische
Industriebeteilgungen GmbH

22/07/98 Programme of the Land of Thuringia: Institutional

financing of selected market-oriented research
institute

14/10/98 Preussag Stahl AG - Purchase of the company by

public authorities (Lower Saxony)

OJ C 392, 16.12.1998

OJ C 289, 17.9.1998

OJ C 392, 16.12.1998

03/06/98 Aid to Mobil Oil Austria AG
17/06/98 Subsidy to a measure to repair past damage to the
environment in favour of Schmid Schraubenwerke

OJ C 290, 18.9.1998
OJ C 409, 30.12.1998

N 277/98

30/06/98 Social security arrangements for miners and the like OJ C 308, 8.10.1998

COMPETITION REPORT 1998

284 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Spain

N 639/97

Italy

21/01/98 Agreement by which the state-owned Inespal group is

sold to the Alcoa group

OJ C 211, 7.7.1998

N 348/98

11/11/98 Measures to promote the construction and regulated

letting of housing (Trento)

Netherlands

N 656/97

29/07/98 Extension of the waste disposal system for car wrecks OJ C 308, 8.10.1998

United kingdom

N 624/98

22/12/98 Sales procedure for the sale of loans of the Student

Loan Company Ltd

3. Aid cases in which the Commission initiated proceedings under Article 88(2) of the

EC Treaty in respect of all or part of the measure

Germany

NN 54/97 (C 5/98)
N 237/97, NN 151/97
(C 8/98)
NN 176/97 (C 9/98)

N 783/96 N 225/97
NN 70/97 (C 11/98)
NN 191/97 (C 15/98)
NN 30/97 (C 19/98)
NN 166/97 NN 169/97
NN 170/97 (C 20/98)
NN 9/98 (C 22/98)
NN 41/97 (C 27/98)
N 771/97, NN 18/98
(C 30/98)
N 573/97, N 588/97
(C 34/98)

C 40/98

04/02/98 Aid to Brockhausen Holze GmbH
18/02/98 Aid to Biotec Biologische Naturverpackungen GmbH OJ C 219, 15.7.1998

OJ C 144, 9.5.1998

18/02/98 Financial measures in connection with the takeover of
Bremer Vulkan Marine Schiffbau GmbH by Lu¨ rssen
Maritime Beteiligungen GmbH & Co. KG

OJ C 252, 12.8.1998

25/02/98 Aid to Addinol Mineralo¨ l GmbH iGV

OJ C 186, 16.6.1998

25/02/98 Aid to Kranbau Ko¨ then GmbH
11/03/98 Aid to Weida Leder GmbH
11/03/98 Aid to the Sican group and its partners for R&D in the

microelectronics field

11/03/98 Aid to Kranbau Eberswalde GmbH
25/03/98 Restructuring aid to Draiswerke GmbH
07/04/98 Aid to Wildauer Kurbelwelle GmbH

OJ C 338, 6.11.1998
OJ C 256, 14.8.1998
OJ C 307, 7.10.1998

OJ C 353, 19.11.1998
OJ C 207, 3.7.1998
OJ C 377, 5.12.1998

22/04/98 Restructuring aid to Torwegge Holztechnik GmbH &

Co. KG, IMA Maschinenfabrik Klessmann GmbH
and IMA Wehrmann; restructuring aid to Heinrich
Nottmeyer Maschinenfabrik GmbH

20/05/98 Multisectorial framework on regional aid to large

investment projects

OJ C 171, 5.6.1998

NN 54/95 (C 42/98)
NN 45/97 (C 45/98)

03/06/98 Aid for setting up CD Albrechts GmbH
17/06/98 Guarantee scheme operated during the period 1991-

OJ C 390, 15.12.1998
OJ C 369, 28.11.1998

1995 by the Land of Brandenburg

N 101/98 (C 54/98)

29/07/98 Restructuring aid for Graphischer Maschinenbau

OJ C 336, 4.11.1998

GmbH

NN 42/98 (C 56/98)
N 362/98 (C 63/98)
NN 113/98 (C 66/98)

29/07/98 Tax-free depreciation reserve for company founders
28/10/98 Aid to Saxonylon Textil GmbH
25/11/98 Excess capacity at Kvaerner Warnow Werft GmbH

OJ C 334, 31.10.1998

COMPETITION REPORT 1998

N 702/97 (C 72/98)

N 100/98 (C 84/98)

NN 106/98 (C 85/98)

NN 137/98 (C 87/98)

Austria

NN 162/97 (C 3/98)

N 895/96 (C 23/98)
N 663/97 (C 24/98)
NN 74/98 (C 52/98)
NN 189/97 (C 61/98)

Belgium

NN 118/98 (C 69/98)

25/11/98 Improper use in the past of the SME investment

scheme of the Land of Thuringia

09/12/98 Law on the tax allowance in 1999 for the new La¨nder,

including Berlin

22/12/98 27th outline plan for the joint Federal Government/
La¨nder programme for improving regional economic
structures

22/12/98 Incorrect application of the ""de minimis"" rules in

the context of the consolidation programme of the
Land of Thuringia of 20 July 1993

22/12/98 Incorrect application of the ""de minimis"" rules in

the context of the consolidation programme of the
Land of Thuringia of 24 January 1996

STATE AID 285

OJ C partial initiation

OJ C partial initiation

21/01/98 Aid scheme for holdings taken by Wibag in companies

OJ C 154, 19.5.1998

located in Burgenland
25/03/98 Aid to KNP Leykam, Gratkorn
OJ C 296, 24.9.1998
25/03/98 Environmental aid for Kiener Deponie Bachmanning OJ C 201, 27.6.1998
OJ C 298, 26.9.1998
29/07/98 Restructuring aid to Ergee Textilwerk GmbH
OJ C 9, 13.1.1999
14/10/98 Aid to Lenzing Lyocell GmbH & Co. KG

N 544/97 (C 29/98)
N 263/98 (C 67/98)

07/04/98 Aid to Hermes Europe Railtel NV
25/11/98 Aid to Decochim SA

OJ C 291, 19.9.1998

Spain

N 749/97 (C 13/98)
N 851/97 (C 25/98)
NN 33/98 (C 33/98)

25/02/98 Aid to AG Tubos Europa SA (large steel tubes)
25/03/98 Aid to Brile´ n SA (synthetic fibres industry)
07/04/98 Aid to Babcock Wilcox Espan˜ a SA

OJ C 156, 21.5.1998
OJ C 199, 25.6.1998
OJ C 249, 8.8.1998

Finland

NN 20/98 (C 55/98)

29/07/98 Accelerated depreciation scheme

OJ C 377, 5.12.1998
partial initiation

France

N 445/97 (C 12/98)

NN 19/95 (C 14/98)

N 124/98 (C 37/98)

NN 52/98 (C 38/98)
NN 53/98 (C 39/98)

25/02/98 Aid to Cofidur for the takeover of the former

Gooding (ex Grundig) plant at Creutzwald

25/02/98 Aid to Gooding Consumer Electronics Ltd in

connection with the purchase of the former Grunding
plant at Creutzwald

20/05/98 Development aid to French Polynesia in accordance
with Article 4(7) of the seventh Directive on aid to
shipbuilding

20/05/98 Aid to the Kimberley Clark/Scott Group
20/05/98 Aid granted by EDF to certain firms in the paper

industry

OJ C 198, 24.6.1998

OJ C 179, 11.6.1998

OJ C 307, 7.10.1998

OJ C 301, 30.9.1998

COMPETITION REPORT 1998

286 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Greece

N 607a/97 (C 50/98)

Italy

NN 10/98 (C 16/98)
NN 79/96 (C 26/98)
N 783/97, N 160/98
(C 35/98)

NN 41/98 (C 47/98)
NN 60/98 (C 48/98)

NN 164/97, NN 75/98
(C 49/98)
NN 95/97 (C 64/98)

N 693/97, NN 130/98
(C 71/98)

29/07/98 SME aid scheme: Operational programme for

industry (Measure 1 4 2: Regions affected by industrial
decline) and Community Initiative for SMEs

11/03/98 Aid to Banco di Sicilia and Sicilcassa
25/03/98 Measures to assist cooperatives
22/04/98 Regional investment aid under Italian Law 488/92 for

the creation of two new shipyards (Oristano and
Belvedere Marittimo)

14/07/98 Aid allegedly granted to Ente Poste Italiane
14/07/98 Capital increases and other measures granted to

several undertakings controlled by public holdings
Emsa, Sigma and Intex

OJ C 297, 25.9.1998
OJ C 382, 9.12.1998
OJ C 307, 7.10.1998

OJ C 367, 27.11.1998
OJ C 403, 23.12.1998

22/07/98 Various laws containing measures to promote

OJ C 384, 10.12.1998

employment

28/10/98 Aid allegedly granted to Instituto Poligraphico e

Zecca dello Stato and its controlled companies

09/12/98 Arrangements for the takeover and completion of

serviced small-business areas developed by Sirap SpA;
rules issued to municipalities for the allocation of lots
and industrial hangars

NN 128/98 (C 77/98)

09/12/98 Defrayment by the public holding company Italinvest
(ex GEPI) of losses incurred by the INMA shipyard

NN 135/98 (C 86/98)

22/12/98 Aid to Sangalli Vetro SpA

Netherlands

N 939/96 (C 18/98)

N 558/97 (C 43/98)

11/03/98 Aid to Oce´ NV for the development of colour ink-jet

printers

03/06/98 Aid to 624 service stations located near the German

border

OJ C 270, 29.9.1998

OJ C 307, 7.10.1998

N 708/97 (C 44/98)

17/06/98 Process integrated gas turbine at Nerefco refinery

OJ C 334, 31.10.1998

Portugal

N 196/98 (C 60/98)

14/10/98 Aid to Cotesi - Companhia de Texteˆ is Sinte´ ticos SA OJ C 405, 24.12.1998

4. Aid cases in which the Commission initiated proceedings under Article 6(5) of Decision

2496/96/ECSC in respect of all or part of the measure

Germany

N 204/98 (C 41/98)

N 261/98 (C 73/98)

Italy

03/06/98 Environmental aid to ESF Elbestahlwerk Feralpi

GmbH

09/12/98 Aid to Neue Maxhu¨ tte Stahlwerke GmbH:
environmental protection measures

OJ C 240, 31.7.1998

N 791/97 (C 46/98)

01/07/98 Environmental protection aid and R&D aid to

Acciaierie di Bolzano

OJ C 269, 28.8.1998

COMPETITION REPORT 1998

5. Aid cases in which the Commission initiated, in respect of all or part of the measure,
proceedings under Article 84 of the ECSC Treaty for failure by a Member State to fulfil
its obligations

STATE AID 287

Germany

C 55/94 and C 41/95

16/12/98 Aid to Neue Maxhu¨ tte Stahlwerke GmbH - recovery

of illegal aid

6. Aid cases in which the Commission extended Article 88 (2) proceedings in respect of all

or part of the measure

Germany

C 42/97
C 23/97
C 61/97

Spain

C 76/97

France

C 51/90

C 42/96

Italy

C 46/94
C 47/98

14/07/98 Aid to Everts Erfurt GmbH, Thuringia
29/07/98 Restructuring aid to Lautex GmbH
22/12/98 Aid to Elpro AG (Berlin)

OJ C 377, 5.12.1998
OJ C 387, 12.12.1998

06/05/98 Aid to Daewoo Electronics Manufacturing Espan˜ a SA

(Demesa)

OJ C 266, 25.8.1998

06/05/98 Aid to Pari Mutuel Urbain (PMU)/racecourse

undertakings

14/07/98 Socie´ te´ Marseillaise de Cre´ dit (SMC): capital

injection of FRF 2 900 million and guarantee ceiling of
FRF 400 million to cover any activating of the
guarantee

OJ C 253, 12.8.1998

OJ C 249, 8.8.1998

04/02/98 Aid to Seleco SpA, Pordenone
16/09/98 Aid allegedly granted to Ente Poste Italiane

OJ C 155, 20.5.1998
OJ C 367, 27.11.1998

7. Interim decisions requiring the Member State to supply the information needed by the

Commission

Germany

NN 142/97
C 63/97

NN 97/98
NN 120/98

07/04/98 SME investment programme of the Land of Thuringia
03/06/98 Aid to Riedel-de Hae¨n AG, a large undertaking

located outside the assisted areas

28/10/98 Aid to BCA (Bitterfelder Chlor-Alkali) GmbH
09/12/98 Misuse of the Thu¨ ringer Industriebeteiligungsfonds

scheme

COMPETITION REPORT 1998

288 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Italy

C 46/94

02/12/98 Aid to Seleco SpA

8. Cases in which the Commission considered that the aid was compatible with the

common market and terminated proceedings under Article 88(2) of the EC Treaty by
way of a positive final decision

Germany

C 16c/95

13/05/98 Aid to Herborn & Breitenbach GmbH (ex

Drahtziehmaschinenwerk)

C 24/97
C 72/97
C 8/98
C 5/97 and NN 102/97
C 27/98
C 59/97

01/07/98 Aid to Chemieanlagenbau Stassfurt AG
30/09/98 Aid to SKET Verseilmaschinenbau GmbH
14/10/98 Aid to Biotec Biologische Naturverpackungen GmbH OJ C 387, 12.12.1998
28/10/98 Aid to Neptun Industrie Rostock GmbH
25/11/98 Restructuring aid for Draiswerke GmbH
09/12/98 Aid to a lignite power plant in Cottbus

Spain

C 13/98

France

C 39/96
C 42/96

Italy

C 22/96

Netherlands

C 59/96

Portugal

C 17/97

Sweden

C 66/97

28/10/98 Aid to AG Tubos Europa SA (large steel tubes)

10/06/98 Aid to Coope´ rative d’exportation du livre franc(cid:224)ais
14/10/98 State financial support for Socie´ te´ Marseillaise de

Cre´ dit (SMC)

01/07/98 Aid for environmental protection to Servola SpA

29/07/98 Development of a digital high-volume photocopier:

OS 120

04/02/98 Aid in synthetic fibres sector to Cordex SA
(Companhia industrial Textil SA)

21/01/98 Acceptance of appropriate measure proposed in

connection with the framework for the motor vehicle
industry

OJ C 122, 21.4.1998

COMPETITION REPORT 1998

9. Cases in which the Commission considered that the aid was compatible with the

common market and terminated proceedings under Article 6(5) of Decision 2496/96/
ECSC by way of a positive final decision

STATE AID 289

Germany

C 85/97

09/12/98 Environmental aid to MCR Gesellschaft fu¨ r

metallurgisches Recycling

Italy

C 46/98

28/10/98 Environmental protection aid and R&D aid to

Acciaierie di Bolzano

10. Cases in which the Commission considered, subject to certain reservations, that the aid

was compatible with the common market and terminated proceedings under Article
88(2) of the EC Treaty by way of a conditional final decision

Germany

C 18/97

25/11/98 Aid to InfraLeuna Infrastruktur und Service GmbH

Austria

C 24/98

France

C 13/97

C 47/96

Italy

C 21/97

C 40/96

C 38/97

C 39/97

09/12/98 Environmental aid to Kiener Deponie Bachmanning

21/01/98 Restructuring aid to Socie´ te´ franc(cid:224)aise de production

(SFP)

OJ L 205, 22.7.1998

20/05/98 Aid to the Cre´ dit Lyonnais group

OJ L 221, 8.8.1998

03/06/98 Articles 51, 114, 117 and 119 of Regional Law 25/93 to

promote employment (Sicily)

29/07/98 Consolidation, restructuring and privatisation of

Banco di Napoli

16/09/98 Capital injections into and privatisation of Societa`

Italiana per Condotte d’Acqua SpA (Condotte)

16/09/98 Capital injections into and privatisation of Italstrade

SpA

COMPETITION REPORT 1998

290 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

11. Cases in which the Commission considered that the aid was incompatible with the

common market and terminated proceedings under Article 88(2) of the EC Treaty by
way of a negative or partly negative decision

Germany

C 16/97

C 14/92
C 22/97

C 52/97

C 9/97
C 35/97
C 37/96

C 40/98

C 7/96

C 46/97

C 11/98
C 7/95
C 63/97

Austria

C 62/97
C 77/97
C 52/98

Spain

C 52/96

C 32/97

C 44/97
C 68/97

France

C 44/96

C 50/97

21/01/98 Tax concessions under Section 52(8) of the German

OJ L 212, 30.7.1998

Income Tax Act

25/02/98 Aid to Bremer Vulkan AG via Krupp and Hibeg
25/02/98 Development aid to Indonesia in accordance with

Article 4(7) of the seventh Directive on aid to
shipbuilding

25/02/98 26th outline plan for the joint Federal Government/
La¨nder programme for improving regional economic
structures; intensity of aid for promoting the
development of teleworking

22/04/98 Aid to SHB Stahl- und Hartgusswerke Bo¨ sdorf AG
22/04/98 Aid to Triptis Porzellan GmbH iGV
06/05/98 Extension of eligibility for regional aid for the

acquisition costs of intangible property for large firms
provided for in the 25th outline plan for the joint
Federal Government/La¨nder programme for
improving regional economic structures
14/07/98 Multisectorial framework on regional aid for large

investment projects

OJ L 316, 25.11.1998

OJ L 316, 25.11.1998

OJ L 304, 14.11.1998

22/07/98 Spillover of restructuring aid for MTW-Schiffswerft

and Volkswerft to other Bremer Vulkan undertakings
29/07/98 Exemption of Georgmarienhu¨ te GmbH (ECSC steel)

from environmental obligations

25/11/98 Aid to Addinol Mineralo¨ l GmbH
09/12/98 Aid to Maschinenefabrik Sangerhausen (Samag)
22/12/98 Aid to Riedel-de Hae¨n AG

01/07/98 Extension of rescue aid to Actual Maschinenbau AG OJ L 316, 25.11.1998
14/10/98 Foreign direct investment to LiftgmbH
22/12/98 Restructuring aid to Ergee Textilwerk GmbH

14/07/98 Restructuring aid granted to Fahave SA and to its

successors

14/07/98 Aid to Porcelanas del Norte SAL (Ponsal)/

Commercial Europa de Porcelanas SAL (Comepor)

14/10/98 Aid to the Magefesa group and its successors
28/10/98 Aid to Sniace SA

22/07/98 State aid, via Consortium de Re´ alisation (CDR), to

part of Socie´te´ de Banque Occidentale (SDBO)
04/11/98 Investment aid and restructuring aid to Nouvelle

Filature Lainie`re de Roubaix

COMPETITION REPORT 1998

STATE AID 291

Italy

C 27/97

C 14/97

13/05/98 Tax reductions under Law 549/95 for the motor

vehicle, synthetic fibres and shipbuilding industries

01/07/98 Restructuring aid to Keller SpA and Keller Meccanica

SpA

C 29/97, C 30/97, C 31/
97
C 55/97

16/09/98 Measures to assist cooperatives under Law 49/85 (the

""Marcora Law"")

11/11/98 Increase in aid intensity for two ship conversion

contracts

C 90/97

25/11/98 Capital injection into Enirisorse SpA

Netherlands

C 41/96

21/01/98 Aid for the construction of a hydrogen peroxide works

in Delfzijl

OJ L 171, 17.6.1998

12. Cases in which the Commission considered that the aid was incompatible with the

common market and terminated proceedings under Article 6(4) of Decision 3855/91/
ECSC or Article 6(5) of Decision 2496/96/ECSC by way of a negative decision

Germany

C 60/97

C 75/97

Luxembourg

C 25/94

14/07/98 Aid (ECSC steel) to Eisen- und Stahlwalzwerke

Ro¨ tzel GmbH

11/11/98 Aid to ESF Elbestahlwerk Feralpi GmbH

17/06/98 Aid (ECSC steel) to ProfilArbed SA for an

environmental protection programme

13. Aid cases in which the Commission terminated proceedings under Article 88(2) of the

EC Treaty after the Member State withdrew the proposed measure

Germany

C 34/98

C 25/97

Austria

16/09/98 Restructuring aid to Torwegge Holztechnik GmbH &

Co. KG, IMA Maschinenfabrik Klessmann GmbH
and IMA Wehrmann; restructuring aid to Heinrich
Nottmeyer Maschinenfabrik GmbH
28/10/98 Aid to Do¨ rries Scharmann Technologie GmbH

C 23/98

09/12/98 Aid to KNP Leykam, Gratkorn

Italy

C 3/97

14/07/98 Extension of the deadlines of the order-book aid

scheme (Article 31 of Regional Law 25/93 - Sicily)

OJ C 395, 18.12.1998

COMPETITION REPORT 1998

292 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Luxembourg

C 36/97

Netherlands

C 36/96

11/03/98 Research and development projects carried out by

steel producers ProfilArbed SA and Ares SA in 1995/
96

OJ C 125, 23.4.1998

22/04/98 Aid to Philips Electronics NV for development of
semiconductor systems for multimedia

OJ C 311, 10.10.1998

14. Aid cases in which the Commission terminated proceedings under Article 6(5) of
Decision 2496/96/ECSC after the Member State withdrew the proposed measure

Germany

C 41/98

09/12/98 Environmental aid to ESF Elbestahlwerk Feralpi

GmbH

15. Aid cases in which the Commission proposed appropriate measures under Article 88(1)

of the EC Treaty

Ireland

E 1/98 E 2/98

United kingdom

22/07/98 - International Financial Service Centre (IFSC) and
Shannon Customs-free Airport Zone (SCAZ) - Irish
Corporation Tax (ICT)

OJ C 395, 18.12.1998

E 2/97

01/07/98 Appropriate measures with regard to Commission

decision (N 31/95: Single Regeneration Budget),
concerning the part of the activities of English
Partnerships under the Partnership Investment
Programme

16. Cases in which the Commission noted the Member State’s agreement to ensuring the
compliance of existing aid awards following the proposal of appropriate measures
under Article 88(1) of the EC Treaty

Sweden

C 48/97

25/03/98 Aid to Volvo Truck Corporation in Umea

OJ C 215, 10.7.1998

17. Aid cases which the Commission decided to refer to the Court of Justice under the

second subparagraph of Article 88(2) of the EC Treaty

Belgium

C 14/96

14/07/98 Maribel bis/ter scheme

COMPETITION REPORT 1998

18. Other Commission decisions

Germany

C 52/97

22/07/98 26th outline plan for the joint Federal Government/
La¨nder programme for improving regional economic
structures; intensity of aid for promoting the
development of teleworking

N 499/97

14/10/98 Privatisation of Verpackungszentrum Bitterfeld

NN 9/98 (C 22/98)

GmbH, Bitterfeld-Wolfen
28/10/98 Aid to Kranbau Eberswalde GmbH

NN 104/96, NN 140/96

11/11/98 Aid to Umformtechnik Erfurt GmbH (UTE)

C 11/98

16/12/98 Aid to Addinol Mineralo¨ l GmbH

STATE AID 293

Corrigendum to the
decision of 25.2.1998

Corrigendum to the
decision of 16.12.1997
Corrigendum to the
decision of 11.3.1998
Corrigendum to the
decision of 1.7.1998
Corrigendum to the
decision of 25.11.1998

Spain

C 52/96

France

N 3/98

C 47/96

Italy

22/12/98 Restructuring aid granted to Fahave SA and to its

successors

Corrigendum to the
decision of 14.7.1998

29/07/98 Support for cinema production

18/11/98 Aid to Cre´ dit Lyonnais: Evaluation of the better

fortunes clause

OJ C 279, 8.9.1998
amendment of the
decision of 3.6.1998
Requirements of
Article 1(3)(c) of the
decision of 20.5.1998

Corrigendum to the
decision of 3.12.1997
Corrigendum to the
decision of 11.3.1998
OJ C 297, 25.9.1998
Corrigendum to the
decision of 16.9.1998
Termination

Corrigendum to the
decision of 9.10.1998

N 737/97

25/02/98 Premium for safeguarding employment in Article

92(3)(a) areas

NN 10/98 (C 16/98)

15/04/98 Aid to Banco di Sicilia and Sicilcassa

C 29/97, C 30/97, C 31/
97
NN 89/98

14/10/98 Measures to assist cooperatives under Law 49/85 (the

""Marcora Law"")

28/10/98 Aid to IRI SpA in the form of an extension of the

unlimited state guarantee: Andreatta/Van Miert
agreement

N 50/98

30/11/98 Automatic aid

Netherlands

NN 28/94

17/06/98 R&D aid for Fokker 70 project

Termination

Sweden

C 48/97

07/04/98 Aid to Volvo Truck Corporation in Umea˚

Corrigendum to the
decision of 25.3.1998
OJ C 215, 10.7.1998

COMPETITION REPORT 1998

294 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

D — List of state aid cases in other sectors

1. In the agriculture sector

1.1. Aid cases in which the Commission raised no objection

Austria

23.1.1998
6.2.1998
27.2.1998 Compensation for losses in the wine-growing sector caused by frost
1.4.1998

OJ C 136, 1.5.1998
Styria: Measures for farm workers
Lower Austria: Measures for the purchase of male breeding animals (rams) OJ C 130, 28.4.1998
OJ C 181, 12.6.1998
OJ C 188, 17.6.1998

Technical amendment to the special guideline on promotion of structures
and Sales of wine
Salzburg: Regional project to protect groundwater and grass

15.4.1998
23.4.1998 Aid for insurance premiums (winegrowing)
29.4.1998
29.4.1998
29.4.1998 Aid for investments in greenhouses
3.6.1998

Styria: Environmental aid
Lower Austria: Village renewal

Tyrol: Measures to improve the quality and hygiene of milk and milk
products
Lower Austria: Start-up aid for young farmers
Investment aid
Programme 2000 for groundwater

30.7.1998
9.9.1998
24.9.1998

Belgium

12.1.1998
13.1.1998

Payments and contributions to the budget fund for raw materials
Flemish Region: Aid for town and country planning and Improvement of
public infrastructure

24.2.1998 Walloon Region: Special measures for beef and veal
4.5.1998

Draft royal decree laying down the annual contributions due from
Ornamental plant growers
Aid and compulsory contributions to the Fund for animal health and
production in the pigmeat sector

8.5.1998

8.7.1998 Measures to assist fruitgrowers
4.8.1998
10.11.1998 Promotion of agricultural products

Royal Decree fixing payment for the issue of plant-health certificates

Germany

8.1.1998

8.1.1998

8.1.1998

Thuringia: Interest subsidies for operating loans to enterprises in agriculture
And forestry
Thuringia: Measure promoting private advisory services for agricultural
And horticultural undertakings
Saxony: Measure to encourage investment in the construction of housing for
animals
Schleswig-Holstein: Marketing of organic products
26.1.1998
Schleswig-Holstein: Aid to associations of organic producers
6.2.1998
Thuringia: Guarantee for a poultrymeat processing undertaking
17.2.1998
17.2.1998
Saxony: Measures for environmental improvement on farms
17.2.1998 North Rhine-Westphalia: Aid for an environmentally-friendly method of

24.2.1998

agricultural production
1998 to 2001 framework plan for the joint scheme for the improvement of
agricultural structures and coastal protection

OJ C 232, 24.7.1998
OJ C 232, 24.7.1998
OJ C 266, 25.8.1998
OJ C 232, 24.7.1998
OJ C 232, 24.7.1998
OJ C 266, 25.8.1998

OJ C 329, 27.10.1998
OJ C 361, 24.11.1998
OJ C 361, 24.11.1998

OJ C 147, 13.5.1998
OJ C 136, 1.5.1998

OJ C 136, 1.5.1998
OJ C 232, 24.7.1998

OJ C 188, 17.6.1998

OJ C 329, 27.10.1998
OJ C 330, 28.10.1998
OJ C 54, 25.2.1999

OJ C 147, 13.5.1998

OJ C 147, 13.5.1998

OJ C 147, 13.5.1998

OJ C 130, 28.4.1998
OJ C 130, 28.4.1998
OJ C 130, 28.4.1998
OJ C 149, 15.5.1998
OJ C 130, 28.4.1998

OJ C 149, 15.5.1998

4.5.1998 Mecklenburg-Western Pomerania: Investment aid for Klaus GmbH

OJ C 266, 25.8.1998

COMPETITION REPORT 1998

29.5.1998 Rheinland-Pfalz: Leader II Community Initiative
1.7.1998
30.7.1998 Mecklenburg-Western Pomerania: Programme to promote investments in

Schleswig-Holstein: Aid for the development of villages and regions

Hydraulic engineering

28.8.1998 Draft law on the promotion of forestry products
24.9.1998
24.9.1998 Bavaria: Investments in the food sector
16.10.1998 Lower Saxony: Measures in the context of the Leader II Community

Lower Saxony: Measures in the context of Leader II

Initiative

STATE AID 295

OJ C 266, 25.8.1998
OJ C 321, 20.10.1998
OJ C 329, 27.10.1998

OJ C 361, 24.11.1998
OJ C 363, 25.11.1998
OJ C 361, 24.11.1998
OJ C 21, 26.1.1999

21.10.1998 Rheinland-Pfalz: Promotion of investment in agriculture
27.10.1998 Bavaria: Bavarian countryside programme (Kulap-A)
28.10.1998 Mecklenburg-Western Pomerania: Promotion of investments in forestry
30.10.1998 Bavaria: Upland farming
30.11.1998 Saxony: Promotion of farming methods compatible with the requirements of

OJ C 21, 26.1.1999
OJ C 21, 26.1.1999
OJ C 21, 26.1.1999
OJ C 21, 26.1.1999
OJ C 47, 20.2.1999

environmental protection

11.12.1998 Saxony-Anhalt: Guideline on the grant of subsidies to encourage Regional

OJ C 47, 20.2.1999

development
11.12.1998 Rheinland-Pfalz: Leader II
21.12.1998 Saxony: Measures to improve the disposal of agricultural products
21.12.1998 Bavaria: Improvement of agricultural structures — Rain am Lech
21.12.1998 North Rhine-Westphalia: Promotion of organic farming
21.12.1998 Schleswig-Holstein: Leader II

OJ C 47, 20.2.1999
OJ C 60, 2.3.1999
OJ C 60, 2.3.1999
OJ C 60, 2.3.1999
OJ C 47, 20.2.1999

Denmark

23.1.1998 Aid for consultancy in the forestry sector
23.1.1998 Aid for the development and maintenance of forests
21.2.1998
Improving the efficiency of agricultural structures
24.2.1998 Aid for development projects for organic farming and fishery
20.8.1998
28.10.1998 Compensation for losses incurred in connection with the prevention and

Tax on pesticides and aid for agriculture

OJ C 130, 28.4.1998
OJ C 130, 28.4.1998

OJ C 149, 15.5.1998
OJ C 329, 27.10.1998
OJ C 21, 26.1.1999

Combat of animal diseases

Spain

5.2.1998

Asturias: Aid to promote new machine and agricultural equipment
technology

17.2.1998 Castile-Leon: Aid for assistance to livestock markets
17.2.1998 Castile-Leon: Aid measures for the processing and marketing of agricultural

Products and foodstuffs

17.2.1998 Murcia: Restructuring of vineyards affected by drought
25.2.1998 Balearic Islands: Measures to assist agricultural production
27.2.1998 Rioja: Measures to assist agricultural cooperatives
12.3.1998 Murcia: Measures to improve agricultural production
19.3.1998 Castile-Leon: Aid to assist livestock holdings
19.3.1998 Measures to assist groups of potato growers
26.3.1998 Cantabria: Measures to assist agricultural cooperatives
7.4.1998
23.4.1998 Castile-La Mancha: Aid for the processing and marketing of

Castile-Leon: Measures to assist cooperatives and producer groups

Agricultural products and foodstuffs

23.4.1998 Castile-La Mancha: Aid to agricultural cooperatives
29.4.1998 Castile-La Mancha: Aid to certification bodies and interbranch

organisations
Cantabria: Measures to assist agricultural production

4.5.1998
29.5.1998 Madrid: Measures to assist zootechnics
3.6.1998

Galicia: Measures to assist agricultural cooperatives

COMPETITION REPORT 1998

OJ C 136, 1.5.1998

OJ C 149, 15.5.1998
OJ C 149, 15.5.1998

OJ C 149, 15.5.1998
OJ C 188, 17.6.1998
OJ C 181, 12.6.1998
OJ C 181, 12.6.1998
OJ C 188, 17.6.1998
OJ C 188, 17.6.1998
OJ C 188, 17.6.1998
OJ C 181, 12.6.1998
OJ C 232, 24.7.1998

OJ C 232, 24.7.1998
OJ C 232, 24.7.1998

OJ C 266, 25.8.1998
OJ C 266, 25.8.1998
OJ C 266, 25.8.1998

296 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

OJ C 321, 20.10.1998
16.6.1998 Measures for agriculture
OJ C 321, 20.10.1998
24.6.1998 Cantabria: Regional aid scheme for environmental protection
OJ C 321, 20.10.1998
24.6.1998 Madrid: Investment aid for the food industry
OJ C 321, 20.10.1998
1.7.1998 Madrid: Measures to assist upland areas
OJ C 329, 27.10.1998
20.7.1998 Canary Islands: Measures to assist the dairy sector
OJ C 329, 27.10.1998
22.7.1998 Castile-Leon: Aid to improve irrigation systems
4.8.1998 Murcia: Improvement of animal health infrastructure in livestock holdings OJ C 330, 28.10.1998
OJ C 330, 28.10.1998
4.8.1998 Murcia: Measures to assist farms
OJ C 363, 25.11.1998
4.8.1998 Murcia: Protection and promotion of the quality of foodstuffs
OJ C 330, 28.10.1998
4.8.1998 Murcia: Aid to firms in the canning industry
OJ C 330, 28.10.1998
4.8.1998
OJ C 330, 28.10.1998
4.8.1998 Murcia: Measures to improve agricultural production
OJ C 330, 28.10.1998
4.8.1998
OJ C 361, 24.11.1998
21.9.1998 Catalonia: Aid for the manufacture of milk products
OJ C 361, 24.11.1998
21.9.1998 Murcia: Aid for the processing and marketing of agricultural products
OJ C 21, 26.1.1999
2.10.1998
OJ C 24, 29.1.1999
28.10.1998 Aid to improve processing and marketing conditions for

Financial measures to assist agricultural associations

Valencia: Aid measures for training in agriculture

Castile-Leon: Aid to Appacale SA

Agricultural products

6.11.1998 Catalonia: Measures to assist SMEs
10.11.1998 Valencia: Aid to restore citrus groves
17.11.1998 Castile-Leon: Aid for replanting vines
21.12.1998 Madrid: Measures to assist firms in Madrid
21.12.1998 Catalonia: Aid to the firm Indulerida SA
21.12.1998 Madrid: Measures to assist producer groups using integrated

Pest control in agriculture

21.12.1998 Catalonia: Aid to the firm Azucares Especiales SAL
21.12.1998 Rioja: Producer group pilot programme
21.12.1998 Catalonia: Aid to the firm Agroles, SCCL
21.12.1998 Galicia: Measures to assist tenants to purchase property

France

28.4.1998 Aid and parafiscal charges for the ‘Groupement national interprofessionnel

Des semences, graines et plants’ (GNIS)
Aid to liqueur-wine and spirits producers

4.8.1998
21.9.1998 Extension of the CTIFL aid scheme (Centre technique Interprofessionnel

des fruits et legumes)

OJ C 16, 21.1.1999
OJ C 16, 21.1.1999
OJ C 47, 20.2.1999
OJ C 60, 2.3.1999
OJ C 60, 2.3.1999
OJ C 60, 2.3.1999

OJ C 60, 2.3.1999
OJ C 60, 2.3.1999
OJ C 60, 2.3.1999
OJ C 47, 20.2.1999

OJ C 232, 24.7.1998

OJ C 330, 28.10.1998
OJ C 361, 24.11.1998

23.10.1998 Aid to improve the quality of pigmeat produced in mountain areas

OJ C 16, 21.1.1999

Finland

Promotion of organic products

24.2.1998
30.9.1998 Aid for the processing and marketing of agricultural products (A˚ land)
14.10.1998 Aid for forestry (A˚ land)

OJ C 149, 15.5.1998
OJ C 21, 26.1.1999
OJ C 21, 26.1.1999

Greece

26.2.1998 Aid to finance research infrastructure in the sugar beet sector

Under Community Initiative Interreg II

1.4.1998 Measures to compensate cotton producers for flood damage in 1997
1.4.1998 Measures to assist producers affected by rain, frost and drought in 1997
1.4.1998 Measures to assist producers affected by floods and storms in 1996
29.5.1998 Measures for holdings damaged by bad weather (rain, floods and frost) in

4.6.1998

1997
Additional measures to assist young farmers

OJ C 149, 15.5.1998

OJ C 188, 17.6.1998
OJ C 232, 24.7.1998
OJ C 188, 17.6.1998
OJ C 266, 25.8.1998

OJ C 266, 25.8.1998

COMPETITION REPORT 1998

14.8.1998 Compensation for losses suffered due to bad weather in 1997 and 1998
28.10.1998 Compensation to producers following the destruction of potatoes

OJ C 330, 28.10.1998
OJ C 16, 21.1.1999

Contaminated by a bacterium

6.11.1998 Measures to assist farms damaged by bad weather (rain, floods,

OJ C 16, 21.1.1999

Frost and snow) in March and April 1998

10.11.1998 Aid for farmers whose farms were damaged by fires in 1997

OJ C 21, 26.1.1999

STATE AID 297

Italy

Advertising campaigns in the agricultural sector

OJ C 147, 13.5.1998
8.1.1998
12.1.1998 Emilia-Romagna: Measures to improve quality in the agri-foodstuffs sector OJ C 147, 13.5.1998
OJ C 130, 28.4.1998
27.1.1998
OJ C 147, 13.5.1998
6.2.1998

17.2.1998
17.2.1998
24.2.1998
17.3.1998

1.4.1998
20.4.1998

23.4.1998
29.4.1998

Lazio: Aid to associations of organic producers
Sicily: Aid for land improvement operations and construction of farm
buildings
Piedmont: Standards for the development of organic farming
Publicity campaigns for agriculture
Interbranch agreement on the processing of potatoes (1997)
Friuli-Venezia Giulia: Refinancing of certain aid schemes
(Article 24(21) and (22) of Regional Law 10/97)
Lombardy: Aid for the purchase of female cattle
Friuli-Venezia Giulia: Regional assistance to agriculture
(draft regional law No 252)
Tuscany: Regional programme to protect ‘relic’ breeds
Tuscany: Measures to help young people set up in farming, assistance to
agricultural services and rural areas
Aid to assist the RISO 2000 project
National programme to assist livestock holdings affected by BSE
Sardinia: Aid for rescue and restructuring
Agrimonetary compensation
‘Camposole’ project

7.5.1998
2.6.1998
4.6.1998
2.7.1998
3.7.1998
22.7.1998 Valle d’Aosta: Investment aid for farms
24.7.1998 Veneto: Plan to prevent pollution and improve water in the catchment area

30.7.1998

Emptying into the Venice lagoon — agriculture and livestock measures
Sicily: Measure to protect wild fauna and regulate hunting
(Article 6 of Regional Law No 33 of 1 September 1997)
Aid for Parmacotto project — RIBS operation
‘Unibon Salumi’ project
Liguria: Aid to farms under the Leader II CIP
Piedmont: Aid for investments in processing of agricultural products

7.8.1998
7.8.1998
20.8.1998
22.9.1998
30.9.1998 Aid for Quargentan project — RIS operation
2.10.1998
15.10.1998 Marche: Provisions for economic development, protection

Publicity and promotion for quality wines

And improvement of mountainous areas

16.10.1998 Marche: Organic farming
21.10.1998 Sardinia: Aid for investment in agriculture
28.10.1998 Emilia-Romagna: Agricultural guarantee consortia
23.11.1998 Sicily: Measure to protect wild fauna and regulate hunting

(Regional Law No 33 of 1 September 1997, except Article 6)
Tuscany: Promotion of agricultural resources
Tuscany: Aid in favour of quality production in the agricultural sector

8.12.1998
8.12.1998
14.12.1998 Liguria: New provisions on mountain areas
21.12.1998 Stimulation of agricultural development in the Mezzogiorno hinterland
22.12.1998 Apulia: Agricultural subsidised short-term operating loans
30.12.1998 Marche: Measures to favour the adoption of environmentally friendly

Agricultural practices

COMPETITION REPORT 1998

OJ C 149, 15.5.1998
OJ C 149, 15.5.1998
OJ C 149, 15.5.1998
OJ C 181, 12.6.1998

OJ C 232, 24.7.1998
OJ C 232, 24.7.1998

OJ C 232, 24.7.1998
OJ C 232, 24.7.1998

OJ C 188, 17.6.1998
OJ C 232, 24.7.1998
OJ C 270, 29.8.1998
OJ C 321, 20.10.1998
OJ C 329, 27.10.1998
OJ C 329, 27.10.1998
OJ C 329, 27.10.1998

OJ C 329, 27.10.1998

OJ C 361, 24.11.1998
OJ C 330, 28.10.1998
OJ C 329, 27.10.1998
OJ C 363, 25.11.1998
OJ C 21, 26.1.1999
OJ C 21, 26.1.1999
OJ C 21, 26.1.1999

OJ C 21, 26.1.1999
OJ C 16, 21.1.1999
OJ C 16, 21.1.1999
OJ C 21, 26.1.1999

OJ C 47, 20.2.1999
OJ C 47, 20.2.1999
OJ C 60, 2.3.1999
OJ C 60, 2.3.1999
OJ C 47, 20.2.1999
OJ C 60, 2.3.1999

298 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Ireland

23.4.1998 Compensation for losses suffered due to bad weather in 1997
17.11.1998 National start-up aid scheme for young farmers
8.12.1998 Compensation for loss of fodder
21.12.1998 Compensation for destruction of dioxin-contaminated livestock

OJ C 232, 24.7.1998
OJ C 47, 20.2.1999
OJ C 47, 20.2.1999

Luxembourg

30.1.1998

Premium for the maintenance of the countryside and the natural landscape OJ C 181, 12.6.1998

Netherlands

20.1.1998 Modification of the parafiscal charges financing existing aid for research in

the
Feedingstuffs sector

17.2.1998 Aid and parafiscal charges for prevention and combat of bovine diseases and

research in the milk sector

OJ C 147, 13.5.1998

OJ C 147, 13.5.1998

17.2.1998 Aid and parafiscal charges for combat of diseases in the pig sector
17.2.1998 Aid and parafiscal taxes for publicity for milk and milk products
18.2.1998 Aid for insurances against plant and animal diseases and adverse weather

OJ C 147, 13.5.1998
OJ C 136, 1.5.1998
OJ C 136, 1.5.1998

conditions

24.2.1998 Aid for non-food use of flax fibres and marigold oil
24.2.1998 Aid for research on non-food use of plant products
24.2.1998 Aid and parafiscal charges for research and publicity in the calf sector
24.2.1998 Buying-up scheme for the pigmeat sector
13.3.1998 Experiments with premiums and levies in mineral accounting
Temporary measures to promote environmental conservation
29.7.1998
Improvement of the efficiency of agricultural structures
31.8.1998
1.9.1998
Aid to fruit and vegetable growing
30.10.1998 Socio-economic pig-rearing plan
3.11.1998

Takeover by the ‘Hoofdproductschap Akkerbouw’ (HPA) of measures run
by the Landbouwschap

OJ C 136, 1.5.1998
OJ C 136, 1.5.1998
OJ C 136, 1.5.1998
OJ C 136, 1.5.1998
OJ C 181, 12.6.1998
OJ C 329, 27.10.1998
OJ C 361, 24.11.1998
OJ C 329, 27.10.1998
OJ C 21, 26.1.1999
OJ C 21, 26.1.1999

10.11.1998 Farina potato fund and protection of farina potatoes
18.11.1998 Financial assistance for restructuring the pig farming sector
7.12.1998
21.12.1998 Measure to dispose of citrus pellets and animal feedstuff contaminated by

Subsidy scheme for Agricultural Research Service

OJ C 21, 26.1.1999
OJ C 16, 21.1.1999
OJ C 47, 20.2.1999
OJ C 47, 20.2.1999

dioxin

Portugal

12.1.1998 Aid for promoting regional products
15.10.1998 Amendment to the Leader II programme
26.10.1998 Measures to assist farms affected by the flooding in October and November

OJ C 147, 13.5.1998
OJ C 21, 26.1.1999
OJ C 21, 26.1.1999

1997

30.12.1998 Measures to promote fruit and vegetables

OJ C 42, 17.2.1999

Sweden

Programme to promote biodiversity in agricultural areas

OJ C 147, 13.5.1998
8.1.1998
OJ C 149, 15.5.1998
26.2.1998 Agrimonetary compensation
14.9.1998 Aid for agricultural production compatible with environmental protection OJ C 361, 24.11.1998

COMPETITION REPORT 1998

United kingdom

Agrimonetary compensation

2.3.1998
23.4.1998 Agrimonetary compensation — sheep scheme
29.5.1998 Moorland scheme
1.7.1998

England: Programme to promote the protection of environmentally
sensitive areas
Farm and countryside enhancement scheme

24.7.1998
14.8.1998 Woodland grant scheme
22.9.1998 Northern Ireland: Protection and promotion of the quality of foodstuffs
28.10.1998 Compensation scheme concerning the compulsory slaughter of scrapie-

STATE AID 299

OJ C 149, 15.5.1998
OJ C 188, 17.6.1998
OJ C 266, 25.8.1998
OJ C 321, 20.10.1998

OJ C 329, 27.10.1998
OJ C 361, 24.11.1998
OJ C 330, 28.10.1998
OJ C 21, 26.1.1999

affected sheep and goats

30.11.1998 Compensation for loss of fodder in the Scottish Islands in 1998
21.12.1998 Northern Ireland: Strategy for the marketing of red meat
30.12.1998 Agrimonetary compensatory aid — Amendment to the beef scheme

OJ C 47, 20.2.1999
OJ C 60, 2.3.1999
OJ C 47, 20.2.1999

1.2. Aid cases in which Article 88(2) proceedings were initiated

Belgium

10.11.1998 Flemish Region: Promotion of agricultural products

Germany

30.3.1998 Aid for the purchase of land in the former GDR

OJ C 215, 10.7.1998

France

2.12.1998 Aid for pig production

Greece

20.5.1998 Aid for the repayment of debts to cooperatives and other enterprises
10.11.1998 Aid in the fruit and vegetable sector (1997)
4.12.1998 Aid to young farmers and new entrants

OJ C 396, 19.12.1998
OJ C 22, 27.1.1999

Italy

12.1.1998
12.2.1998 Valle d’Aosta: Extension of regional aid schemes for the processing and

Liguria: Aid to agricultural cooperatives

marketing of agricultural products
Sicily: Guarantee fund for the fruit and vegetable sector

13.2.1998
17.2.1998 Aid for the purchase of new machinery
8.5.1998
20.5.1998 Guarantee fund for debt consolidation operations involving SMEs in

Aid to Centrale del Latte di Roma

Objective 1 areas (amendments)

17.8.1998 Veneto: Subsidised loans in agriculture
29.9.1998

Tuscany: Aid for the ‘Chianina’ cattle breed (1997-99)

COMPETITION REPORT 1998

OJ C 101, 3.4.1998
OJ C 85, 20.3.1998

OJ C 86, 21.3.1998
OJ C 100, 2.4.1998
OJ C 206, 2.7.1998
OJ C 245, 5.8.1998

OJ C 309, 9.10.1998
OJ C 390, 15.12.1998

300 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Ireland

25.2.1998 Measures promoting transport of Irish livestock by sea to Continental

Europe

OJ C 142, 7.5.1998

Portugal

20.8.1998

Plans for restructuring and privatising the undertakings Epac and Silopor OJ C 363, 25.11.1998

1.3. Aid cases in which Article 88(2) proceedings were terminated by way of a positive decision

Italy

Liguria: Aid to agricultural cooperatives

24.6.1998
26.10.1998 Ravenna: Aid to Agriterminale SpA (Regional Law No 236/93)
20.11.1998 Molise: Aid for cooperatives

OJ L 117, 5.5.1999

1.4. Aid cases in which the Commission took a conditional decision pursuant to Article 88(2) of the

EC Treaty

Italy

17.8.1998 Regional aid
27.10.1998 Aid for the purchase of new machinery

1.5. Aid cases in which the Commission took a negative final decision pursuant to the first

subparagraph of Article 88(2) of the EC Treaty

Germany

2.7.1998

Processing and marketing of agricultural products

OJ L 60, 9.3.1999

Austria

27.10.1998 Aid to Agrana Staerke GmbH

Spain

14.12.1998 Aid to Hijos de Andres Molina SA (HAMSA)

Greece

1.9.1998

Aid for lentil producers in the Prefecture of Levkas

OJ L 32, 5.2.1999

COMPETITION REPORT 1998

Italy

29.7.199
6.8.1998

Lazio: Aid measures for farming under Laws Nos 44/89 and 57/92
Sicily: Initiatives to support and maximise the value of citrus production

OJ L 86, 30.3.1999

1.6. Aid cases in which the Commission reviewed an existing scheme pursuant to Article 88(2) of the

STATE AID 301

EC Treaty

Sweden

14.10.1998 Exemption of the company Agroetanol from the energy and carbon dioxide

tax

1.7. Council Decisions under Article 88(2) of the EC Treaty

Council Decision on the reimbursement by Greece of the debts of certain farmers to the Agricultural Bank of Greece

2. In the fisheries sector

2.1. Measures which the Commission considered compatible with the common market without

opening an investigation under Article 88(2) of the EC Treaty

Germany

12.3.1998
N 603/97
N 847/98
6.3.1998
N 22/B/98 15.6.1998

N 44/98
N 194/98

5.6.1998
15.6.1998

Shrimp processing plant
Direct marketing
Promotion of fishery products (Mecklenburg-Western
Pomerania)
Aid to Gottfried Friedrichs KG, Hamburg
Processing and marketing of fisheries products (Schleswig-
Holstein)

N 476/98

17.11.1998 Promotion of the fisheries sector (Rheinland-Pfalz)

OJ C 146, 12.5.1998
OJ C 107, 7.4.1998
OJ C 236, 28.7.1998

OJ C 213, 9.7.1998
OJ C 236, 28.7.1998

Belgium

N 365/97

Denmark

11.2.1998 Aid for investment and new entrants in the fisheries and

aquaculture sector

OJ C 103, 4.4.1998

N 73/98
N 74/98
N 574/97

12.3.1998 Aid for the construction of fishing vessels
3.4.1998 Modernisation and improvement of fishing vessels
Fund maintained by parafiscal charges
16.1.1998

OJ C 111, 9.4.1998
OJ C 156, 21.5.1998
OJ C 51, 18.2.1998

Spain

N 180/98
N 219/98

2 8 98
24.7.1998

N 265/98

9.7.1998

Temporary cessation of fishing activities (Murcia)
Temporary laying-up of fishing vessels (agreement with
Morocco)
Investment in aquaculture (Galicia)

OJ C 308, 8.10.1998
OJ C 308, 8.10.1998

OJ C 308, 8.10.1998

COMPETITION REPORT 1998

302 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

N 304/98
N 144/
A/96

4.8.1998
23.1.1998

Renovation and modernisation of the fishing fleet (Galicia)
Law 19/1994 on economic and tax arrangements (Canary
Islands)

OJ C 308, 8.10.1998

Finland

N 173/98

24.7.1998 Aid for salmon production

France

NN 146/95 6.7.1998 Modernisation of collective landing facilities and construction of

a fish auction market (Provence-Alpes-Coˆ te d’Azur)

OJ C 253, 12.8.1998

Greece

N 660/97
N 86/B/98 20.7.1998 Aid to young fishermen

2.3.1998

Implementation of the Pesca operational programme

Ireland

N 306/98
N 343/98
N 407/98

Italy

Purchase of second-hand fishing vessels

30.7.1998
30.7.1998 Measures in the whitefish industry
27.8.1998

Training in the herring fishing industry

OJ C 111, 9.4.1998
OJ C 330, 28.1.1998

OJ C 330, 28.10.1998
OJ C 330, 28.10.1998
OJ C 330, 28.10.1998

334/A/96
N 923/96
N 819/97
N 825/97

2.3.1998
6.7.1998
18.8.1998
15.5.1998 Aid for mollusc fishermen (Abruzzi)

Aid for fish canning factories (Sicily)
Aid to the fisheries and aquaculture sector (Sardinia)
Investment in bluefish businesses (Abruzzi)

OJ C 130, 28.4.1998

OJ C 330, 28.10.1998
OJ C 192, 19.6.1998

Netherlands

N 765/97
N 775/97
N 2/98
N 37/98
N 425/98

17.11.1998 Experimental fishing — Barents Sea
20.1.1998 Aid for torque-measuring equipment to prevent fraud
8.7.1998
1.4.1998
14.10.1998 Processing and marketing of fishery products

Reduction of the fishing capacity in the Ysselmeer
Canadian pair-seining

OJ C 351, 18.11.1998
OJ C 351, 18.11.1998
OJ C 146, 12.5.1998
OJ C 363, 25.11.1998

United kingdom

N 85/98

1.4.1998

N 147/98

6.4.1998

Aid for the fishing sector in south-west Scotland under the Pesca
Community Initiative
Aid to the fisheries sector under the Pesca Community Initiative
for Scotland (Aberdeenshire)

OJ C 146, 12.5.1998

OJ C 156, 21.5.1998

COMPETITION REPORT 1998

STATE AID 303

3. In the transport sector

3.1. Inapplicability of Article 87

N 517/98 UK

South Wales freight terminal

22.12.1998

3.2. Decisions to raise no objection

N 592/97 D
NN 155/97 E
I
N 350/97
UK
N 78/98
NL
N 8/98
N 350/98
SE
NN 17/98 DK
NN 28/98 D
N 387/98 E
P
N 414/98
F
N 436/98
F
N 511/98

N 396/98 D
N 231/98 NL
IRL
N 553/98
F
N 379/98
F
N 518/98

N 598/98 NL
N 576/98 UK

Sea transport
Economic and tax arrangements Canary Islands
Shipping companies
SMART
Sea transport
Shipbuilding
DSB Rederi (Port of Nyborg)
Financial contributions 1998
Air transport Canary Islands
Air transport Madeira
Plan for inland waterway transport
Termination of service of merchant marine
personnel
Tonnage tax relief
Environmental measures in aviation
Measures in favour of seafarers
Business tax in the sea transport sector
Employers’ social-security contributions in the sea transport
sector
Terminal at Born
CTRL

3.3. Initiation of Article 88(2) proceedings

NN 98/97 B
NN 188/97 AT
NN 12/98 E
I
N 403/97
N 9/98
F
NN 64/97 F
N 701/97 NL
NN 115/98 E
I
N 421/97
N 618/98
F
NN 21/98 F

Measures in favour of the merchant marine and dredging
Tauern motorway
Transmediterra´ nea
Restructuring of the road transport sector
Brittany Ferries
Brittany Ferries
Inland waterway transport
Renove II plan
Port sector
Brittany Ferries
Corsica Marrittima

3.4. Negative final decisions

21.1.1998
4.2.1998
18.2.1998
25.3.1998
22.4.1998
1.7.1998
#1.7.1998
#29.7.1998
#29.7.1998
29.7.1998
#2.10.1998

28.10.1998
25.11.1998
#11.11.1998
#9.12.1998
#9.12.1998
#9.12.1998

9.12.1998
#22.12.1998

21.1.1998
4.2.1998
18.2.1998
25.3.1998
7.4.1998
7.4.1998
#14.10.1998
28.10.1998
22.12.1998
9.12.1998
9.12.1998

C 10/96
C 86/97

B
IRL

Ostend airport
Seafarers’ social-security contributions borne by shipowners

#21.1.1998
9.12.1998

3.5. Positive final decisions

C 54/96
C 14/94

I
G

Alitalia
Olympic Airways

COMPETITION REPORT 1998

#3.6.1998
29.7.1998

304 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

E — Judgments of the Community courts

1. Court of First Instance

Case

T-67/94

T-107/96

T-189/97

Parties

Date

Publication

Ladbroke Racing Ltd. v Commission

27.1.1998

[1998] ECR II-1

Pantochim v Commission and France

17.2.1998

[1998] ECR II-311

Comite´ d’Entreprise de la Socie´te´ Franc(cid:224)aise de
Production v Commission

18.2.1998

[1998] ECR II-355

T-129/96

Preussag Stahl v Commission

T-86/96R

Arbeitsgemeinschaft Deutscher Luftfahrt-
Unternehmen and Hapag Lloyd Fluggesellschaften
v Commission

31.3.1998

[1998] ECR II- 609

2.4.1998

[1998] ECR II- 641

T-214/95

Vlaams Gewest v Commission

30.4.1998

[1998] ECR II- 717

T-16/96

T-238/97

T-371/94

T-394/94
T-11/95

T-140/95

T-95/96

T-126/96

Cityflyer Express v Commission

30.4.1998

[1998] ECR II-757

Comunidad Auto´ noma de Cantabria v Council

16.6.1998

[1998] ECR II-2271

British Airways and Others and British Midland
Airways v Commission

BP Chemicals and UK v Commission

Ryanair v Commission and Others

25.6.1998

[1998] ECR II-2405

15.9.1998

15.9.1998

Gestevision Telecinco SA v Commission and France

15.9.1998

Breda Fucine Meridionali SpA (BFM) v
Commission and Others

T-127/96
T-188/95

Waterleiding Maatschappij “Noord-West Brabant”
v Commission

2. Court of Justice

15.9.1998

16.9.1998

Case

C-280/95

C-309/95

Parties

Commission v Italy

Date

Publication

29.1.1998

[1998] ECR I-259

Commission v Council and France

19.2.1998

[1998] ECR I-655

C-174/97P

FFSA and Others v Commission

25.3.1998

[1998] ECR I-1303

C-367/95P

Commission v Sytraval and Brink’s France

2.4.1998

[1998] ECR I-1719

C-52/97,

C-53/97,
C-54/97
C-415/96

C-200/97

Epifanio Viscido and Others v Ente Poste Italiane

7.5.1998

[1998] ECR I-2629

Spain v Commission

12.11.1998

Ecotrade Srl v Altifornie e Ferriere di Servola SpA
(AFS)

1.12.1998

COMPETITION REPORT 1998

I

I

C
O
M
P
E
T
T
O
N
R
E
P
O
R
T

1
9
9
8

5F — Enforcement of Commission decisions ordering the recovery of aid

1. Commission decisions (DG IV) ordering the recovery of aid (1983-1997) not yet implemented

MS

Name

Date of decision

Official Journal

Form taken by the
aid

Current
status

Ammount
to be repaid
(ECU
million)

d
i
a
p
e
R

e
l
b
a
r
e
v
o
c
e
r

t
o
N

d
i
a
p
e
r

t
e
y

t
o
N

Remarks

B

B

Beaulieu I
(Fabelta)

Beaulieu II
(Idealspun)

30.11.1983

L 62 (1984)

Capital injection

13.27

27.6.1984

L 283 (1984)

Capital injection

5.41

UK

Dean Dove

23.7.1984

L 238 (1984)

Grant

1.5

x Action brought against MS for failure
to fulfil obligations. CJ judgment
finding that decision had not been
implemented (21.2.1990, Case C-74/89).
Latest national court judgment in 1994.
Appeal pending before Court of
Appeal. Amount to be repaid is in
blocked account.

x Action brought against MS for failure
to fulfil obligations. CJ judgments
finding that decision had not been
implemented (9.4.1987, Case 5/86) and
that its judgment in Case 5/86 had not
been complied with (19.2.1991, Case C-
375/89). Appeal pending before Court
of Appeal. Amount to be repaid is in
blocked account.

x Company stopped trading in 1989 and

was wound up in 1994.
Actions before national courts against
company’s directors.

D

Deufil

10.7.1985

L 278 (1985)

Grants

1.53

x

Judgment of Court of Justice upholding
decision (24.2.1987, Case 310/85);
national court upholds decision. Tax
authorities recover the investment
grant. As regards aid from the Land:
action before national courts.

S
T
A
T
E

I

A
D

3
0
5

MS

Name

Date of decision

Official Journal

Form taken by the
aid

Current
status

Ammount
to be repaid
(ECU
million)

d
i
a
p
e
R

e
l
b
a
r
e
v
o
c
e
r

t
o
N

d
i
a
p
e
r

t
e
y

t
o
N

Remarks

D

Alcan

14.12.1985

L 72 (1986)

Grants

4.18

D

BUG-Aluminium

17.11.1987

L 79 (1988)

Grant

1.05

G

I

E

E

Exemption from
taxes on exports

3.5.1989

L 394 (1989)

Tax exemption on
earnings from
exports

Not
specified

Ferriere acciaierie
sarde SpA

5.6.1991

L 298 (1991)

Grant

0.96

Hytasa (now
Mediterraneo
Tecnica Textil SA)

25.3.1992
18.9.1996

Piezas y Rodajes
(Pyrsa)

14.3.1995

L 171 (1992)
L 96 (1997)

Capital injection

26

L 257 (27.10.1995) Grant; loan

guarantee; interest
subsidy; gift of
land

Not
specified

x Action against MS for failure to fulfil
obligations. Judgment of the Court of
Justice finding that decision had not
been implemented (2.2.1989, Case C-
94/87). Case pending before national
courts. See also judgment of 20.3.1997
in Case C-24/95.

x Action brought against MS for failure
to fulfil obligations. CJ judgment
finding that decision had not been
implemented (20.9.1990, Case C-5/89).
Various national courts have confirmed
that repayment is due. Appeal pending
before the Federal Administrative
Court.

x Action brought against MS for failure
to fulfil obligations. Judgment of Court
of Justice finding that decision had not
been implemented (10.6.1993, Case C-
183/91)

x

x
x

x

Judgment of Court of Justice upholding
decision (5.3.1993, Case C-102/92)

Decision partly annulled by Court of
Justice (14.9.1994, Case C-278/92). New
Commission decision of 18.9.1996
before the Court (Case C-415/96).

Judgment of Court of Justice upholding
Commission decision (14.1.1997, Case
C-169/95). Company has suspended
payments. Appeal by company against
the administrative decision ordering the
reimbursement.

3
0
6

I

A
P
P
L
C
A
T
O
N
O
F

I

T
H
E
C
O
M
P
E
T
T
O
N
R
U
L
E
S

I

I

I

N
T
H
E

E
U
R
O
P
E
A
N
U
N
O
N

I

I

I

C
O
M
P
E
T
T
O
N
R
E
P
O
R
T

1
9
9
8

I

I

C
O
M
P
E
T
T
O
N
R
E
P
O
R
T

MS

Name

Date of decision

Official Journal

Form taken by the
aid

18.10.1995

13.3.1996

L 53 (2.3.1996)
L 198 (8.8.1996)

Loans

Loans

31.10.1995

L 78 (28.3.1996)

Soft loans

1
9
9
8

D

D

D

E

Neue Maxhu¨ tte
Stahlwerke GmbH
(decisions II and
III)

Hamburger
Stahlwerke GmbH

Walzwerk
Ilsenburg

29.5.1996

L 233 (14.9.1996)

Grant

3.5

Tubacex

30.7.1996

L 8 (11.1.1997)

Soft loans;
repayment holiday

Not
specified

Current
status

Ammount
to be repaid
(ECU
million)

d
i
a
p
e
R

e
l
b
a
r
e
v
o
c
e
r

t
o
N

25.64

12.39

approx.
82

d
i
a
p
e
r

t
e
y

t
o
N

x

x

x

Remarks

31.12.1998: NMH insolvent. The
amount to be recovered has been
notified as part of the insolvency
proceedings.

Pending before CFI (Case T-234/95)
and Court of Justice (Case C-404/95).
Appeal by Government to national
courts. Aid has been partly repaid.

B

Maribel bis/ter

4.12.1996

L 95
(10.4.1997)

Reduction of
social security
contributions

Not
specified

D

West Berlin tax
concessions

12.2.1997

L 228
(19.8.1997)

Tax breaks

Not
specified

F

Borotra plan

9.4.1997

L 334
(5.12.1997)

Reduction of
social security
contributions

Not
specified

x Appeal by MS to Court of Justice

against decision of 9.4.1997 (Case C-
251/97)

x Appeal to CFI dismissed (31.3.1998,

Case T-129/96). Appeal by Preussag to
Court of Justice (Case C-210/98P)

x Aid to Fogasa partly repaid, remainder
to be repaid in near future. Appeal by
the company to the Spanish courts
against reimbursement of aid linked to
social security. Pending before Court of
Justice (Case C-342/96).

x Appeal by MS to Court of Justice

against decision of 4.12.1996 (Case C-
75/97). Action by the Commission for
failure to implement decision of
21.10.1998 (Case C-378/98).

x

The German authorities have notified
the Commission that the decision has
been implemented. The notification is
being examined. The need for
repayment depends on any domestic
proceedings.

S
T
A
T
E

I

A
D

3
0
7

MS

Name

Date of decision

Official Journal

Form taken by the
aid

Current
status

Ammount
to be repaid
(ECU
million)

d
i
a
p
e
R

e
l
b
a
r
e
v
o
c
e
r

t
o
N

d
i
a
p
e
r

t
e
y

t
o
N

Remarks

D

D

Tax concessions
former GDR (8%)

1.10.1997

Land of Saxony-
Anhalt

18.11.1997

L 73
(12.3.1998)

L 126
(28.4.1998)

Tax premiums

Guarantees

Not
specified

Not
specified

x Repayment under way.

x Discussions in progress on

arrangements for repayment of aid in
the form of a guarantee for firms in
difficulty.

3
0
8

I

A
P
P
L
C
A
T
O
N
O
F

I

T
H
E
C
O
M
P
E
T
T
O
N
R
U
L
E
S

I

I

I

N
T
H
E

E
U
R
O
P
E
A
N
U
N
O
N

I

I

I

C
O
M
P
E
T
T
O
N
R
E
P
O
R
T

1
9
9
8

I

I

C
O
M
P
E
T
T
O
N
R
E
P
O
R
T

2. Commission decisions (DG IV) taken in 1998 ordering reimbursement

MS

Name

Date of decision Official Journal

Form taken by the aid

D

Income Tax Act

21.1.1998

L 212
(30.7.1998)

Tax relief

Ammount to be repaid
(ECU million)

Not specified

Remarks

Status of reimbursement under
examination: application of the Act
subject to approval by the Commission;
no aid apparently granted

1
9
9
8

NL

FMC

21.1.1998

D

Teleworking

25.2.1998
22.7.1998
(corrig.)

25.2.1998

Development
assistance to
Indonesia

L 171
(17.6.1998)

Publication
pending

Publication
pending

Grants, sale of land at a
lower price

2.85

Decision implemented (phased payment
of grants has ceased)

German authorities confirmed on
22.12.1998 and 7.1.1999 that no aid had
been granted under the prohibited part
of the scheme

Loan and grant

5.7

Proceedings partly terminated

Bremer Vulkan,
Krupp & Hibeg

(see above
1993) 25.2.1998

L 316
(25.11.1998)

Loan and grant

DEM 126 million
(ECU 63 million)

Company insolvent. Government has
demanded repayment.

Stahl- und
Hartgußwerke
Bo¨ sdorf (SHB)

22.4.1998

Publication
pending

Participation of the
Consolidation Fund of the
Land of Saxony: grant and
loan

DEM 5 million
(ECU 2.5 million)
DEM 4.5 million
(ECU 2.25 million)
DEM 1.5 million
(ECU 0.75 million)

Company insolvent. Government has
registered its claim. Talks with the
Commission on repayment of interest
under way (as planned).

Triptis
Porzellan

22.4.1998

Publication
pending

Waiving of claims;
guarantees

DEM 34.75 million
approx.ECU17million

Tax reductions

13.5.1998

Publication
pending

Tax reductions

Not specified

Employment in
Sicily

3.6.1998

Publication
pending

Loan

Not specified

Company insolvent. Government has
registered its claim. Talks with the
Commission on repayment of interest
under way (as planned).

Italy has taken the necessary action to
identify businesses which have benefited
from the aid.

Securing repayments will be difficult
given the form taken by the aid, the
small amounts involved and the
application of percentages.

L

ProfilArbed

17.6.1998

Publication
pending

LUF 91.95 million

Luxembourg has been requested by the
Commission to undertake recovery.

D

D

D

D

I

I

S
T
A
T
E

I

A
D

3
0
9

MS

Name

Date of decision Official Journal

Form taken by the aid

Ammount to be repaid
(ECU million)

Remarks

3
1
0

I

O¨

E

F

D

D

E

E

Keller & Keller
Meccanica

1.7.1998

Publication
pending

Loans at preferential rates

2.62

Soft loan

1.1

Preferential interest rates

Not specified

Grant and equity loan

2.17

Grants Guarantees

4.8 6.14

Actual
Maschinenbau

1.7.1998

Sniace

28.10.1998

Lainie`re de
Roubaix

4.11.1998

ESF
Elbestahlwerk
Feralpi

Eisen- und
Stahlwalzwerke
Ro¨ tzel

11.11.1998

14.7.1998

Favahe

14.7.1998

L 316
(25.11.1998)

Publication
pending

Publication
pending

Publication
pending

Publication
pending

Publication
pending

Ponsal

14.7.1998

L 29 (3.2.1999)

Loan

Guarantee

Guarantees

D

MTW

22.7.1998

F

SDBO

22.7.1998

Publication
pending

Publication
pending

Loan and grant

Recapitalisation

The publicly owned banks have
demanded repayment of the aid from
the companies concerned. Their
response is not known.

Spanish authorities have not responded
so far.

Deadline for compliance: 17.1.1999.
Implementation under way/appeal
possible.

Company has brought an action for
annulment before the CFI (Case T-6/99)

Company insolvent. Government has
registered its claim.

Company insolvent. Government has
registered its claim.

In liquidation. Decision requiring
repayment of loans granted by Regional
Government of Navarre in process of
being enforced.

Company insolvent; no funds available
for repayment, but claims registered as
part of the insolvency proceedings.

Reimbursement notified by the French
authorities. DG IV challenges
reimbursement procedures applied.

I

A
P
P
L
C
A
T
O
N
O
F

I

T
H
E
C
O
M
P
E
T
T
O
N
R
U
L
E
S

I

I

I

N
T
H
E

E
U
R
O
P
E
A
N
U
N
O
N

I

6.14

6

5

402

36

D

E

Georgmarien-
hu¨ tte

Magefesa I &II

29.7.1998

Publication
pending

Grant

I. 20.12.1989
II. 14.10.1998

I. L 5 (1991) II.
Publication
pending

I. Loan guarantees, soft
loans, grants II. Non-
payment of taxes and social
security contributions

31.15 or 18.77

I. 7.2 II. Not specified

I. Negative decision on new aid.
Reimbursement required in new
decision. II. Spanish authorities have not
responded so far.

I

I

C
O
M
P
E
T
T
O
N
R
E
P
O
R
T

1
9
9
8

MS

Name

Date of decision Official Journal

Form taken by the aid

Ammount to be repaid
(ECU million)

Remarks

D

D

Samag

9.12.1998

Riedel-De
Hae¨ n

22.12.1998

Publication
pending

Publication
pending

Grants

Grant

1

4

German authorities have not responded
so far.

German authorities’ reply expected by
21.3.1999

I

I

C
O
M
P
E
T
T
O
N
R
E
P
O
R
T

1
9
9
8

S
T
A
T
E

I

A
D

3
1
1

INTERNATIONAL 313

IV — INTERNATIONAL

Commission Report to the Council and the European Parliament on the application of the
Agreement between the European Communities and the Government of the United States
of America regarding the application of their competition laws, 1 January 1998 to 31
December 1998

1. Introduction

On 23.09.1991 the Commission concluded an Agreement with the Government of the United States of
America regarding the application of their competition laws 234 (“the 1991 Agreement”), the aim of
which is to promote cooperation between the competition authorities. By the joint decision of the
Council and the Commission of 10.04.1995 235 the Agreement was approved and declared applicable.

On 8.10.1996 the Commission adopted the first report on the application of the Agreement for the
period of 10.04.1995 to 30.06.1996 236. The second report completes the 1996 calendar year, covering
the period of 1.07.1996 to 31.12.1996 237. The third report covers the whole calendar year 1997 238, and
the present report covers the calendar year from the 1.01.1998 to 31.12.1998. This report should be read
in conjunction with the first report which sets out in detail the benefits, but also the limitations of this
kind of cooperation.

2. EC/US cooperation: the record so far

In the period from April 1995 till December 1998 application of the 1991 Agreement gave rise to
contacts on more than 200 competition cases.

In all cases of mutual interest it has become the norm to establish contacts at the outset in order to
exchange views and, when appropriate, to coordinate enforcement activities. The two sides, where
appropriate, seek to coordinate their respective approaches on the definition of relevant markets, on
possible remedies in order to ensure that they do not conflict, as well as on points of foreign law
relevant to the interpretation of an agreement or to the effectiveness of a remedy. Cooperation under
this heading has involved the synchronisation of investigations and searches. This is designed to make
fact-finding action more effective and helps prevent companies suspected of cartel activity from
destroying evidence located in the territory of the agency investigating the same conduct after its
counterpart on the other side of the Atlantic has acted.

Formal activation of the positive comity provision (Article V of the 1991 Agreement) was felt
appropriate in the Sabre/Amadeus case. The US Department of Justice (‘DoJ’) requested the
Commission to investigate specific allegations of discrimination advanced by the US Computerised
Reservation System (CRS) SABRE regarding the operation of the CRS AMADEUS set up by a
number of European airlines. The Commission is currently investigating the case in close co-operation

234 Agreement between the Government of the United States of America and the Commission of the European

Communities regarding the application of their competition laws (OJ L 95, 27.4.95, pp.47 and 50)

235 See OJ L 95, 27.4.95, pp.45 and 46.
236 Com(96) 479 final, see XXVIth Report on Competition Policy, pp. 299-311.
237 Com(97) 346 final, see XXVIth Report on Competition Policy, pp. 312-318.
238 Com(98) 510 final, see XXVIIth Report on Competition Policy, pp. 317-327.

COMPETITION REPORT 1998

314 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

with the DoJ. More details will be published in the first EC/US cooperation report following the
closure of this case.

2.1. Mergers

Since the adoption of the Merger Regulation, there has been nearly every year a steep increase in the
number of operations notified to the Commission. The number of cases increased annually by more
than 30% in 1997 and 1998.

On top of the increase in the number of transactions, there are a number of indications that the current
merger wave has a new, global dimension. Indeed, there is an increase in the co-operation between the
US and the EC on merger cases.

International co-operation has proved effective in the context of individual cases. An example of best
cooperation practices is set by the WorldCom/MCI case, where the two case-teams worked smoothly
together. Indeed, joint negotiations were undertaken between the parties and the US DoJ and the
European Commission, as a result of which the parties agreed to find a buyer and to divest MCI’s
Internet activities prior to completing the merger. On the basis of these undertakings, the Commission
cleared the transaction on 8 July 1998 and, following approval from the US DoJ and the FCC, MCI’s
Internet business was sold to Cable & Wireless. The merger was cleared in September 1998. This kind
of co-operation has been replicated in many other transactions.

In fact, the co-operation is very extensive: co-operation on timing, on market definition, (in the
Boeing/McDonnell Douglas case, for example, both the Federal Trade Commission (‘FTC’) and the
Commission reached the same product definition of “large commercial aircraft”), co-operation on
remedies and co-operation on the assessment of anti-competitive effects. US antitrust authorities have
moreover participated as observer in some Commission hearings (Guinness/Grand Metropolitan,
Boeing/MDD and Worldcom/MCI), and the Commission is exploring the possibility for its officials to
attend, under similar conditions and with the consent of the parties, certain key meetings between the
US competition authorities and parties to proceedings under US antitrust rules.

The complexities involved in the handling of cases involving more than two competition agencies need
also be taken into consideration. Co-operation between, for instance, four or even more agencies might
be more difficult to manage than a single transatlantic communication. The risks of reaching diverging
decisions, or simply of the agencies being unable to grasp the economic significance of all aspects of a
given transaction, would then be higher. In a few instances, transactions needed clearance by several
competition agencies (for example the Price Waterhouse/Coopers & Lybrand merger). In such cases,
the various agencies involved have co-ordinated their investigations. None of the two potential pitfalls
identified above has yet materialised. It is true that in some rare instances (cf the Boeing case), the
final outcomes of procedures have been different. However, final decisions have never been in conflict.

2.2. Cartels

The US-DoJ has suggested in the past that cooperation in cartel cases would be facilitated if there was
in DGIV one contact point responsible for major international cartel cases. It is expected that the new
DGIV cartel structure, the Cartel Unit 239, will be in a position to provide this interface with officials of

239 IP/98/1060, Brussels 3.12.1998.

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INTERNATIONAL 315

the DoJ responsible for criminal investigations. This should facilitate cartel cooperation, even if it
cannot solve all problems.

Until now, despite excellent cooperation with the US in merger cases, DGIV has experienced
difficulties regarding cooperation in cartel cases, primarily because of confidentiality rules. DG IV
receives no advance notice of settlements in ‘guilty plea’ cases, our leniency policies are not sufficiently
co-ordinated and we have difficulties in planning joint investigations.

On the issue of advance information (in the absence of waivers, which are rare in such cases), it is clear
that the DoJ is in some instances not able to provide advance notifications is normally contemplated in
the EC-US Agreement because of the confidentiality constraints. The situation could be improved, if
an EC/US Bilateral Agreement, pursuant to the 1998 OECD Recommendation concerning Effective
Action against Hard Core Cartels 240, made it possible for the US authorities and the Commission to
share confidential information. It is clear that EC and US actions against serious infringements (e.g.
hard core cartels) would be more effective if we could share confidential information.

A comparison of the leniency scheme in the EC and the corporate immunity scheme in the US also
reveals divergences that could create practical problems. Some common strategy in order to solve
these problems appears desirable.

2.3. Abuses of Dominance

One of the best examples of co-operation with the US in a case of abuse of dominant position is the
1993 Microsoft case which led, in 1994, to an undertaking from Microsoft to modify its licensing
practices. This followed a period of intense negotiations involving Microsoft and a team of senior
officials drawn from the European Commission and the United States Department of Justice. These
negotiations also resulted in Microsoft settling charges brought by the United States Department of
Justice by signing a consent decree.

The negotiation of the undertaking remains a milestone in the co-operation between the EC
Commission and the United States Department of Justice: during the investigations conducted by DG
IV and by the DoJ respectively, Microsoft consented to the exchange of information between the two
competition authorities by waiving its right to secrecy with respect to both authorities. A number of
contacts between DG IV and the DoJ followed; a co-ordinated approach was elaborated, and it was
agreed to negotiate jointly with Microsoft. To this end, trilateral talks were held, both in Brussels and
in Washington DC. They resulted in an undertaking by Microsoft to both authorities.

Although this type of joint action was carried out independently of the Cooperation Agreement in
competition matters concluded in 1991 (its legal validity was at that time still under scrutiny by the
Court of Justice), it served as an important model for the future, as it showed how the two authorities
can combine their efforts to deal effectively with giant multinational companies. The success of this
joint approach also sent a strong signal to all multinational companies, including those in other sectors.

The 1996 investigation into the practices of Nielsen, a provider of retail tracking services, is also a good
example of successful cooperation

240 C(98)35/Final.

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316 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

3. The 1998 EC/US Agreement on positive Comity

It is clear that the 1991 Agreement has provided a solid and quite satisfactory framework for
cooperation. However, with the increasing integration of transatlantic (and global) markets there was a
need to broaden, deepen and intensify EU-US cooperation in the area of competition. It was also
beyond doubt that certain conflicts can be avoided by using the positive comity concept more
extensively.

On the basis of a mandate by the Council, the Commission negotiated with the United States an
agreement which strengthens the relevant provisions of the 1991 Agreement. The product of these
negotiations, the 1998 EC/US Positive Comity Agreement 241 was signed in Washington and entered
into force on 4.06.1998.

The 1998 EC/US Positive Comity Agreement, like the 1991 Agreement, does not alter existing law, nor
does it require any change in existing law. However,
it does create a presumption that when
anticompetitive activities occur in the whole or in a substantial part of the territory of one of the parties
and affect the interests of the other party, the latter “will normally defer or suspend its enforcement
activities in favour of” the former. This is expected to happen particularly when these anticompetitive
activities do not have a direct, substantial and reasonably foreseeable impact on consumers in the
territory of the party deferring or suspending its activities.

The presumption of deferral will only occur if the party in the territory of which the restrictive
activities are occurring has jurisdiction over these activities and is prepared to deal actively and
expeditiously with the matter. When dealing with the case that party will keep its counterpart closely
informed of any developments in the procedure, within the limits of its internal rules protecting
confidentiality.

The new Agreement constitutes an important development, since it represents a commitment on the
part of the European Union and the United States to cooperate with respect to antitrust enforcement
in certain situations, rather than to seek to apply their antitrust laws extraterritorially.

3.1. Protection of confidential information

Following its 1st Statement 242 in 1995,
the Commission indicated in a new ‘Statement on
Confidentiality of Information’ made during the adoption on 29.05.1998 of the Joint Council and
Commission Decision concluding the 1998 Positive Comity Agreement that:

— ‘The Statement made by the Commission in April 1995 on the confidentiality of information and
the exchange of interpretative letters dated May 31 and July 31, 1995 in relation to the 1991
Agreement apply in their entirety to this Agreement.

241 Agreement between the European Communities and the Government of the United States of America on the
application of positive comity principles in the enforcement of their competition laws, OJ L 173, 18/06/1998, pp.
26 — 31.

242 Submitted by the Commission to the Council during the adoption on 10.04.1995 of the Joint Council and
Commission Decision regarding the entry into force of the 1991 EC/US Agreement and published in the 3rd EC/
US cooperation report at point 3, Com(98) 510 final; see also XXVIIth Report on Competition Policy, pp. 317-
327.

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INTERNATIONAL 317

— Article VII of this Agreement states that existing laws remain unchanged and that the Agreement
must be interpreted consistently with those existing laws. This Agreement therefore cannot permit
either of the Parties’ competition authorities to do any act they do not already have the power to
do. One consequence of this is that the Commission may only provide information to the US
authorities where it is consistent with Community law to do so.

— While this Agreement envisages that it may be appropriate to provide information to the other
party in order to keep it informed of enforcement activities, confidential information may only be
provided with the consent of the source of that information. Community law provides a high level
of protection to confidential information provided to the Commission, and it will be necessary that
any consent obtained is sufficient to discharge the Commission from its obligation of confidentiality
pursuant to general principles of Community law, the case-law of the Court of Justice of the
European Communities and Article 20(2) of Council Regulation No 17’.

3.2. Transparency vis-a` -vis Member States concerned

Member States concerned are kept informed of cooperation activities under the 1991 EC/US
Agreement in accordance to the 1st Statement by the Commission to the Council 243 in 1995. The
Commission indicated in a new ‘Statement on Transparency’ made during the adoption on 29.05.1998
of the Joint Council and Commission Decision concluding the 1998 Positive Comity Agreement that:

— ‘The principles on transparency which govern the relationship between the Commission and the
Member States in the application of the competition rules as enshrined, in particular, in Council
Regulation No 17, the statement made by the Commission in April 1995 on transparency and the
arrangements contained in the exchange of interpretative letters dated 31 May and 31 July 1995, in
relation to the 1991 Agreement shall apply.

— The Member States whose interests are affected shall be informed as soon as is reasonably possible
of all requests by the US authorities to investigate or remedy anticompetitive activities and of all
proceedings opened by the Commission as a result of a request by the US authorities under Article
III of this Agreement.

— The Member States whose interests are affected shall be informed as soon as is reasonably possible
of requests to the US authorities under Article III of this Agreement to investigate anticompetitive
activities.

— The Member States whose interests are affected shall be informed as soon as is reasonably possible
of Commission and US deferrals or suspensions of enforcement activities pursuant to Article IV(2)
of the Agreement, or of Commission and US initiations or re-institutions of such activities pursuant
to Article IV(4) of the Agreement.

— When the Commission opens proceedings following a request by the US authorities under Article
III of this Agreement, the undertakings concerned shall be informed of the existence of the request,

243 Submitted by the Commission to the Council during the adoption on 10.04.1995 of the Joint Council and
Commission Decision regarding the entry into force of the 1991 EC/US Agreement and published in the 3rd EC/
US cooperation report at point 4, Com(98) 510 final; see also XXVIIth Report on Competition Policy, pp. 317-
327.

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318 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

at the latest when the statement of objections is issued, or when a publication pursuant to Article
19(3) of Council Regulation No 17 is made.

— The annual report presented by the Commission to the European Parliament and the Council on
the application of the 1991 Agreement shall also cover the application of this Agreement, including
any cases where information has been exchanged under the Agreements’.

3.3. Application of the 1998 Agreement

In the period from its entry into force (4.6.1998) to 31.12.1998 no requests have been submitted by the
EC or the US under the 1998 Positive Comity Agreement.

4. Case specific cooperation within 1998

The cases listed below are those which fall directly under the EC/US Agreement and are dealt in the
US by either the US DoJ or the FTC. Some competition cases are dealt in the US by other agencies, for
instance the US Department of Transportation (DoT), the Federal Maritime Commission (FMC) or
the US Department of Commerce (DoC). These agencies do not formally cooperate with the
Commission directly, but do so indirectly, mostly through the DoJ. There are therefore informal
contacts between the Commission and these agencies. These cases are not discussed in this report.

4.1. Statistical information

a)

Number of cases notified by the Commission and by the US

There were the total of fifty-two notifications made by the Commission during the period between 1
January 1998 and 31 December 1998. The cases are divided into merger and non-merger cases and are
listed in the Annex 1.

The Commission received the total of forty-six notifications from the US authorities during the same
period. Twenty-four were received from the DoJ and twenty-two from the FTC. A list of these cases is
found in the Annex 2, again broken down in merger and non-merger cases.

Merger cases made up the majority of all notifications in both directions. There were forty-three
merger notifications by the Commission and thirty-nine by the US authorities.

The figures given represent the number of cases in which one (or more) notifications took place and
not the total number of individual notifications. Under Article II of the Agreement, notifications are
made at certain stages of the procedure and so several notifications may be made concerning the same
case

Table 1 sets out in figures the number of cases notified under the 1991 EC/US Agreement during the
period from 1 January 1998 to 31 December 1998. Table 2 sets out in figures the number of cases
notified since 23 September 1991.

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INTERNATIONAL 319

Table 1

CASES NOTIFIED

Year

No. of EC
notifications

1998

52

No. of US
notifications
FTC

22

DoJ

24

No. of merger
notifications

43 (EC)

39 (US)

Table 2

Year

1991

1992

1993

1994

1995

1996

1997

1998

CASES NOTIFIED

No. of EC
notifications

No. of US
notifications
FTC

DoJ

No. of merger
notifications

5

26

44

29

42

48

42

52

10

20

22

16

14

20

12

22

2 (=12)

3 (EC) + 9 (US)

20 (=40)

11 (EC) + 31 (US)

18 (=40)

20 (EC) + 20 (US)

19 (=35)

18 (EC) + 20 (US)

21 (=35)

31 (EC) + 18 (US)

18 (=38)

35 (EC) + 27 (US)

24 (=36)

30 (EC) + 20 (US)

24 (=46)

43 (EC) +39 (US)

b)

Notifications by the Commission to Member States

The text of the interpretative letter sent by the European Communities to the US as well as the
Statement on Transparency made by the Commission to the Council on 10 April 1995 (see point 3.2
above) provides that the Commission, after notice to the US Competition authorities, will inform the
Member State or Member States, whose interests are affected, of the notifications sent to it by the US
antitrust authorities. Thus, when notifications are received from the US Authorities, they are forwarded
immediately to the relevant units of DG IV and at the same time copies are sent to the Member States,
if any, whose interests are affected. Equally, at the same time that DG IV makes notifications to the US
authorities, copies are sent to the Member State(s) whose interests are affected.

In most instances, the US authorities also notify the Member States directly, under the OECD
Recommendation 244. During the period under review 35 cases were notified to the United Kingdom,
17 to Germany, 11 to the Netherlands, 8 to France, 3 to Spain and Sweden, 2 to Italy and 1 to Denmark,
Finland and Ireland each.

244 Revised recommendation of the OECD Council concerning cooperation between Member countries on anti-

competitive practices affecting international trade, adopted 27/28 July 1995.

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320 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

4.2. Substantive aspects of case-specific cooperation 245

1998 was notable not only for the continuation of a substantial level of merger and acquisition activity
but also for the increasing size of the deals being announced. Throughout the year there were a string
of announcements of ever larger global-scale mergers.

At the start of the year the merger with largest claimed value was the WorldCom/MCI deal, with a
figure in the order of US$37 billion. During the course of year this was surpassed by mergers with
higher announced values, for example, the Travelers Group/Citicorp deal, the BP/Amoco and Exxon/
Mobil mergers, as well as SBC/Ameritech, Daimler Benz/Chrysler, and American Home Products/
Monsanto. Other headline cases announced in 1998 included Price Waterhouse/Coopers & Lybrand
and KPMG/Ernst & Young, as well as numbers of smaller concentrations which had implications
beyond their home territory.

Not all large mergers require filing in Europe — SBC/Ameritech is one example which did not fall
under EC jurisdiction. But as most of those mentioned above were international, if not global in scale,
the majority required multiple competition filings with different agencies, including normally the EC
and the US anti-trust enforcement agencies.

It might be thought that large mergers would normally require more extensive co-operation simply
because of their scale, but this is not necessarily true. While some relatively large cases fell technically
within the EC jurisdiction, they had little or no competitive impact in Europe. This might be because
the main focus of activity is outside Europe, such as in the Travelers Citicorp case, or because the
merging parties were coming together from home positions in their respective territories and the
competitive impact of the overlap was minimal. In the Daimler Benz/Chrysler and BP/Amoco cases
each party was active principally in its respective home continent, but absent or not substantially
present in the territory of the other, hence overlaps were marginal or non-existent.

In such cases co-operation will be limited, and typically involve case handlers in the EC and US
respectively making contact with one another, keeping each other informed about their respective
timetables, and perhaps discussing product and geographic market definitions.

In another category of case, the EC and US agencies may adopt differing views on product and
geographic markets, but find co-operation helpful in establishing why those differences exist, and to
satisfy themselves that they are comfortable with their own reasoning. American Home Products/
Monsanto, and Hoffmann-La Roche/Boehringer Mannheim, were cases where the conditions of
competition were different in Europe from those in the US. Even if the product or geographic markets
and hence the competition analysis differ, there may still be cases where a certain co-ordination of
treatment of remedies is desirable. Hoffmann-La Roche/Boehringer Mannheim and Halliburton/
Dresser were examples where discussions took place about possible remedies.

More substantial co-operation in the assessment phase may arise where the geographic extent of the
product or service markets is either world-wide, or covers both the United States and Europe. In these
cases both agencies have an interest in ensuring consistency of product and service market definition,
and in knowing whether the other believes there is a substantial competition issue. In Price
Waterhouse/Coopers & Lybrand, WorldCom/MCI, Wolters Kluwer/Reed Elsevier, Exxon/Shell and

245 This report concentrates on aspects of case handling related to the EC/US cooperation. For more information on

a particular case see the XXVIIth Report on Competition Policy.

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INTERNATIONAL 321

Marsh & McLennan/Sedgwick, discussions took place about product market definition and geographic
extent, with a view toconfirming each agency’s analytical approach.

It is becoming more common for case handlers to ask for waivers on a routine basis in order to enable
the agencies to exchange confidential information between one another. Frequently the main benefit
of this is not so much the information which might be exchanged, but the removal of constraints which
prevented the agencies from having a free and unfettered dialogue. For example, such exchanges
prevent misunderstandings which might otherwise arise owing to an imperfect understanding of the
position or intentions of case handlers in the other jurisdiction. And where co-operation is carried into
the investigation stage, a co-ordinated approach can reduce the burden on the notifying parties and
third parties. Finally, co-operation in the devising of remedies can help the notifying parties avoid
‘double-jeopardy’ whereby they are required to negotiate remedies sequentially, and thus have to
make further concessions to the second agency to secure the clearance of a deal which has already
received the blessing of the first.

If such dialogue is to be of value, it is important to facilitate it as early as possible in the assessment
process. A common feature of earlier attempts to secure waivers was lengthy negotiations with the
parties about the terms of their waiver, to the point where the value of any subsequent co-operation
might be lost. The Commission has begun to take the initiative in suggesting to notifying parties a
‘standard form’ waiver, which they are invited to sign, and hence to minimise the time spent on
negotiating the terms.

In a few cases, co-operation has been taken a stage further, to include co-ordination of investigative
activity. Although both agencies would continue to make their own enquiries of third parties, they
might discuss who should be contacted, and co-ordinate the questions to be asked. In WorldCom/MCI,
assessments were greatly facilitated by the readiness of many firms who responded to parallel enquiries
from the EC and US agencies and allow information to be shared between them, or who supplied the
same submission to both.

Co-operation can go further still. In WorldCom/MCI and Exxon/Shell case the co-operation which had
begun during the assessment stage was continued when discussions of remedies began. In WorldCom/
MCI trilateral remedy negotiations were conducted between the notifying parties and the two
agencies. In addition, the US Department of Justice (“DoJ” — the US agency responsible for handling
the case) and the Commission jointly conducted the market testing of a first set of remedies. This
included the presence of one person from DG IV case team in the DoJ premises to take part to the
DoJ market testing. In Exxon/Shell, the remedy was extensively discussed between the US and EC
agencies before either agency came to a final view.

There are as yet few cases on record where co-operation has taken place regarding the implementation
of undertakings offered, but this may be an area of growth in the future. In WorldCom/MCI there was
an exchange of letters between the EC and the US DoJ where the Commission requested the DoJ’s co-
operation regarding the undertakings which were mutually offered by the parties to both the
Commission and the DoJ. The DoJ confirmed that it would take whatever steps are necessary and
appropriate to evaluate, and if it found them to be sufficient, to seek the effective implementation of
these undertakings. In a good example of such co-operation, the Halliburton/Dresser case was cleared
within the first Phase in the EC, but in the US it took somehow longer because of several serious
problems identified there. One of the problem areas found related to the market for drilling fluids.
Although this was of concern to the European Commission as well as to the DoJ, the US Antitrust
Division was considered to be better placed to deal with it, as it involved divestitures of assets located

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322 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

in the US. Therefore, the Commission kept in close contact with its US counterparts, and relied on
their pursuing the required divestiture as an element in deciding to clear the case at Phase 1.
Subsequently, the US Antitrust Division kept the Commission fully informed throughout the
divestiture process.

5. Conclusions

The implementation of the bilateral EC/US 1991 Agreement has been very successful so far.
Approaches by the respective antitrust authorities have been largely converging rather than diverging.
The experience has shown that co-operation with the US is not merely an option but rather an absolute
necessity if both competition authorities want to be able to deal effectively with the ever-increasing
problem of cross-border restrictive business activities.

This co-operation is even more necessary because of the importance of the sectors principally
concerned (transport, telecom, pharmaceuticals, computers,...), and because of the implications of
competition decisions for these key industries.

It is clear that these Agreements do not eliminate the possibility of conflicting views, because the
different authorities retain the right to make their own analysis and to reach decisions independently of
each other. However, increased cooperation contributes to improving the effectiveness and efficiency
of both the EC’s and the US’s competition laws and reduces the risks of divergent decisions.

COMPETITION REPORT 1998

ANNEX 1

NOTIFICATIONS BY THE EUROPEAN COMMISSION
TO THE US AUTHORITIES 01.01.1998 — 31.12.1998

INTERNATIONAL 323

Merger cases 246

01 Case no IV/M.1094 — Caterpillar/Perkins Engines

02 Case no IV/M.1042 — Eastman Kodak/Sun Chemical

03 Case no IV/M.986 — Agfa-Gevaert/DuPont

04 Case no IV/M.1081 — Dow Jones/NBC — CNBC Europe

05 Case no IV/M.970 — TKS/ITW Signode/Titan

06 Case no IV/1069 — WorldCom/MCI

07 Case no IV/M.1040 — Wolters-Kluwer/Reed-Elsevier

08 Case no IV/M.1120 — Compaq/Digital

09 Case no IV/M.1112 — Advent International/EMI/WH Smith

10 Case no IV/M.1109 — Owens-Illinois/BTR Packaging

11 Case no IV/M.1020 — GE Capital/Sea Containers

12 Case no IV/M.1155 — Cendant Corporation/NPC

13 Case no IV/M.1139 — DLJ/FM Holdings

14 Case no IV/M.1162 — GE/BAYER

15 Case no IV/M.1168 — Deutsche Post/Lufthansa/DHL

16 Case no IV/M.1192 — CHS Electronics/Metrologie International

17 Case no IV/M.1196 — Johnson Controls/Becker

18 Case no IV/M.1182 — Akzo Nobel/Courtaulds

246 Due to the confidentiality requirements, this list names only those investigations or cases which have been made

public.

COMPETITION REPORT 1998

324 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

19 Case no IV/M.1140 — Halliburton/Dresser

20 Case no IV/M.1137 — Exxon/Shell

21 Case no IV/M.1208 — Jefferson Smurfit/Stone Container

22 Case no IV/JV.5 — Cegetel/Canal+/America Online/Bertelsmann

23 Case no IV/M.1204 — Daimler Benz/Chrysler

24 Case no IV/M.1229 — American Home Products/Monsanto

25 Case no IV/M.1289 — Harbert Management/DB/Bankers Trust/SPP/O¨ hman

26 Case no IV/M. 1276 — NEC/PBN

27 Case no IV/M.1306 — Berkshire Hathaway/General Re

28 Case no IV/M.1292 — Continental/ITT

29 Case no IV/M.1300 — Allied Signal/AMP

30 Case no IV/M.1304 — Hercules/BetzDearborn

31 Case no IV/M.1307 — Marsh & McLennan/Sedgwick

32 Case no IV/M.1246 — LHZ/Carl Zeiss

33 Case no IV/M.1293 — BP/Amoco

34 Case no IV/M.1286 — Johnson & Johnson/Depuy

35 Case no IV/M.1298 — Kodak/Imation

36 Case no IV/M.1301 — Texaco/Chevron

37 Case no IV/M.1327 — Canal+, CDPQ and Bank America/NC

38 Case no IV/M.1252 — AT&T/TCI

39 Case no IV/JV.15 — BT/AT&T

40 Case no IV/M.1335 — Dana/Glacier Vandervell

41 Case no IV/M.1368 — Ford/ZF

COMPETITION REPORT 1998

INTERNATIONAL 325

42 Case no IV/JV.12 — Motorola/Ericsson/Nokia/Psion

43 Case no IV/M.1355 — Newell/Rubbermaid

Non-merger cases 247:

01 Case no IV/36.638 — FIA/FOA

02 Case no IV/36696 — Parallel Products of DuPont Paints and Pigments

03 Case no IV/36890 — Monitoring of Digital’s Undertaking of 8 October 1997

04 Case no IV/36702 — Investigation of Iomega Corporation agreements and market behaviour

05 Case no IV/34237 — Anheuser Bush/Scottish and Newcastle

06 Case no IV/37241 — Boeing/Airbus

07 Case no IV/36967 — Beloit/Valmet

08 Case no IV/36545 — Aminoacids

09 Case no IV/37174 — Network Solutions Premier Partner Program

247 Due to the confidentiality requirements, this list names only those investigations or cases which have been made

public.

COMPETITION REPORT 1998

326 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

ANNEX 2

NOTIFICATIONS BY US AUTHORITIES TO THE EUROPEAN
COMMISSION 01.01.1998 — 31.12.1998

Merger cases 248

01 see footnote

02 DuPont/Degussa

03 T &N PLC/Federal-Mogul

04 Engine Alliance

05 Flir/Spectra

06 GNK/Armstrong

07 Sentrachem/Dow

08 Reed Elsevier/Wolters Kluwer

09 Siemens/FPG

10 Wolters Kluwer/Thomson

11 Nutone/Nortek

12 SC Investments/Andes

13 Sungard/Rolfe & Nolan

14 Wolters Kluwer/Waverly

15 ANRFS/ANRP/Transok/Shell

16 Harsco/Pandrol Jackson

17 Coloniale/Parmalat/Kinnett

18 Boeing-McDonnell Douglas helicopter business

19 PMSI/Cognizant

248 Due to the confidentiality requirements, this list names only those investigations or cases which have been made

public.

COMPETITION REPORT 1998

20 Intel Corporation/Digital Equipment Corporation

INTERNATIONAL 327

21 Worldcom/MCI

22 Reed Elsevier/Matthew Bender

23 Crosfield ICI/Grace

24 see footnote

25 ChryslerCorporation/Daimler-Benz

26 Alcatel/DSC

27 American Home Products/Monsanto

28 Pearson/Viacom

29 Wandel & Goltermann/Wavetek

30 Metallgesellschaft/Cyprus Foote

31 Giant Food/Ahold

32 Jefferson Smurfit/Stone Container

33 Halliburton/Dresser

34 see footnote

35 BP/Amoco

36 see footnote

37 Elsag Bailey/Finmeccanica/ABB

38 Sulzer/Guidant

39 AT & T/BT

40 see footnote

COMPETITION REPORT 1998

328 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

41 Exxon/Shell

42 Marsh &McLennan/Sedgwick

Non-merger cases 249

01 ICI Explosives

02 see footnote

03 see footnote

04 see footnote

05 see footnote

06 see footnote

07 see footnote

249 Due to the confidentiality requirements, this list names only those investigations or cases which have been made

public.

COMPETITION REPORT 1998

THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 329

V — THE APPLICATION OF COMPETITION RULES IN THE MEMBER

STATES

This chapter is based on contributions from Member States’ competition authorities. Fuller details of
their activities may be found in the national reports which most of them draw up.

A — Legislative developments

The process of alignment of national laws on Community law continued in 1998, even though the
alignment is only partial in some cases. The new Danish and Dutch laws, brought into conformity with
Community law, entered into force on 1 January. New competition acts which closely resemble the
Community rules were adopted in Germany and the United Kingdom. Discussions are continuing in
Austria, Luxembourg and Sweden. New merger legislation in Finland is based on the European model.
Interesting procedural reforms are to be noted in Belgium, Spain and Sweden.

There was no amendment to competition law in 1998 in six Member States (Austria, France, Greece,
Italy, Luxembourg and Portugal).

Austria

In 1998 debate began in Austria on a revision of domestic competition law. Various solutions are being
considered with regard to institutional structure (greater powers for the Restrictive Practices Court,
creation of an independent Restrictive Practices Office (Kartellamt)). Also being discussed is an
alignment of the substance of Austrian law with Community competition law. No final decision has yet
been taken, although there is unanimous agreement that the principle of initiating proceedings by an
administrative procedure should be reinforced.

Belgium

The Belgian Competition Act of 5 August 1991 is largely based on European competition law. Belgian
law in this field is therefore already aligned with European law.

Furthermore, where the Belgian competition authorities must rule under Article 84 of the EC Treaty
on the legality of agreements or of an abuse of a dominant position in the common market, their
decision must be taken in the light of Articles 81(1) and 82 of the Treaty, according to the procedure
and applying the penalties laid down by Belgian competition law.

In 1998 two additional implementing decrees were published. The Royal Decree of 22 January 1998
(published in the official gazette - Moniteur belge - of 24 April 1998) on lodging the complaints and
applications provided for in Article 23(1)(c) and (d) of the Act of 5 August 1991 on safeguarding
economic competition sets out how complaints should be lodged. It provides that eight copies must be
submitted, that there must be a clear, detailed description of the competition practices concerned and
that sufficient documentary evidence must be furnished.

The second Royal Decree, of 22 January 1998 (Moniteur, 24 April 1998) amends the Royal Decrees of
15 March 1993 on procedures in connection with safeguarding economic competition, of 23 March 1993
on the applications and notifications provided for in Articles 6 and 7 of the Act of 5 August 1991 on
safeguarding economic competition, and of 23 March 1993 on the notification of mergers provided for

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in Article 12 of the Act of 5 August 1991. The Royal Decree, which is intended to improve the
interaction between the authorities responsible for implementing the Competition Act, lays down that,
in merger proceedings, firms may appeal against a decision of the Competition Council to launch the
second stage of an investigation only when an appeal is brought against the Council’s final decision on
whether the merger is lawful or not.

Denmark

As indicated in the 1997 Competition Report, new competition legislation, Act No 384 of 10 June 1997,
entered into force on 1 January. The Act lays down a general ban on agreements restricting
competition and prohibits abuse of a dominant position, both prohibitions corresponding to those
contained in Articles 81 and 82 of the EC Treaty. The Danish competition authorities may not directly
apply the prohibitions under Articles 81(1) and 82 of the Treaty.

The move to the prohibition principle represents a systemic change in Danish competition law, which
will be applied from now on in accordance with the practice of the Commission and the case-law of the
Court of First Instance and the Court of Justice.

The new Competition Act has also introduced the principle of a one-stop-shop, which means that
agreements which qualify for Community exemption are automatically excluded from the general ban
on agreements restricting competition laid down by the Competition Act.

Also excluded from the general prohibition are agreements which do not exceed certain thresholds and
which are therefore of minor importance.

As at European Union level, it is possible to obtain negative clearance or an individual exemption,
provided the competition authorities are notified.

By 1 July, there had been 845 notifications of agreements which were in existence when the Act
entered into force on 1 January.

When the new Act was adopted, the Minister for trade and industry announced eight exemptions by
category corresponding to those applied in the European Union, together with a special block
exemption for agreements involving retail chain stores.

The Competition Act, which covers both private and public enterprises, is applied by the Competition
Council (Konkurrencera˚det), made up of 19 members. The Competition Board (Konkurrencestyrelsen),
which acts as the Council’s secretariat, ensures its day-to-day application and deals with cooperation
with the European Commission on matters of common interest.

Decisions taken under the Competition Act may be contested before the Competition Appeals Board
(Konkurrenceankenævnet) and ultimately before the courts.

Infringements of the prohibitions laid down by the Competition Act, whether committed deliberately
or as a result of serious negligence, are punishable by a fine, which constitutes a criminal penalty.
However, a fine is imposed for infringing the prohibition on abuse of a dominant position only if an
order has been issued in respect of a similar infringement within the last five years. Furthermore, as set
out in the explanatory memorandum of the Act, it was not considered to be in line with the tradition of

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Danish criminal law to propose penalties as heavy as the fines imposed for a breach of the Community
competition rules.

The new Competition Act does not cover merger control, but it does require mergers to be notified to
the Competition Board if the combined turnover of the firms involved exceeds DKK 50 million.
However, the obligation to notify applies only if at least one of the firms has its registered office in
Denmark.

Finland

On 24 March the Finnish Parliament adopted an Act (No 303/1998) amending the Act on competition
restrictions (No 480/1992). The amendment took effect on 1 October.

The most important change consisted in the addition of rules on the acquisition of undertakings. These
rules apply to acquisitions where the parties’ total turnover exceeds FIM 2 billion and at least two
parties have a turnover of more than FIM 150 million. It is a further condition that the transaction
involve business carried on in Finland. Acquisitions of undertakings will be monitored in all sectors.

If an acquisition of an undertaking creates or strengthens a dominant position which appreciably
impedes competition on all or most of the Finnish market, the Office of Free Competition
(Kilpailuvirasto) may propose to the Competition Council (Kilpailuneuvosto) that the acquisition be
prohibited. If the adverse effects of the acquisition can be avoided by making it subject to conditions,
the Office must negotiate those conditions with the parties.

An acquisition of an undertaking must be notified to the Office within one week. Within one month at
the latest following such notification, the Office must inform the parties whether the acquisition will be
the subject of a detailed investigation. A proposal to prohibit the acquisition must be sent to the
Competition Council within three months of the Office’s decision to conduct an investigation. The
Council must take a decision on the case within three months of receiving the proposal. The acquisition
may not be put into effect until the procedure is completed, if its implementation has not been
authorised separately. Where proceedings are brought before the Competition Council, the prohibition
of the acquisition’s implementation will expire if the Council has not decided otherwise within one
month of the Office’s making the proposal or of a complaint’s being lodged.

In addition, acquisitions of enterprises operating on the electricity market are subject to a special
provision whereby the Competition Council may, on a proposal from the Office, prohibit an acquisition
in the electricity sector which would lead to a market share of more than 25% of the national
distribution networks. This provision applies to activities on networks with a voltage of 400, since this is
where the adverse effects of vertical integration are most evident.

On 1 July the Ministry of Trade and Industry took decisions on the obligation to notify acquisitions of
undertakings (No 499/1998) and on the calculation of the turnover of parties to an acquisition (No 498/
1998). These decisions took effect on 1 October. On 15 September the Office of Free Competition
published a notice on the monitoring of acquisitions of undertakings.

By amendment (No 303/1998), a provision on minor restrictions of competition was also added to the
Act on competition restrictions: the Office of Free Competition may choose not to take action if the
competition restraint has only a minor impact on economic competition. On 17 September the Office
published a notice on minor competition restraints.

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A provision on negative clearance was also added to the Act in order to improve legal protection for
firms. Firms may apply to the Office of Free Competition for negative clearance in respect of the
prohibitions set out in the Act on competition restrictions, except in cases of an abuse of a dominant
position on the market. On 30 September the Office published instructions on how to apply for
exemption and negative clearance.

Under the new provision on compensation incorporated into the Act on competition restrictions, firms
which, whether deliberately or through negligence, are in breach of the Act or of the legislation or
decrees adopted under it must compensate other firms for any damage they cause them. The aim is to
clarify the situation regarding compensation for damage caused by restrictions of competition, in
particular in cases where there is no agreement between the firm responsible for the damage and the
injured party. Applications for compensation are examined by the ordinary courts, which may request
an opinion from the Office of Free Competition.

Germany

On 28 May, after three years’ work, the German Parliament adopted legislation amending for the sixth
time the federal Act on competition restraints (Gesetz gegen Wettbewerbsbeschra¨nkungen —
hereinafter GWB). As part of this reform, the text of the Act, which had been in effect for more
than 40 years, was completely revised, with its provisions tightened up and drafted in more
comprehensible language. As regards substance, the reform has brought about a moderate alignment
with Community antitrust law, together with an increase in the extent to which the law as a whole
safeguards competition.

The amended law prohibits the actual conclusion of restrictive agreements and not just their
implementation. The list of exemptions from the prohibition on restrictive practices has been
shortened and the procedure by which such practices are exempted has been simplified. As regards a
number of specific forms of cooperation, the law has added a further ground for exemption, in line with
Article 81(3).

Under the new provisions, the abuse of a dominant position is expressly prohibited by law, as under
Article 82 of the EC Treaty, so that injured firms may themselves assert their rights before the civil
courts. The authorities responsible for monitoring restrictive practices now have greater powers to
investigate infringements by firms in dominant positions. Access to networks and infrastructures is
governed by a general clause in the GWB. The new legislation prohibits firms in dominant positions
from selling goods at below cost price if there is no objective justification for doing so and if it is not an
occasional sale.

As regards merger control, the reform applies the prevention principle, which means that mergers must
be notified before being implemented, as under Community law. Other firms may contest decisions
authorising mergers before the courts.

The number of areas excluded from the scope of the law on competition restraints (agriculture,
banking/insurance and transport) has been considerably reduced. The exemption applicable to the
energy sector (electricity and gas) had already been abolished in March when the energy law was
amended. Sport has been added to the list of sectors not covered by the law, thereby allowing the
centralised sale of television broadcasting rights by sports federations. Since they provide services of
general interest (promotion of youth and amateur sports), an adequate financial base must be ensured
for these federations.

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The new version of the GWB is to enter into force on 1 January 1999.

Ireland

The Competition Authority published one decision: Category certificate/licence in respect of
agreements between suppliers and resellers, Decision No 528 of 4 December 1998. This block
exemption will apply from 1 January 1999 to 31 December 2003.

Luxembourg

In 1998 good progress was made with the research project which the Ministry of Economic Affairs is
carrying out in cooperation with the Public Research Centre’s economic law think tank with a view to
updating the Act of 17 June 1970 on restrictive trade practices. Consumers and the sectors of business
and industry concerned were widely consulted. These very constructive consultations gave direction to
the reform plans in the light of the real problems faced by businesses in their specific markets. The
ambitious project will attempt to demonstrate that competition legislation should be placed in a wider
context so that it is consistent with legislation on unfair competition and consumer protection.

The Luxembourg Minister for Economic Affairs attaches great
importance to modernising
competition policy, which, in the context of the decentralisation of Community cases, will need to
be applied to a greater extent in the years to come. The reform plan should be ready to be discussed
and decided on by the relevant authorities in the second half of 1999.

Netherlands

In January the Dutch Government set out principles for (general and specific) monitoring of the
liberalised public utility services. The Government took a position on the basis of the general
Competition Act, which came into force on 1 January, and in the context of the liberalisation of the
market for these services. It was important to clarify the basic system so as to prevent fragmentary
monitoring by various authorities and the development of inconsistencies in the way the competition
rules are applied.

The basic principle is that the Netherlands is not in favour of introducing specific arrangements: sector-
specific rules will be adopted in addition to the Competition Act applicable to all sectors of the
economy only if the general arrangements do not achieve the desired result. Regular assessment, in
principle every three years, must be carried out to determine whether specific arrangements are
necessary.

If there is a need for specific rules, their implementation will not necessarily have to be monitored by a
separate regulator. This task can be entrusted to the general supervisory authority, the Netherlands
Competition Authority (Nederlandse Mededingingsautoriteit or NMa), or a division attached to it.

The administrative relationship between the Netherlands Competition Authority and any other
supervisory bodies, if these are set up, should be carefully defined. For some decisions, the specific
supervisory body will have to come to an agreement with the Competition Authority, in particular if
there is a danger of divergent interpretations of certain competition law concepts.

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Since these basic principles were laid down by the Government, they have been formalised in laws,
draft laws and declarations of intent.

A new Telecommunications Act has entered into force and a new Postal Services Act is being
prepared. A specific regulator has been set up: the Independent Post and Telecommunications
Authority (Onafhankelijke Post- en Telecommunicatie Autoriteit or OPTA). The Government plans to
require the OPTA to take certain decisions in agreement with the NMa.

An office responsible for implementing and monitoring the Electricity Act (Dienst Uitvoering en
Toezicht Elektriciteitswet or DTE) was set up on the basis of that Act, adopted in 1998. The office takes
some decisions in agreement with the NMa. It constitutes a division of the NMa.

Under the draft Gas Act, this sector will be supervised, not by a separate authority, but by the NMa.

Public transport (local and regional) is another area where no separate authority will be set up; rather,
the NMa will be assigned specific responsibility for the sector.

Spain

On 27 February Royal Decree No 295/1998 for the application in Spain of the Community competition
rules was approved. This law, on which work began in 1997, amends Royal Decree No 1882/86 of
29 August 1986 for the application of Articles 81 and 82 of the Treaty by the national competition
authorities; the latter decree required modernisation in the light of legislative changes which had taken
place since its entry into force.

The new decree makes the following changes:

i.

ii.

it specifies the procedure to be followed in investigating cases under the Community competition
rules and in taking decisions on those cases;

it corrects the inflexibility of Royal Decree No 1882/86, which assigned responsibilities for applying
Community legislation to the national competition authorities by drawing up an exhaustive list of
the Community rules in force in 1986; the new royal decree assigns responsibilities ratione materiae,
i.e. by subject-matter;

iii. as regards mergers, the royal decree specifies that:

the Competition Tribunal is responsible for taking decisions on merger cases referred by the
Commission to Spain’s competition authorities under Article 9 of Council Regulation (EEC)
No 4064/89 (as amended by Regulation (EC) No 1310/97) and on whether it is appropriate to apply
Article 22(3) of Council Regulation (EEC) No 4064/89;

the Competition Service (SDC) is responsible for the procedural application of Articles 9 and 22(3)
of Regulation (EEC) No 4064/89;

the Government (meeting in cabinet) is responsible for authorising, unconditionally or not, or
prohibiting mergers with a Community dimension referred to it by the Commission under Article 9

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THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 335

of Council Regulation (EEC) No 4064/89; it is also competent to take appropriate measures under
Article 21(3) of the same regulation;

iv. as regards proceedings in respect of practices which infringe Articles 81(1) and 82:

the Competition Tribunal is responsible for ensuring the application in Spain of Articles 81(1) and
82 together with secondary legislation;

the SDC is responsible for the procedural application of Articles 81(1) and 82 together with
secondary legislation;

v.

the Directorate-General for Economic Policy and Competition is considered responsible for
cooperation between the Spanish authorities and the Commission for the purpose of applying the
Community competition rules in Spain;

vi. the royal decree also sets out the powers of officials and other Spanish government staff who, under

the Community rules, carry out monitoring visits or checks in companies located in Spain;

vii. lastly, the decree defines arrangements with regard to the duty of confidentiality and the procedure
to be followed in confidential investigations in connection with proceedings under the royal decree
itself.

Act No 66/97 of 30 December 1997 on tax, administrative and social measures (official gazette —
Boletı´n Oficial del Estado — of 31 December 1997) amended Competition Act No 16/89. Specifically, it
added a new article (Article 56), which lays down maximum time limits for proceedings initiated
before the Competition Service and Tribunal. These time limits apply only to proceedings initiated on
or after 1 January 1998 and are of 18 months and 12 months for the Service and Tribunal respectively,
after which time the proceedings become null and void.

Sweden

A number of amendments to the Competition Act came into force on 1 July. The redress system was
amended as regards certain decisions taken by the Competition Authority (Konkurrensverket).
Appeals against non-intervention, exemption and injunction decisions, for example, should from now
on be brought directly before the highest court, which is the Commercial Court (Marknadsdomstolen).
Previously, such appeals had to be brought before the court of first instance, the Stockholm District
Court (Stockholms tingsra¨tt). This amendment is designed to enable the firms concerned to obtain a
final decision more rapidly.

At the same time, the Competition Authority was given greater scope to impose interim measures. As
of 1 July, these decisions may be taken as soon as there is a ‘particular reason’ for doing so, whereas
previously ‘exceptional circumstances’ were required, such as the possibility that a competitor might be
eliminated.

The Competition Authority’s rules of procedure were also amended. Thus, for example, it must now
take a decision on an exemption request within one year at the most, whereas previously no time limit
was applied.

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In the light of work in progress within the Commission, the Government has decided to extend the
block exemption applicable to franchise agreements until 30 June 2000. The exemption rules
applicable to specialisation and research and development agreements have been extended to
30 June 2001.

A working party set up by the Government is considering inter alia the arrangements under the
Competition Act with regard to cooperation between small businesses. The block exemption granted
to retail chain stores, specific to Sweden, is also being reviewed as part of that work.

In addition, a study carried out by Government departments suggested amendments to the rules on
merger control. The Competition Authority supported most of the proposals, which bring domestic law
more into line with Community law.

United Kingdom

On 9 November the Competition Act 1998 received Royal Assent. The purpose of the Act is to
strengthen UK competition law by replacing much of the current system with two prohibitions, closely
based on Articles 81 and 82 of the EC Treaty: one concerns agreements between undertakings,
decisions by associations of undertakings or concerted practices which prevent, restrict or distort
competition and may affect trade within the UK; the other concerns conduct amounting to the abuse
of a dominant position which may likewise affect trade within the UK. The Act provides for
exemptions for agreements whose benefits outweigh their anticompetitive effects.

investigation and enforcement,

The prohibitions in the Act come into force on 1 March 2000 and at that time will replace the
Restrictive Trade Practices Act 1976, the Resale Prices Act 1976 and the greater part of the
Competition Act 1980. The new Act will give the Director General of Fair Trading improved powers of
sanction,
including the power to levy fines and impose interim
measures. It will be applied and enforced by the Director General and, in relation to the regulated
utility sectors, concurrently by the regulators for telecommunications, gas and electricity, water and
sewage treatment, and railway services. A new body, the Competition Commission, will take over the
current role of the Monopolies and Mergers Commission and will also consider appeals against
decisions of the Director General of Fair Trading and of the regulators.

The current UK competition legislation will continue to apply until 1 March 2000. However, the
Restrictive Trade Practices Act will apply in a modified form only, requiring formal notification of
price-fixing agreements to the Director General, who retains his powers to call in other forms of
agreement considered to be anticompetitive.

One of the aims of the new legislation is to align national rules as far as possible on Community rules.
Section 60 of the Act provides that the UK authorities must resolve problems of competition, as far as
possible and having regard to any existing differences, in compliance with Treaty principles and
European case-law.

The new Act will have no direct effect on the UK rules on mergers, which will continue to be assessed
under the relevant provisions of the Fair Trading Act 1973. Agreements giving rise to mergers within
the meaning of the 1973 Act will generally be excluded from the provisions of the 1998 Act, as will
restrictions considered ancillary to such agreements. The Government has announced its intention to
review the effectiveness of the current UK merger rules, and a consultation paper may be published
soon.

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B — Application of the Community competition rules by national

authorities

Currently, in seven Member States (Austria, Denmark, Finland, Ireland, Luxembourg, Sweden and the
United Kingdom) the competition authorities do not have the power to apply Articles 81(1) and 82
directly. In Sweden, however, a government committee is considering this possibility for the country’s
authority.

Articles 81(1) and 82 were applied in 1998 by the competition authorities in France, Germany, Italy
and Spain. Article 84 was applied by the United Kingdom competition authority. Cases involving the
application of Article 9 of the Merger Regulation have been mentioned by the French and Netherlands
authorities. The latter authority, together with the Danish one, has mentioned the application of the
notice on cooperation between the Commission and national competition authorities in respect of the
application of Articles 81 and 82.

This chapter also contains a summary of decisions based on domestic law reported by the national
competition authorities of Austria, Belgium, Finland, Portugal and Sweden, owing mainly to their
significance from a Community point of view. Mention is also made of court judgments delivered on
appeal from competition authority decisions.

Austria

In the Oscar Bronner v Mediaprint case, which had been pending in Austria since 1995 and, in the
meantime, also partly before the Court of Justice of the European Communities through a reference
for a preliminary ruling, the Restrictive Practices Court (Kartellgericht) handed down a final judgment,
upheld by the Supreme Court (Oberster Gerichtshof — 1 Ok 5/98), on the count of predatory pricing.
Having regard to the case-law of the Court of Justice, the Restrictive Practices Court held that the act
of reducing spectacularly and for a short period the price charged for publishing job advertisements in
the largest-circulation Austrian daily newspapers was not a measure in restraint of competition in the
area of provision of services. The plaintiff had been unable to prove that the defendant was pursuing a
deliberate strategy of squeezing competitors out of the market. Consequently, the publishing house
(the defendant), whose advertising rates had been temporarily frozen by interim order, will be able to
set them freely once more.

On the second matter complained of by the plaintiff, who argued that inclusion in the only daily
newspaper home-delivery scheme in Austria, which was operated by the defendant, was an essential
facility, the Court of Justice delivered its judgment on 26 November. 250 The Court ruled that, although
the national court’s decision was in fact based on Article 35 of the Austrian Restrictive Practices Act
(Kartellgesetz) and not on Article 82 of the EC Treaty, a conflict was capable of arising between
national law and Community law, with the result that the reference for a preliminary ruling was
justified and that, in the present case, owing to the existence of other means of distributing daily
newspapers, non-inclusion in a home-delivery scheme did not constitute an abuse of a dominant
position within the meaning of Article 82. The Restrictive Practices Court’s judgment is still awaited.

In its judgment 16Ok7/98, the Supreme Court, in its capacity as Supreme Restrictive Practices Court
(Kartellobergericht), annulled a suspension order of the Restrictive Practices Court concerning the

250 Case C-7/97.

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notification of an Austria-wide waste-disposal system. The system had also been notified to the
Commission in 1994 under Article 81(3). The annulment order necessitated a decision on the part of
the Commission, which had not yet officially initiated proceedings. The Supreme Restrictive Practices
Court justified its decision on the ground that national restrictive practices law had to be applied in
parallel with the relevant Community law. In view of the fact that an authorisation by the European
Commission cannot on its own serve as a basis for the national authority’s decision, proceedings
instituted under Austrian restrictive practices law cannot be suspended.

Belgium

Hearing an appeal from a decision of the Competition Council, the Brussels Court of Appeal held that
resale price maintenance was prohibited. The Competition Council had established in 1997 that a
system of resale prices imposed on individual retailers constituted an agreement in restraint of
competition and did not qualify for exemption. The Court of Appeal upheld the Council’s decision,
finding that the system did not allow consumers a fair share of the resulting benefit and therefore could
not be exempted.

The most noteworthy merger case handled by the Competition Council in 1998 was the operation
notified in April whereby Cognizant acquired control at world level of Pharmaceutical Marketing
Services (PMSI). Given that there were serious doubts about the lawfulness of the operation, its
structure was modified. The new structure provides for the acquisition by IMS of some of PMSI’s
businesses, including the European and Japanese subsidiaries, but excluding the Belgian ones, for
which a stock option plan was drawn up. The operation was prohibited by the Council on 14 December
on the ground that IMS’s dominant position on the Belgian market for market research into, and the
monitoring of, sales of pharmaceutical products would have been strengthened as a result.

In view of the fact that the stock option in respect of one of the subsidiaries had already been exercised
during the second phase, the Council required the parties to undertake to dissolve the merger and sell
the shares acquired.

Denmark

By virtue of the Commission notice on cooperation with Member States’ competition authorities, the
Competition Council investigated a complaint which had been referred to it by the Commission. It
concerned a circular which the Danish Motor Dealers Association (Danmarks Automobilforhandler
Forening — DAF) had sent to its members.

In the circular, DAF declared that the individual freedom of its members to set prices and discounts
was to be interpreted as meaning that they were lawfully entitled to ask for a bigger deposit in the
event of sales to nationals of other countries of the European Union.

DAF was thus encouraging Danish car dealers to practice on a regular basis price discrimination
against non-Danish buyers.

Under Article 6 of the Competition Act such initiatives on the part of an industry association are
prohibited because they can lead to uniform pricing and limit sales to certain categories of customer.

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The Competition Council has ordered DAF to withdraw its circular and distribute a correction
concerning the deposit required by dealers in case of sale to EU nationals.

Finland

As indicated in the 1997 Competition Report, 251 by decision of 24 October 1997 the Competition
Council (Kilpailuneuvosto) fined Valio Oy FIM 5 million for abusing its dominant position on the
market in milk products in Finland. Valio granted traders rebates on the wholesale price of liquid milk
products on the basis of the average value of all products supplied. To obtain the maximum rebate,
traders had to obtain all of their dairy product supplies from Valio. This had the effect of tying them to
Valio and excluding smaller competitors. Marketing support, 252 which was granted on the basis of the
trader’s overall volume of purchases and which discriminated to some extent between traders, had
similar effects. The Supreme Administrative Court (Korkein hallinto-oikeus) dismissed, by its
judgment of 11 November, the appeal which Valio had brought against the Competition Council’s
decision.

In its judgment the Court held that Valio’s market position and activities should be viewed in the light
of Finnish competition-law requirements and the provisions of European Community law concerning
dominant positions and the decisions of a firm in such a position. The Court found, as had the
Competition Council before it, that Valio was guilty of an abuse of a dominant position on the market,
prohibited by points 2 and 4 of Article 7 of the Act on competition restrictions and by Article 82.

The Competition Council pointed out in its decision on Ajasto Oy, which was delivered on
17 December, that the fact of fulfilling the conditions for the application of Article 82 did not preclude
the application in the same case of national law on restrictions of competition. The Competition
Authority had expressed the view in its proposal to the Competition Council that Ajasto had been
guilty of an abuse of a dominant position prohibited by Article 7 of the Finnish Act. Ajasto had argued
that domestic law was not applicable in this case as the conduct in question could have an effect on
trade between Member States. Referring to the judgments of the Court of Justice of the European
Communities in Walt Wilhelm (Case 14/68) and Guerlain (Joined Cases 253/78 and 1-3/79), the
Competition Council stated that the Community competition rules and national competition law were
applicable in parallel. These provisions were also complementary as regards the monitoring and
punishment of abuses of dominant positions. Express exceptions had been laid down by specific
legislation, for example with respect to the monitoring of acquisitions of companies. Ajasto also
opposed the Competition Authority’s proposal regarding the dominant position and the abuse. The
scrutiny of this matter is currently under way.

By its decision of 30 March the Competition Council dismissed an application for exemption submitted
by Turun Linja-autoilijain Osakeyhtio¨ (TLO). The Council, like the Competition Authority before it,
considered that cooperation in respect of fares and market sharing between coach operators under a
joint pricing agreement was contrary to the Act on competition restrictions and that exemption was out
of the question. Under an agreement, the city of Turku purchased transport services direct from TLO
members without any call for tenders.

251 At p. 339.
252 ‘Markkinointirahalla’ in Finnish. It consists in an amount paid by the producer, in this case Valio, to traders who
buy substantial quantities from it, with which the traders have to make the producer’s goods known amongst
consumers.

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in recent years,
In its decision the Competition Council attached importance to the fact that,
competition from other Member States in the Finnish coach transport market had increased. The
maintenance of a cartel between operators and the lack of any open tendering had objectives and
effects contrary to Articles 81 and 49 and to the public procurement directives. It was not possible to
authorise this type of practice, which foreclosed the market and prevented competition from other
Member States. The Competition Council observed that it followed from Article 10 of the Treaty that a
judicial body could not take, under domestic law, a decision that would clearly conflict with the
obligations stemming from accession which were binding on Finland.

By its decision of 4 December the Competition Authority refused to grant the exemption which K-
kauppiasliitto and Kesko Oyj. had applied for in connection with a cooperative venture involving the
retail prices of products belonging to the basic range of the K-la¨ hikauppa, K-market, K-supermarket,
Citymarket and Anttila chains. Nor was an exemption granted for the harmonisation of the other
conditions of sale and delivery and of purchase prices and other conditions of purchase. The Authority
considered that the applicants had not set out sufficient grounds for obtaining an exemption as
required by Article 19 of the Act on competition restrictions. The substantial share of the basic
consumer goods market held by the K group (nearly 40%) was also a factor in the Authority’s reaching
a negative decision.

France

In 1998 there was one case in which a decision 253 was taken finding that anticompetitive practices by a
firm infringed Article 82. The case involved practices by Decaux, a street-furniture manufacturer,
which consisted, through an interplay of tacit renewal clauses and schedules to a contract concluded
with a local authority, in artificially prolonging the contract’s duration. The practices were held to
constitute an abuse of a dominant position within the meaning of Article 82 as they prevented
competing firms from other Member States from gaining access to the market for the supply of
advertising hoardings to French local authorities.

Two judgments of the Paris Court of Appeal, which has jurisdiction to hear appeals from decisions of
the Competition Council (Conseil de la Concurrence), must also be mentioned.

In the first case 254 the Court upheld under Article 81 the penalties imposed by the Competition
Council on France Te´le´com and Transpac for a restrictive practice having the effect of promoting
Transpac technology to the detriment of the VSAT solution proposed by British Te´le´com-France. The
rebate offered by Transpac on the price charged for the service was also found to constitute an abuse
on the part of France Te´le´com, the dominant operator, and of its subsidiary Transpac under Article 82.

In the second case 255 the Court upheld a decision of the Competition Council declaring unlawful under
Article 81 clauses of exclusive distribution agreements granting distributors absolute territorial
protection.

253 Decision No 98-D-52 of 7 July 1998.
254 Judgment of the Paris Court of Appeal of 23 January 1998 in France Te´le´com-Transpac.
255 Judgment of the Paris Court of Appeal of 23 January 1998 in Tradition et perspectives-Prospection.

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THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 341

Germany

During the period under review the Federal Cartel Office applied the Community competition rules in
four cases.

In proceedings brought under Article 81(1) in respect of the charging of recommended rates for
groupage freight transport by forwarding agents, the Office decided to tolerate the practice pending
repeal of the exceptional provision in Article 99(2) of the Law prohibiting restraints of competition -
Gesetz gegen Wettbewerbsbeschra¨nkungen (GWB) - as from the entry into force on 1 January 1999 of
the sixth Law amending the GWB. The Office had previously informed the Federal Transport and
Storage Association (Bundesverband Spedition und Lagerei eV) of
the impending ban on
recommended rates.

The proceedings brought for infringement of Articles 81 and 82 by clauses in gas supply contracts
providing for total coverage of requirements were terminated after the gas distribution companies
concerned ceased applying the clauses.

In an action against the German federal railways operator Deutsche Bahn AG, the ferry company
Deutsche Fa¨ hrgesellchaft Ostsee-mbH and Deutsche Bahn’s real-estate arm (Deutsche Bahn
Immobiliengesellschaft mbH), the Office initiated proceedings under Article 82 of the Treaty and
Articles 22 and 26 of the GWB in respect of those firms’ refusal to share use of the port facilities at
Puttgarden with competing ferry companies.

The Office considered that the refusal by Deutsche Telekom AG to communicate, to persons
requesting it, all the data in its possession concerning off-line use constituted an abuse. It took the view
that the incomplete provision of such data to third parties was a serious obstacle to potential
competitors’ entering the product markets for enquiry services and subscriber directories. Moreover,
the system of payment for supplying subscriber data was particularly exploitative and prevented
effective competition on the markets for the relevant products. Proceedings were initiated under
Article 82 of the EC Treaty, in conjunction with Articles 47 and 26 of the GWB.

During the period under review, the Federal Court of Justice (Bundesgerichtshof) confirmed a
prohibitory injunction issued by the Office, and a set of proceedings before the Berlin Court of Appeal
(Kammergericht) was brought to an end.

In the first case, the Federal Court of Justice upheld the ban under Article 1 of the GWB and
Article 81(1) of the EC Treaty on implementation of the articles of association of Carpartner
Autovermietung GmbH (Carpartner) and of the cooperation agreements concluded between its
shareholders and motor vehicle liability insurers. In the Court’s view, the formation of Carpartner by
six insurance companies with a view to concentrating demand for the conclusion with car-hire firms of
bilateral contracts on the replacement of accident-damaged vehicles had the effect of limiting the
opportunities for parties on the other side of the market to withdraw from the contracts.

In the second case, the termination of the demarcation agreement between Ruhrgas and Thyssengas
signalled the end of the proceedings before the Berlin Court of Appeal. The latter thereupon withdrew
the order it had made in 1996 for a reference to the European Court of Justice.

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342 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Italy

As part of the decentralised application of Articles 81(1) and 82 of the Treaty, the Competition and
Market Authority (Autorita` Garante della Concorrenza e del Mercato) is authorised, under Article 54
of Law No 52 of 6 February 1996, to use the powers and procedures at its disposal to apply domestic
antitrust law. During 1998 the Authority initiated two sets of investigation proceedings under the
Community competition rules.

The first set of proceedings (Consorzio industrie fiammiferi), initiated on 5 November, concerned
possible infringements of Article 81(1) and Article 82 in the market for the production and wholesale
distribution of matches in Italy. The case involved the presumed coordination of the commercial
policies of Italian match manufacturers and conduct likely to have the effect of limiting access to the
market by competing producers, whether from Italy or from other Community countries. The
proceedings are scheduled to terminate on 31 March 1999.

The second set of proceedings (Unapace/ENEL), initiated on 12 November, concerned a presumed
infringement of Article 82 by ENEL due to conduct likely to limit access by competitors from Italy and
from other Community countries to the electricity supply market. The proceedings are scheduled to
terminate on 20 May 1999.

In 1998 the Authority took its first two decisions on merger operations referred by the Commission
under Article 9 of Regulation No 4064/89.

The first operation concerned the acquisition by Promode` s of joint control of Gruppo GS, a company
active in Italy in the retailing of foodstuffs, personal hygiene products and household goods. As a result
of the merger the parties would have occupied a dominant position with shares of as much as 40-85%
of some local retailing and distribution markets. The Authority gave the merger the go-ahead on
condition that the parties undertook to dispose of a number of sales outlets in areas where competition
might be affected.

The second operation concerned the acquisition by Alleanza Salute Italia of joint control of Unifarma
Distribuzione. Both companies operate in the sector of the wholesale distribution of pharmaceutical
and parapharmaceutical products. In view of the presence of sufficiently active actual competitors and
the lack of any major entry barriers, the Authority took the view that the operation would not give rise
to the creation of a dominant position likely to eliminate or reduce competition in regional markets for
the wholesale distribution of pharmaceutical and parapharmaceutical products.

Luxembourg

With a view to preparing the Restrictive Trade Practices Commission (CPCR) for the new functions it
may be required to fulfil after the entry into force of the planned reform of the Competition Act, the
Minister for Economic Affairs referred a number of cases to it. The two most interesting cases
submitted to the CPCR concerned telecommunications and catering services.

The first case had to do with accounting rates, which are arrangements freely negotiated between
telecommunications operators whereby they are paid for transferring international telephone calls to
their destination. Accounting rates formed the subject-matter of a preliminary inquiry by the
European Commission, which suspended the procedure in order that the national authorities might, as

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THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 343

part of the decentralisation process, handle the case with a view to taking a decision under their
domestic law. The investigation is scheduled to end during the first half of 1999.

The second case started with a complaint about practices relating to means of payment in restaurants.
Since the investigations are lengthy and complex, the file on the case will not be closed before
May 1999.

Netherlands

A large number of cases which it fell to the NMa to consider formed the subject-matter of
consultations with the Directorate-General for Competition. The notice on cooperation between the
Commission and national competition authorities performed a useful role in this respect. Cooperation
at staff level proved particularly effective and was much appreciated, not only when it came to
ensuring proper coordination between the Commission and the NMa, but also as a means of
preventing the practice of forum shopping.

The NMa submitted a number of practical proposals to the Directorate-General aimed at making the
cooperation between the two even more effective. The Directorate-General responded positively to
these moves.

Although the NMa has the power to apply Article 81(1) and Article 82 of the EC Treaty, it did not use
it in 1998. When it applies Netherlands competition rules, it relies extensively on Community case-law.

Merger control

Following receipt from the Netherlands of a memorandum on the subject, the Commission referred,
under Article 9 of Regulation No 4064/89, the Vendex-KBB case to the NMa with regard to that part
which concerned the Dutch non-food retailing sector. As far as the other activities of Vendex and KBB
were concerned, the Commission found that the proposed merger was compatible with the common
market. The NMa carried out a survey to see whether large-surface stores constituted a separate
market. It concluded that that was not the case as all the products offered for sale in large-surface
stores were also to be found in specialised shops;
large-surface stores therefore faced strong
competition. They were, of course, distinct from specialised shops, but the difference was not so big as
to prevent consumers from buying goods in specialised shops if large-surface stores charged more. The
combined market shares of Vendex and KBB came to between 19% and 40% in the markets for
products such as baby clothes, lingerie, jewellery and leather goods. In the NMa’s opinion, the parties
were therefore not in a dominant position, there being still sufficient competition from other large
stores. Moreover, the barriers to entry to the relevant product markets were low. The NMa also
considered whether Vendex/KBB would be in a dominant position as seeker of sites for luxury shops.
The investigation showed that the market for sites for A1-type shops was a supplier’s market. In view
of the limited supply of such sites and the ever-increasing demand from chain stores in particular,
suppliers were in a position of strength. Although Vendex and KBB were well represented in major
shopping centres in the Netherlands, this did not place them at an advantage compared with other
chain stores when acquiring new sites. Price was the decisive criterion when it came to letting out a
shop. There was nothing to be gained, moreover, by being totally dependent on one big tenant. All
these factors were instrumental in inducing the Director-General of the NMa to decide to agree to the
planned merger and to grant an unconditional authorisation to that effect.

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344 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Portugal

The Competition Council (Conselho da Concorreˆncia) did not apply Community law in 1998.

Acting under domestic law (Decree-law No 371/93 of 24 October 1993), the Council initiated two sets
of infringement proceedings, one concerning the formation of a joint venture (Farmindu´ stria) between
the National Pharmacies Association and Stada Arzneimittel AG for the production and sale of
generic medicines, and the other a concerted practice by a group of four firms in the medical gases
sector aimed at market sharing.

Neither of the proceedings led to any fines being imposed.

The Council granted three negative clearances in respect of agreements between enterprises in the sea
transport, soft drinks and dietary products sectors.

In 1998 the Directorate-General for Trade and Competition initiated four sets of proceedings for
infringement of Portugal’s competition rules. They concerned flat glass, the provision of information
during stock exchange sessions, the audio-visual sector and dietary products.

In the merger control field, the Directorate-General received 29 notifications and authorised 19 of
these operations in the following sectors: industry (8), commerce (5) and services (6). Two of them,
concerning the industrial sector, were also notified in other Member States. Thus, one operation,
concerning the industrial sector of plant and machinery, was notified in Belgium, Ireland and the
United Kingdom, while another, in the chemical industry, was notified in Belgium, Germany, Greece
and the United Kingdom.

Spain

The dispute between ARCO and Repsol was sparked off by agreements for the transfer of shares
which ARCO Chemicals held in the Puertollano plant owned by a 50/50 joint venture between the two
companies. It was in this plant that a technique for the joint production of propylene oxide and styrene
monomer was developed in the 1960s. When it disposed of its interest in 1986, ARCO placed limits on
the expansion of production capacity by Repsol. This gave rise to a lengthy conflict, waged on many
fronts, between the two companies when Repsol, in view of the technique’s excellent results from a
commercial and ecological point of view, sought to increase output by building a plant at Tarragone.

ARCO lodged a complaint against Repsol before the International Chamber of Commerce in Paris
and notified the agreements to DG IV with a view to obtaining exemption under Article 81(3). Repsol,
for its part, lodged a complaint against ARCO before the Competition Service (SDC) and DG IV,
arguing that the agreements infringed the Competition Act and Article 81(1). The SDC and DG IV
accordingly initiated restrictive practices proceedings (DG IV case IV/36.233 and SDC case 1454/96).

The SDC learnt from press reports that the two parties had reached an agreement putting an end to
their long-running dispute and removing the main restrictions of competition. It thereupon opened a
confidential inquiry (ref. 1742/97) into the compatibility of the new agreements notified to DG IV
(case IV/36.838).

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THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 345

DG IV closed the file on both cases early in 1998 and the SDC, after having analysed the new
agreements and having been informed that both parties were withdrawing their suits, likewise found on
26 February that there was no case to answer in case 1454/96 and on 5 January closed the confidential
inquiry in case 1742/97.

By decision of 26 May 1997 the Competition Tribunal had decided to adopt the interim protective
measure proposed by the SDC at the request of the plaintiff, McLane, consisting in ordering
Tabacalera to supply McLane, on non-discriminatory terms, with tobacco products bearing its trade
marks for a period of six months.

Tabacalera holds a monopoly on the relevant market, that for the manufacture and sale of tobacco
products in Spain, and occupies a de facto dominant position in the wholesale distribution and
importation of such products. According to the complaint, although McLane had in 1995 obtained
authorisation to act as a distributor, it had been unable so to act because of (a) Tabacalera’s refusal to
supply it with the products it manufactures and (b) the exclusive distribution agreements the latter had
concluded with other tobacco manufacturers.

The decision was notified to Tabacalera on 29 May 1997. By order of 30 July 1997 the Competition
Tribunal required Tabacalera to make within 10 days a proposal concerning supplies to McLane and
decided to impose a penalty of PTA 150 000 a day on it in the event of non-compliance.

On 18 November 1997 Tabacalera claimed that it had made offers to negotiate supplies of products to
McLane but that the latter had not responded. The Competition Tribunal asked the SDC to confirm
the existence of these offers and, if appropriate, whether there was any proof that the Tribunal’s
decision had been complied with. The SDC informed the Tribunal that the offers and responses in
question were the same as those of which it already had cognisance and that, in the absence of any
fresh evidence, Tabacalera had to be deemed not to have complied.

The Competition Tribunal decided, on 4 February 1998, to fine Tabacalera PTA 15 450 000 for its
failure to comply with its decision of 26 May 1997.

By decision of 15 July 1998 the Competition Tribunal dismissed the application for interim protective
measures submitted by the SDC at the request of Federacio´ n Espan˜ ola de Hoteles, Agrupacio´ n
Hotelera de las Zonas Turı´sticas de Espan˜ a, Sol Melia´ SA, Ciga International Hotels Corporation SA,
Cigahotels Espan˜ a SA and NH Hoteles SA. The measures were intended to ‘require EGEDA to
refrain from applying, in whatsoever way, the rates published by that body in December 1997, as set
out in point 1.A.3 of the ’Schedule of charges applicable to the right of authorisation of reproduction
and to the right to remuneration enjoyed by producers of audio-visual recordings in respect of
retransmissions (Article 20(2)(f) of the codified version of the Intellectual Property Act) and
communications in a place accessible to the public (Article 20(2)(g) of the Act)’, and to refrain also
from applying the rates published before December 1997 for the retransmission in hotels of audio-
visual works and recordings contained in broadcasts and/or transmissions of broadcasting organisa-
tions’.

EGEDA is the body responsible for managing the rights of producers of audio-visual works. The
applicants in this case did not recognise its right to make any charge for the piping of programmes
picked up by hotel TV aerials to rooms, as they considered that, in such circumstances, there was no
‘communication to the public’ (Article 20(2)(g)) or ‘retransmission’ (Article 20(2)(f)) of the broadcast

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346 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

work within the meaning of
interpretation in numerous actions before the ordinary courts.

the Intellectual Property Act, and hence they challenged this

The Competition Tribunal found that in this instance the requirements of the establishment of a prima
facie case and urgency, which must be fulfilled before interim measures can be ordered, were not met.

The Tribunal adopted the interim protective measure proposed by the SDC consisting in suspending,
for six months, the application of one of the general conditions of sale of Glaxo Wellcome SA and its
subsidiaries. It considered it necessary, moreover, to require the applicants — the Association of
Spanish Exporters of Pharmaceutical Products, the Association of Pharmaceutical Cooperative
Businesses and Spain Pharma SA — to provide a joint guarantee of PTA 600 million in case the
interim measure was not confirmed by the final decision in this matter.

On 6 March Glaxo’s sales department sent wholesalers new general conditions of sale for the
proprietary medicinal products marketed by the group, indicating that they would enter into force on
9 March. These general conditions, which set out the contractual terms on which products were sold to
wholesalers, contained two price lists depending on the products’ end use. Through these new
conditions, Glaxo was trying to curb parallel exports by certain Spanish wholesalers to other EC
countries where pharmaceutical prices were higher. The prices on the two lists differed by as much as
2 500%.

On 6 March Glaxo notified the new general conditions of sale to the European Commission with a
request for negative clearance or, alternatively, exemption under Article 81(3). As from 13 March
Glaxo stopped supplying its products to wholesalers who had not signed the general conditions of sale.

By order of 22 April the SDC decided to institute criminal proceedings in respect of practices
prohibited by Articles 1 and 7 of the Competition Act and Article 81(1). DG IV sent Glaxo a warning
letter about the agreement the latter had notified in which it expressed the view that, upon preliminary
scrutiny, the agreement seemed to contain or give rise to competition restrictions incompatible with
Article 81(1) and not covered by any of the exceptions in Article 81(3).

The Competition Tribunal, applying the Commission’s criteria as confirmed by the Court of Justice in
its judgment in Sandoz, 256 held that, in so far as the purpose of the new conditions of sale was, as Glaxo
had itself acknowledged, to limit exports of proprietary medicinal products from Spain, it had to be
determined whether the existence of an infringement of Article 81(1), and hence of a prima facie case,
had been sufficiently proven for interim measures to be granted, without prejudice to the final
outcome of the main proceedings.

The Tribunal also stated that the new conditions of sale ‘appreciably modify the terms of competition
on the wholesale market for proprietary medicinal products for traders marketing Glaxo products — a
situation which both affects those who have signed them and is liable to affect those who have not
signed them.’

The interim protective measure did not enter into force, however, until December, when the applicants
provided the guarantee.

256 Case C-277/87 Sandoz prodotti farmaceutici SpA v Commission [1990] ECR I-45.

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THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 347

On 14 December the Competition Tribunal held in Ondas Ramblas v AGEDI that no practice
prohibited by Article 6 of the Competition Act or by Article 82 of the EC Treaty, such as that which
the SDC claimed the Association for the Management of Intellectual Property Rights (AGEDI) had
engaged in, had been proved to exist.

The SDC had taken the view that AGEDI was guilty of practices contrary to Article 6(2)(a) and (b) of
the Competition Act and Article 82(a) and (b) in that it had imposed unfair prices and prescribed
additional conditions not directly connected with the service provided. It considered, therefore, that
AGEDI had abused its dominant position on the market for management services in respect of rights
held by producers of sound recordings in the transmission of their musical works to the public by radio.

The file on the case was opened following the lodging of a complaint by a private radio station, Ondas
Ramblas, about the imposition by AGEDI of a contract for the authorisation of retransmission and the
collection of intellectual property dues. The contract had been negotiated between AGEDI and the
Spanish Association for Commercial Broadcasting (AERC), which groups together most private
stations. It provided for the payment of dues by stations according to their advertising revenue, and
hence the dues reflected each station’s audience share. Onda Ramblas refused to sign the standard
contract negotiated by AERC on the ground that it was discriminatory, the amount paid by each
station being dependent, not on the quantity of music broadcast, but on operating income.

In its judgment the Tribunal held that the clauses of the contract proposed to Ondas Ramblas by
AGEDI stemmed from the agreements concluded between AGEDI and AERC and that, as Ondas
Ramblas was a member of AERC, the existence of an abuse consisting in the imposition of the
contract did not have to be determined inasmuch as the law of intellectual property recognised the
system of collective bargaining for fixing the remuneration of intellectual property rights. The Tribunal
added that it likewise did not have to be determined whether some of the contract’s rates were unfair
as they were similar to other rates charged by other associations of holders of intellectual property
rights and to those in force in other Member States.

Sweden

The Swedish competition authority (Konkurrenceverket) is not empowered to apply Articles 81 and 82.
The Government has, however, appointed a rapporteur to look into the question and present a report
in 1999.

Among the cases of interest involving the application of domestic law, mention may be made of the
Posten Sverige AB case. 257 Posten Sverige had notified its intention to charge a different rate for the
distribution of large commercial consignments according to whether they were sent between certain
localities or between certain localities and the rest of Sweden. The Competition Authority considered
that the measure could constitute an abuse of a dominant position and prohibited the new rating
method. Posten Sverige appealed against the decision to the Market Tribunal (Marknadsdomstolen),
which held that the system of charging different rates had to be considered a form of abuse. Although
Posten Sverige had objectively justifiable reasons for charging a different rate as between certain
localities and the rest of Sweden, it had not established the need for doing so on the basis of cost
differences between certain localities. The Tribunal accordingly authorised the rating system proposed
by Posten Sverige for deliveries between certain localities and the rest of Sweden, but held that the
second measure envisaged constituted an abuse.

257 1997 Competition Report, p. 342.

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348 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

In 1997 the Competition Authority submitted to the Stockholm District Court (Stockholms tingsra¨tt)
an application for the prohibition of the acquisition by the building materials producer Optiroc of a
holding in its competitor Sta˚ bruken. Both firms are active mainly in the building materials field. The
Authority argued that the merger would place Optiroc in a dominant position, which would be harmful
to competition as the firm had a share of around 80% of some markets and competition from imports
was insignificant. The court disagreed and dismissed the application. The Authority appealed against
the judgment to the Market Tribunal, which nevertheless upheld it. The Tribunal found that a merger
investigation should not concentrate solely on the operation’s direct effects on competition, but should
be based on an overall assessment embracing other particularly important interests. It thus took
account in this case of the need for restructuring and the growing pressure from international
competition. It also considered that the opportunities for gaining access to the market were satisfactory
and that purchasers (building firms and building materials distributors) had considerable buying power
vis-a` -vis suppliers (Optiroc).

The Tribunal also decided that a major cooperative venture in southern Sweden between the leading
forest products companies Stora, MoDo and Munksjo¨ , operating through a common purchasing
organisation, Sydved, 258 was prohibited under the Competition Act and should be quickly dismantled
within the period set by the Tribunal. The cooperation involved the joint purchasing of building timber
and had the effect of eliminating price competition between the three companies and preventing
suppliers from selling to, and customers from buying from, each company individually.

In 1996 the Competition Authority brought an action against Statens Ja¨ rnva¨ gar (SJ), the state railways
operator, on the ground that, through its bid to secure the contract for the operation of the regional rail
network, SJ had abused its dominant position. The abuse consisted essentially in quoting too low a
price. 259 SJ won the contract by submitting a lower bid than its smaller competitor BK Ta˚ g. SJ’s bid
came to SEK 23.5 million. The Stockholm District Court found, first, that the total operating cost to SJ
was more than SEK 30 million, with variable costs of at least SEK 29 million, and secondly that SJ
must have known that its bid was lower than those amounts. SJ having quoted a price lower than its
variable costs, the Court held that there was a presumption that the operator had quoted too low a
price with a view to squeezing one or more competitors out of the market, or at least seriously
weakening their position. Moreover, SJ had not furnished any counter-evidence capable of rebutting
that presumption. The Court concluded that SJ had unlawfully quoted too low a price and fined it
SEK 8 million. SJ has appealed against the judgment.

The Competition Authority brought an action against Scandinavian Airlines System (SAS) and called
for it to be fined SEK 10 million for refusing to sign an interlining agreement with Nordic European
Airways (NEA), a much smaller competing airline. The Stockholm District Court found for the
Authority, holding that SAS had knowingly refused to conclude an interlining agreement with NEA
with the intention of restricting competition or, at least, that SAS knew that its refusal could have the
effect of restricting competition. The Court nevertheless imposed a smaller fine than that called for by
the Authority, giving as its reasons the brevity (about 8 months) and limited impact of the
infringement. Both SAS and the Authority have appealed from the judgment to the Market Tribunal.

The Competition Authority brought an action against explosives manufacturer Nitro Nobel AB and
called for it to be fined SEK 5 million. The Authority considered that the firm had abused its dominant
position, first by granting to one reseller more favourable trade terms than it did to others, and

258 1997 Competition Report, p. 341.
259 1997 Competition Report, p. 342.

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THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 349

secondly by tying some of its customers by means of exclusive purchasing agreements. In a judgment
delivered in 1998, the Stockholm District Court found in favour of the Competition Authority only as
regards the exclusive purchasing agreements, and accordingly imposed a smaller fine than the
Authority had called for. Both parties have appealed from the judgment to the Market Tribunal.

United Kingdom

The Competition Act 1998 makes no provision for the direct application of Articles 81 and 82.

The United Kingdom continued to investigate, under Article 84 of the EC Treaty, the proposed
alliance between British Airways and American Airlines. The investigation proceeded in parallel with
investigations under the merger provisions of the Fair Trading Act and by the Commission under
Article 85.

The Director General of Fair Trading continued to advise the Secretary of State for Trade and Industry
on regulations made in 1997 by the United Kingdom implementing the European directive on
packaging and packaging waste (94/62/CE). During 1998 five compliance schemes for recycling
packaging met the requirements of competition scrutiny and were approved by the Secretary of State
following advice from the Director General. One proposed scheme, Glaspak Ltd, withdrew its
application following advice from the Director General that it failed to meet competition scrutiny
requirements.

C — Application of the Community competition rules by courts in the

Member States

This section does not include judgments delivered by courts with jurisdiction over decisions of national
competition authorities. These judgments were mentioned in the previous section (Application of the
Community competition rules by national authorities).

The competition authorities of six Member States only (Austria, France, Germany, Italy, the
Netherlands and the United Kingdom) have reported decisions by a national court applying the
Community competition rules or referring a question to the European Court of Justice for a
preliminary ruling.

Germany

The judgments of the German civil courts applying Community competition law and notified to the
Federal Cartel Office are indicated below:

1 Frankfurt am Main Higher Regional Court (Oberlandesgericht), judgment of 13 January 1998, 11 U

(Kart) 33/97 P-080/97
AE TV Cooperation GmbH, Heidelberg
Fe´de´ ration internationale de l’automobile (FIA), Paris
In view of the lack of urgency of the case, the defendant could not be prohibited by an injunction
from claiming that it held certain television rights in motor racing competitions; as an application
for negative clearance and/or exemption under Article 81(3) EC had been submitted, a suspension
of proceedings was inappropriate.

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350 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

2 Stuttgart Regional Court, judgment of 5 March 1998, 17 O 344/96 P-052/96

Interparfums GmbH, Stuttgart

Eurocos Cosmetic GmbH, Dreieich

The applicant is not entitled to supplies of cosmetic products as the defendant is not subject to the
legal provision in question and the discrimination is justified (first and second sentences of
Section 26(2) and Section 35 of the Law prohibiting restraints of competition - GWB, Article 81(1)
EC, read in conjunction with Article 823(2) of the German Civil Code — BGB).

3 Berlin Regional Court, judgment of 17 March 1998, 16 O 642/97 P-072/98

Langnese-Iglo GmbH, Hamburg

Ingeborg Handl, Scho¨ nwalde

is prohibited by injunction from selling, at

The applicant
ice-cream made by
manufacturers other than the defendant (Article 81(1) EC; Article 3(d) of Commission Regulation
No 1984/83).

its stand,

4 Du¨ sseldorf Regional Court, judgment of 20 March 1998, 38 O 22/98 P-054/98

Procter & Gamble GmbH, Schwalbach am Taunus

AOK Rheinland, Du¨ sseldorf

No injunction can be granted under Section 35 of the GWB and Articles 1004 and 823(2) of the
German Civil Code, read in conjunction with Article 81 EC, against sickness insurance funds as the
determination of fixed amounts under the German Social Security Code (SGB V) constitutes a
sovereign act.

5 Du¨ sseldorf Regional Court, judgment of 20 March 1998, 38 O (Kart) 126/97 P-179/097

Is Internet Services GmbH & Co. KG Hamburger, Hamburg

Deutsche Telekom AG, Du¨ sseldorf

DTAG’s ‘T-InterConnect’ tariff does not infringe Section 26(2) of the GWB or Article 82 EC, as
DTAG does not hold a dominant position on the market for Internet access services only
(disregarding on-line services).

6 Leipzig Higher Regional Court, judgment of 8 April 1998, 7 U 2980/97 P.092/98

Fernwasserversorgung Elbaue-Ostharz GmbH, Torgau

Magdeburger Wasser-und Abwassergesellschaft mbH i.L; Magdeburg

The regional water distribution body is not entitled to ask water distribution firms to reimburse
payments made under the water supply contract (Section 22 of the GWB in conjunction with
Article 138 of the Civil Code; Sections 22(4) and (5) and 103 of the GWB; Article 82 EC read in
conjunction with Article 134 of the Civil Code).

7 Nuremberg-Fu¨ rth Regional Court, judgment of 22 April 1998, 3 O 11298/95 P-004/96

Michael Wolf Spedition, Straubing

Zweckverband Abfallwirtschaft Straubing Stadt und Land, Straubing

The services contract concluded in connection with the Duales System for the setting-up and
operation of a system for collecting and sorting waste commercial packaging infringes Section 1 of
the GWB and Article 81 EC.

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THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 351

8 Hanover Regional Court, judgment of 23 April 1998, 21 O 146/96 (Kart) P-175/96

Autohof Bismark GmbH, Mu¨ nster

HDI Haftpflichtverband der Deutschen Industrie VVaG, Hanover

No injunction can be granted against an insurer which, in respect of replacements for crashed
vehicles, charges for its services on the basis of its own price lists, as the applicant is not subject to
the legal provision in question.

9 Du¨ sseldorf Regional Court, judgment of 29 April 1998, 12 O (Kart) 95/97 P-057/97

Langnese-Iglo GmbH, Hamburg

Kioland GmbH & Co. KG. Mu¨ hlheim, and others

Incitation to breach of contract by the defendant, who had caused kiosque operators to terminate
their contract by wrongly stating that the contracts they had concluded with the defendant infringed
competition law (Article 1 of the German law on unfair competition — UWG; Articles 81 and 82
EC; Commission Regulation No 83/1984).

10 Munich Regional Court I, judgment of 29 April 1998, 7 HKO 17070/96 29.04.1998

HEI. A Kosmetik Handels GmbH & Co. Parfu¨ merie KG; Munich

Calvin Klein Cosmetic Vertriebs GmbH, Wiesbaden

The applicant has a right to be supplied with cosmetic products under the warehouse supply
contract habitually concluded between the defendant and retailers (Article 81(1) EC read in
conjunction with Article 823(2) and the first sentence of Article 249 of the Civil Code).

11 Munich Regional Court, judgment of 7 May 1998, 4 HKO 11297/97 P-119/97

Agip Dt AF u. weit. Mineralo¨ lges, in GbR Tankdienst-Ges, Munich

Flughafen Mu¨ nchen GmbH, Munich

Neither Article 82 EC nor Section 26(2) of the GWB authorises the applicant to replace a provider
of ‘into-plane’ services or to act as an additional provider of handling services at Munich airport.

12 Federal Court of Justice (Bundesgerichtshof), judgment of 12 May 1998, KZR 23/96 3/95

City Parfu¨ merie Ju¨ rgen Rathjen GmbH, Munich

Biotherm Kosmetik GmbH, Bonn

The protection provided by Article 81(1) EC read in conjunction with Article 823 of the Civil Code
does not guarantee a right of supply. The Federal Court of Justice delivered judgment on the
relevance of precontractual conduct to a right to be supplied with cosmetic products (Section 26(2)
read in conjunction with Section 35 of the GWB).

13 Federal Court of Justice, judgment of 12 May 1998, KZR 25/96 P-061/95

Zentral-Droguerie Meidinger GmbH, Munich

Biotherm Kosmetik GmbH, Bonn

The protection provided by Article 81(1) EC read in conjunction with Article 823 of the Civil Code
does not guarantee a right of supply; similarly, Section 26(2) read in conjunction with Section 35 of
the GWB does not give the applicant the right to be supplied as he is not dependent on a particular
range of products and/or leading manufacturers.

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14 Federal Court of Justice, judgment of 12 May 1998, KZR 24/96 P-044/91

City-Parfu¨ merie Ju¨ rgen Rathjen GmbH, Munich

Deutsche Lancoˆ me GmbH, Bonn

The protection provided by Article 81(1) read in conjunction with Article 823 of the Civil Code
does not guarantee a right of supply; the Federal Court of Justice delivered judgment on the
relevance of precontractual conduct
to be supplied with cosmetic products
(Section 26(2) read in conjunction with Section 35 of the GWB).

to the right

15 Du¨ sseldorf Higher Regional Court, judgment of 16 June 1998, U (Kart) 15/97 P-178/96

1. British Telecommunications plc. London/GB; 2. VIAG Interkom GmbH & Co.

1. Deutsche Telekom AG Bonn; 2. ATLAS Deutschland

The defendants, whose joint venture ‘Global One’ had started trading before the Commission
exemption decisions entered into force, were ordered to pay compensation to the applicants
(Article 81 EC).

16 Rostock Regional Court, judgment of 2 July 1998, 3 O 284/97 P-147/97

Stadtwerke Neustrelitz GmbH, Neustrelitz

EMO Energieversorgung Mu¨ ritz-Oderhaff AG, Neubrandenburg

The applicant may not obtain a reduction in long-term electricity prices agreed with the defendant
after the acquisition of the local electricity distributor by the latter (Sections 26(2) and 35 of the
GWB, Articles 81, 82 and 86 EC).

17 Du¨ sseldorf Higher Regional Court, judgment of 11 August 1998, U (Kart) 3/98 P-042/98

Hetzel GmbH & Co. KG, Rudersberg-Steinenberg

Duales System Deutschland GmbH, Cologne

Validity of a licensing agreement which provides that use of the ‘Green Dot’ must be subject to
payment of a fee, also in the case of packaging not sold to individuals and small firms (Section 26(2)
of the GWB, Article 81 EC).

18 Du¨ sseldorf Regional Court, judgment of 28 August 1998, 38 O 84/97 (Kart) P-108/97

Intersan, Institut f. pharm. u klin. Forschung GmbH, Ettlingen

AOK Bundesverband, Bonn, and other central sickness insurance funds

No injunction can be granted for breach of Articles 81 and 82 EC in respect of the determining of
fixed sums as the applicant is not concerned by trade between Member States and the defendant is
not an undertaking (Articles 81 and 82 EC, Articles 1004 and 823 of the German Civil Code,
Section 1 of the Law on unfair competition).

19 Du¨ sseldorf Higher Regional Court, judgment of 28 August 1998, U (Kart) 19/98 P-054/98

Procter & Gamble GmbH, Schwalbach am Taunus

AOK Rheinland, Du¨ sseldorf

The medical supplies manufacturer was successful in its action to prevent central sickness insurance
funds from determining a fixed amount (Articles 823(2) and 1004 (by analogy) of the Civil Code,
read in conjunction with Article 81(1) and (2) EC; injunction).

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THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 353

20 Du¨ sseldorf Regional Court, judgment of 28 August 1998, 38 O 74/97 (Kart) P-097/97

Go¨ decke AG, Berlin
AOK Bundesverband, Bonn, and other central sickness insurance funds
The applicant may not compel central sickness insurance funds (defendant) not to adjust the fixed
amount, as the defendant is not an undertaking and the applicant is not statutorily affected
(Article 81 EC read in conjunction with Section 35 of the GWB and Articles 823 and 1004 of the
Civil Code); leave to appeal.

Austria

In 1998 the decisions of the courts were of decisive importance to the application of competition law. A
judgment by the Constitutional Court (Verfassungsgerichtshof) had the effect of abolishing a provision
of the law on pharmacies which regulates the number of new pharmacies according to the number of
inhabitants on the ground that the requirement was contrary to the freedom to pursue an occupational
activity. The judgment should lead to greater competition in the pharmacy sector.

The Korneuburg Regional Court (Landesgericht) handed down a criminal law decision in a case of
fraud in public works contracts and price fixing: it was able to prove that the fraud had caused direct
harm amounting to several million schillings. Through the decision, the penalties in force for cases of
fraud (up to ten years of imprisonment and payment of damages) were also applied to the price-fixing
cartels, thus effectively strengthening competition law. The Vienna and Korneuburg public prosecution
departments instituted proceedings against price-fixing cartels created for invitations to tender for
public works contracts: a building firm had been illegally obtaining or purchasing lists of tendering
firms, approaching potential competitors and then increasing the prices. The firms not selected
received payments amounting to 1% of the transaction, financed by bogus invoices. When the financial
police carried out on-the-spot investigations simultaneously in over 80 firms, documents were found
containing, before the end of the tender deadline, the names of tenderers and the amounts of their bids.
Other documents showed that the building firm in question, SBG, had calculated the amount of
building bids on behalf of competitors. In all, 22 persons were committed to trial. The director of SBG
was sentenced to seven years imprisonment for fraud and was fined ATS 30 million; non-payment of
the fine entails a possible extra year of imprisonment.

The persons who supplied lists of tenderers were given suspended prison sentences of between six and
eight months for breach of confidentiality. None of the sentences has as yet been enforced. The injured
municipalities demanded repayment of damages by the tenderers; substantial amounts have already
been paid. The lawyers for the entrepreneurs concerned claimed that fraud was not at issue in this case
but rather a failure to comply with the law on restrictive agreements, which at the most would incur a
penalty of 360 day-fines. The prosecutor’s office replied that, in cases of agreements between firms
concerning public contracts, tenderers would be misled into believing that competition existed; if such
cartels or agreements became public knowledge, the tendering procedure was cancelled and the firms
concerned were usually removed from the list of approved entrepreneurs. As a result, to the extent that
the existence of injury could be proved, fraud had been committed and the perpetrator was liable to a
period of imprisonment of up to 10 years.

Several cases before the national (commercial) courts concerned the direct application of Article 81
and/or Article 82 of the EC Treaty to motor vehicle distribution agreements. In its Decision 4Ob165/98
of 30 June 1998, the Supreme Court (Oberster Gerichtshof) held that a leasing company belonging to
an automotive group with a market share in excess of 20%, which concluded maintenance contracts
involving some 8 000 vehicles, did not have a dominant position as regards the repair of its vehicles, and

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354 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

that the cancellation of orders given to a firm which was no longer a member of the vehicle distribution
system did not constitute a boycott.

Other proceedings concerned the direct application of Articles 81 and 82 of the EC Treaty (e.g. OBH
2Ob237/98 of 24.9.1998, Lotto-Totto sales point), although the courts considered that there was no
evidence of abuse of a dominant position. The case concerned a firm holding a monopoly which had
refused to provide a newsagent with the on-line equipment needed to register lottery tickets.

In a case concerning the refusal of a film distribution company in a dominant position to supply a
cinema, the reasoning concerned inter alia Article 82 of the EC Treaty, together with the accepted
principle of morality within the meaning of the law on unfair competition (4Ob214/97). The court
concluded that the refusal to supply was in itself an infringement of the law on unfair competition.

France

Two judgments delivered by the Court of Cassation, which uphold the case-law of the Court of Justice,
are noteworthy.

In the first case, 260 the Court applied the case-law of the Court of Justice of 17 February 1993 in
Camulrac and Cancava, according to which Organic, a body managing the recovery of the social
contribution to the solidarity fund (CSG), fulfils a purely social function and is therefore not an
undertaking within the meaning of Articles 81 and 82.

In the second case, 261 the Court of Cassation upheld the application by the Paris Court of Appeal of
the de minimis rule in proceedings concerning a supplier of luxury products and its vertical distribution
agreement. The supplier held a market share amounting to only 0.5%. The Court of Cassation found
that the fact that the contract had not been notified to the Commission was not relevant to the
lawfulness of the contract under Article 81.

In 1998, the Council of State did not annul any administrative decisions or contracts on the basis of the
Community competition rules. In a judgment dismissing a case, 262 however, the Council upheld its
case-law on the inclusion of those rules in the body of law guaranteed by the administrative courts.

Italy

1)

Decisions of national courts:

In its judgment No 791 of 11 July 1998 (relating to the tariffs of the national Bar Council (Consiglio
Nazionale Forense), the Turin Court of Appeal (Corte d’Appello di Torino) annulled the tariff of legal
fees which, in accordance with the law, had been drawn up by the Bar Council and approved by
Ministerial decree, on the ground that it was contrary to Articles 10 and 81(1). The Court of Appeal
had in particular considered, on the basis of the Court of Justice judgment in Case C-35/96
(Commission v Italian Republic) (customs agents), that the activity of lawyers falls within the concept

260 Social Division of the Court of Cassation, 5 February 1998, Organic.
261 Commercial Division of the Court of Cassation, judgment of 13 January 1998 Gift Shop v Boucheron
262 Judgment of the Council of State of 1 April 1998 in Union Hospitalie`re prive´e v Intersyndicale des Etablissements

d’hospitalisation prive´e.

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THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 355

of undertaking for the purposes of the application of Article 81(1) of the Treaty and regarded the
national Bar Council as an association of undertakings.

2)

References for preliminary rulings:

In 1998, four orders for references to the Court of Justice for preliminary rulings under Article 234 of
the EC Treaty were adopted. They concerned the compatibility of national rules or of the conduct of
certain firms with Articles 81, 82 and 86 of the Treaty. 263

One of the cases concerned was a question by the Turin Court of Appeal concerning the applicability
of Article 82 of the Treaty to motor vehicle manufacturers exercising industrial and intellectual
property rights over their own spare parts.

Netherlands

The Dutch courts applied Community competition law in the following decisions. It should be noted
that, even where the Dutch courts apply the new Competition Act, they interpret Articles 81 and 82 as
the Dutch act is based on the Community competition rules.

— President of the Arnhem District Court (Rechtbank Arnhem), order of 1 April 1998, Schuurmans v

Banken Champignons BV

Application for interim measures; non-compete clause in a contract for the acquisition of a
mushroom and asparagus business; no incompatibility with Article 81(1); under Article 2 of
Regulation No 26, Article 81(1) is not applicable to such agreements.

— President of the Rotterdam District Court (Rechtbank Rotterdam), order of 1 April 1998 in
Onderlinge Waarborgmaatschappij Zorg en Zekerheid v Theo de Graaf Brillen en Contactlenzen BV

Application for interim measures; the healthcare insurer can in this case be regarded as an
undertaking under Article 81(1) as, in addition to its statutory objects, it provides supplementary
insurance; the fact that it operates on the basis of statutory terms of reference is irrelevant in this
respect.

— President of the Leeuwarden District Court (Rechtbank Leeuwarden), order of 9 April 1998 in

Beheer Miedema BV v Kapenga Beheer BV

the agreement (protection of a sector) is
Application for interim measures; notion that
incompatible with Article 81(1); the relevant market is at most a part of Leeuwarden; Article
81, which served as model for Article 6 of the Competition Act, concerns a geographic market of a
certain size; it is clear from the case-law of the Court of Justice that Article 81(1) does not cover
every geographic market, however small.

263 Turin Court of Appeal, order of 19.11.1997-16.1.1998; Lombardy Regional Administrative Court, order of
28.1.1998-23.6.1998; Florence District Court, order of 20.6.1998; Genoa Court of First Instance, order of
26.9.1998.

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356 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

— Arnhem Court of Appeal (Gerechtshof Arnhem), judgment of 14 April 1998 in Coenders v Louis

Nagel
Application for interim measures; block exemption for exclusive distribution agreements
(Regulation No 1983/83) makes it possible to require a reseller not to distribute competing
products; Article 2(2)(a) is not applicable as it concerns competing products of other brands;
Article 2(2)(b) is not applicable either because the contract goods are, in this case, only new
products; the ban on importing recent, second-hand tractors under an exclusive resale agreement is
consequently not covered by the block exemption.

— Groningen Magistrates Court (Kantongerecht Groningen), judgment of 20 May 1998 (interlocutory

judgment of 4 February 1998), Hendrik van der Woude v Stichting Beatrixoord
Collective agreement for hospitals; the applicant considers that the provision which prohibits
exceptions to the agreement in conjunction with the provision that employees are entitled to
sickness benefits from the employer only if they are insured by the insurer specified in the
agreement, is incompatible with Article 81(1). The Court referred the matter to the European
Court of Justice for a preliminary ruling since, in order for it to deliver a judgment, it was necessary
to know whether the insurer could be regarded as an undertaking within the meaning of Article
81(1).

— Utrecht District Court (Rechtbank Utrecht), judgment of 17 June 1998, WAC Centraal Bureau BV v

Toonen
Application made under a scheme notified to the Commission for exemption. The Court
considered it possible that the scheme could be exempted under Article 81(3) but would await the
Commission’s decision.

— President of

the ’s Hertogenbosh District Court (Rechtbank ’s-Hertogenbosch), order of

19 June 1998, MTV Europe v Combivisie Regio
Application for interim measures: dispute between a programme supplier and a cable operator;
finding that the various cable operators in the Netherlands hold a collective dominant position
under Article 82; in this case, the cable operator is not abusing its dominant position.

— Amsterdam Court of Appeal (Gerechtshof Amsterdam), judgment of 9 July 1998, Van der Neut

(Neutrol) v Primagaz
Application for interim measures; exclusive purchasing clause; there is no agreement within the
meaning of Article 81(1); the clause exists only in agreements with consumers, the end users, who
are not undertakings within the meaning of Article 81(1).

— President of the Arnhem District Court (Rechtbank Arnhem), judgment of 17 September 1998,

Heineken Nederland BV v Mega Company and others.
Application for interim measures; block exemption for exclusive purchasing agreements
(Regulation No 1984/83) is not applicable as there are no particular economic or financial
advantages for the reseller; the restriction of competition resulting from the ten-year exclusive beer
tie is not justified.

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THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 357

— Amsterdam District Court (Rechtbank Amsterdam), judgment of 30 September 1998, Free Record
Shop BV v Koninklijke Vereeniging ter Bevordering van de Belangen des Boekhandels (KVB)

Temporary validity of the KVB rules notified prior to 1 November 1962 with a view to exemption
under Article 81(3); following amendments to the rules, questions were referred to the Court of
Justice, for a preliminary ruling, which was given on 24 April 1997. The District Court then
concluded that, for the rules no longer to retain their provisional validity, two criteria should be
met: 1) the amendments should have the effect of limiting, reinforcing or extending the restrictions
of competition; and if that were the case, 2) the amendments could not be regarded as introducing
new restrictions severable from the agreement and not affecting its essential structure. As the last
criterion was not met in the case in point, the rules remain in force provisionally.

— Trade and Industry Appeals Tribunal (College van Beroep voor het Bedrijfsleven), judgment of

7 October 1998, Stolp International BV v Productschap Tuinbouw

The decision of the Productschap 264 to impose advertising taxes is not incompatible with Article
81(1) because decisions to conduct impersonal advertising campaigns for certain products must not
be regarded as prohibited by Article 81(1). Accordingly, the judgment does not rule on whether a
Productschap is an undertaking within the meaning of Article 81(1).

— Supreme Court (Hoge Raad), judgment of 20 November 1998, Johnson Wax GmbH v Novem

Trading International BV

Exclusive distribution agreement; the agreement is not inherently incompatible with Article 81(1)
as it qualifies for (block) exemption under Regulation No 1983/83 or under Article 81(3); a clause
which prohibits the sale of the relevant products three months after termination of the agreement
does not, in the case in point, constitute one of the restrictions exempted in Article 2(2) of
Regulation No 1983/83.

United Kingdom

In 1998 the Court of Appeal heard two cases involving beer ties: Trent Taverns Ltd v Sykes and
Gibbs Mew plc and Centric Pub Company Ltd v Graham Gemmell. In both cases the tenants of tied
houses sought unsuccessfully to persuade the Court that the agreements in question were caught by
Article 81(1) and thus rendered void.

D — Application of the 1993 notice on cooperation between the

Commission and national courts

An account follows of replies given before 1998 but not reported in the 1996 265 and 1997 266
Competition Reports, in response to questions raised by national courts under the 1993 notice on

264 ‘Productschappen’ are producers’ trade organisations with certain economic powers in their sector. They are

essentially to be found in agriculture.

265 see pp. 338-340.
266 see pp. 350-351.

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358 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

cooperation between national courts and the Commission in applying Articles 81 and 82 of the EC
Treaty. 267, 268

The first case concerns a reply dated 1 August 1996 given by the deputy Director-General of the
Directorate-General for Competition to questions put by the Vice-President of the Commercial Court
of Brussels. The information was sought in connection with a dispute between a distributor of
parapharmaceutical products and a manufacturer of parapharmaceutical and pharmaceutical products,
together with a professional association of pharmacists. The reply was in response to a request referred
by the Court on 26 June 1996 and forwarded to the Commission through the parties, a mode of
transmission provided for in the Notice (point 42). The Commercial Court was primarily seeking
information on procedure, namely whether the Commission intended to institute proceedings against
the producer following a complaint by the distributor. It also sought the opinion of the Commission on
the compatibility with Article 81 of an alleged agreement between the manufacturer and the
association of pharmacists, under which the former expressed a wish for its products to be distributed
exclusively in pharmacies. In its reply, the Commission stated that the parapharmaceutical products
distributor had also complained to the Commission about the producer and the association of
pharmacists. The complaint also concerned alleged collusion between manufacturers of parapharma-
ceutical products and a professional association of pharmacists, on the one hand, and between the
manufacturers and pharmacies on the other, which was aimed at preventing or restricting the sale in
Belgium of parapharmaceutical products except in pharmacies. The reply also stated that, to enable the
Commission to obtain the full facts of the alleged collusion and its context, it had been necessary to
undertake investigations on 26 and 27 June 1996 under Article 14(3) of Regulation No 17. The
documents obtained during the investigations were being examined. It concluded that, should the
existence of such agreements be proven, they and/or the practices could constitute an infringement of
Article 81(1), in accordance with the judgment of the Court of First Instance in Vichy (judgment of 27
February 1992 in Case T-19/91).

In the second case, the Director-General for Competition replied on 8 April 1997 to a request dated 17
March 1997 made by the Spanish Chamber for Contentious Administrative Proceedings of the
National High Court. In its request, the Court hoped that the Commission could provide it with copies
of agreements examined in similar cases to that currently before it and also with information on the
existence of files relating to the agreements. The requests were made in connection with an appeal by a
sports federation, supported by a television channel, against a decision of the Competition Court which
found that the Spanish law on competition (Law No 16/1989) had been breached by an agreement on
the television broadcasting rights to certain sporting events organised by the federation concerned. In
his reply, the Director-General noted that the agreements referred to by the National High Court were
not directly linked to the case forming the subject of the ongoing appeal. There was therefore a
problem of confidentiality. The Director-General as a result provided the court with a copy of the
notices published in the Official Journal pursuant to Article 19(3) of Regulation No 17 in similar cases,
and the press statement published when those cases ended. He pointed out that the cases had been
dealt with by comfort letter under Article 81(3) and that they were exempted on the ground that the
television channel enjoying exclusive retransmission rights in the country in question had just been
launched on the market (a new market at that time) for direct broadcasting by satellite, which justified
relatively long-term exclusive rights in order to facilitate its entry onto the market. As regards other
cases concerning contracts involving the acquisition of sports retransmission rights, the Director-
General stated that the notification of the agreement between the sporting federation of another

267 OJ C 39, 13.2.1993.
268 With the summary of the replies provided in the 1994 Competition Report (point 51) and this summary, all the

replies given to date appear in the annual reports on competition policy.

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THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 359

Member State and a television channel had not resulted in any definite position being adopted by the
Commission as, following the bankruptcy of that channel, the retransmission rights had been sold to
other television companies operating in that Member State.

In 1998 the Directorate-General for Competition replied to four questions raised by national courts
under the 1993 notice.

Firstly, on 4 August, the Director of Directorate A (competition policy, international affairs and
relations with other institutions) replied to a letter dated 14 July 1997 from the Registrar of the
’s Hertogenbosch Court of Appeal. The letter contained questions asked in connection with a dispute
between a farmer and an agricultural cooperative. The farmer considered that his exclusion from the
cooperative was contrary to Article 81(1) of the Treaty and Article 2(1) of Council Regulation No 26.
The court first requested factual information concerning the structure of the livestock market (cattle
and pigs) and the meat market. It was sent two reports on the situation in the European Union of the
markets for beef and pigmeat. The long delay in answering the court was due to the delay in the
anticipated date of adoption of the latter report, which was finally approved on 29 July 1998. The court
also asked whether the Commission had initiated an investigation into the compatibility of the statutes
of the cooperative in question with Article 81(1) of the Treaty or whether it intended to undertake an
investigation. The reply given was in the negative; the Commission had formed a preliminary opinion
of the compatibility of the disputed statutes with Article 81(1) and, on the basis of its assessment, was
not planning an investigation. Lastly, the Dutch court sought the Commission’s opinion on the
compatibility of the statutes with Article 2(1) of Regulation No 26. It also asked the Commission to
provide it with criteria for the application of the provision to enable it to judge the dispute without any
danger of infringing on the decision-making powers of the Commission. In reply, the Commission
stated that, as it had not begun an investigation into the compatibility of the statutes in question with
Article 81(1),
it was not in a position to decide whether they complied with Article 2(1) of
Regulation No 26. As regards the criteria for the application of that article, the Commission pointed
out first that, if the nullity of a provision of the statutes of an agricultural cooperative for breach of
Article 81(1) was sought in a case before a national court, and if the cooperative invoked Article 2(1)
of Regulation No 26, the national court may rule that the disputed provision is null and void under
Article 81(2) if it is clear that the provision is not compatible with Article 81(1) and does not satisfy the
conditions to benefit from Article 2(1) of Regulation No 26 or for exemption under Article 81(3). It
pointed out that, in the present case, the cooperative could not invoke the first category of exemption
in Article 81(1), provided for in Article 2(1), namely that the provision in question formed part of a
national market organisation, owing to the existence of a common organisation of the market in
pigmeat. As regards the second exemption provided for in Article 2(1), namely that the provision was
needed in order to achieve the aims of the common agricultural policy set out in Article 33 of the
Treaty, the Commission replied that no answer was required if the statutes qualified for exemption
under the second sentence of Article 2(1) of Regulation No 26. The Commission set out its reasoning,
based on the case-law of the Court of Justice 269 and on its own decision-making practice.

On 3 December, the competent Director provided the information requested on 30 September by the
President of the Commercial Court of Paris and the President of Chamber, responsible for Community
law, of that court. The request followed several legal actions instituted by wholesalers against the stock
management system used by a major pharmaceuticals producer, a system which the wholesalers
regarded as contrary to Article 81. Having learnt that the system had been notified to the Commission,

269 Case 61/80 Stremsel-en Kleurselfabriek [1981] ECR 851, at paragraphs 12 et seq.; Case C-399/93 Oude Luttikhuis
[1995] ECR I-4515, at paragraphs 28 and 31; Commission decision of 23 December 1992, OJ No L 183, 26.7.1993;
the Campina case, 1991 Competition Report, points 83-84.

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360 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

the Commercial Court wished to know, if not the outcome of the notification, then at least the
probable time it would take to respond to the notification. If the response were not to be given before
the end of 1998, the court requested clarification concerning established practice as regards the
Community law in question. In reply, the Commission confirmed that it had been notified of the
system, which was applicable to the leading pharmaceutical products of the manufacturer in question.
It had also received complaints about the system from wholesalers in several Member States. The
Commission explained that it was actively examining the notification in question and the relevant
complaints, but that for the time being it was not possible to predict when it would be in a position to
adopt a decision. It noted that, in this context, its Decision 96/478/EC (Adalat, OJ L 201, 9.8.1996) had
dealt with several legal questions which could also arise in the case in point, and that the decision was
pending before the Court of First Instance. As regards established policy regarding the relevant
Community law,
the competent Director drew attention to certain competition cases in the
pharmaceuticals sector. These were the above-mentioned Adalat decision, Decision 80/1283/EEC
(Johnson & Johnson, OJ L 377, 31.12.1980), Decision 87/409/EEC (Sandoz, OJ L 222, 10.8.1987),
upheld by the Court of Justice in Case 277/87 ([1990] ECR I-45), and the Organon case, terminated
without a formal decision as the firm concerned had ended its behaviour contrary to Article 81
following a statement of objections (1995 Competition Report, points 37-38). It also referred to certain
cases concerning the application of Article 28 of the Treaty, in particular Joined Cases C-267/95 Merck
& Co. Inc. and others v Primecrown Ltd and C-268/95 Beecham Group plc v Europharm of Worthing
Ltd ([1996] ECR I-6285), and Case 16/74 Centrafarm BV and Adriaan de Peijper v Winthrop BV
([1974] ECR 1183).

On 22 December, the competent Director provided the Court of First Instance of Madrid with the
information requested by the latter in a letter of 16 June. The court was dealing with a dispute between
an oil company and the manager of a petrol service station. In order to deliver judgment, the court had
asked the Commission whether it had examined the compatibility of the contract with Regulation
No 1984/83. It had also requested a complete copy of the file compiled by the Commission concerning
the notification of certain service-station contracts by the oil company. In his reply, the Director stated
that, following changes to the contracts to bring them into line with Community rules, the proceedings
instituted in 1993 in respect of the contracts had been terminated in June 1994. He specified that the
manager of the service station in question had received a letter dated 1 March 1994, sent on 18 March,
which modified the method of calculating the duration of the contract. The Director also stated that
sending a complete copy of the notification file, consisting in this case of eight volumes, was not a
customary form of cooperation with national legal authorities. But he said he was prepared to respond
to further requests from the Spanish court to the extent allowed by administrative diligence and taking
the necessary precautions to protect any confidential aspects contained in the information requested.

On the same day, the Director answered questions put by the Baeza Court of First Instance in
connection with a dispute of a similar nature concerning the compatibility of a service-station contract
with Regulation No 1984/83. The Director noted that the manager of the service station had not
received a letter modifying his contract with the oil company following the modification of certain
contracts of this type in June 1994. He noted, however, that the contract already appeared to
correspond to modifications introduced by the standard letter notified to other service-station
managers. He also considered that, as one of the aims of the block exemption regulations was to
facilitate the application of Article 81 by national courts, the court was in possession of all necessary
facts to rule on the compatibility of the contract with Regulation No 1984/83. Lastly, as regards the
question of forwarding a complete copy of the file concerning the oil company, his reply was the same
as that given to the Madrid Court of First Instance.

COMPETITION REPORT 1998

THE APPLICATION OF COMPETITION RULES IN THE MEMBER STATES 361

Annex

Application of Articles 81 and 82 by national competition authorities

Opening remarks:

1.
The present summary relates only to the enforcement of Articles 81 and 82 of the EC Treaty by
the administrative authorities of the Member States, not by the judiciary, as those articles are directly
applicable and are therefore enforceable by the courts of each Member State without exception.

Their application by the administrative authorities is subject to the limitations provided for, in

2.
favour of the Commission, by Article 84 of the Treaty and Article 9(3) of Regulation No 17.

APPLICATION
YES/NO

SOURCE OF LAW / ADDITIONAL DETAILS

AUSTRIA

BELGIUM

NO

YES

DENMARK

FINLAND

NO

NO

FRANCE

YES

GERMANY

YES

GREECE

YES

IRELAND

ITALY

NO

YES

LUXEMBOURG NO

THE
NETHERLANDS

YES

COMPETITION REPORT 1998

Law of 5.8.1991, Art. 53, effective from 1.4.1993: when the Belgian
authorities have to decide, under Art. 84 of the EC Treaty, on the
admissibility of agreements and on abuse of a dominant position in the
common market, the decision is taken by the authorities stipulated in that
Law pursuant to Articles 81(1) and 82 of the Treaty, according to the
procedure and the penalties provided for in that Law.

The working group established by the Ministry of Commerce and Industry
opted out of this possibility (report of January 1997)

Order I.12 1986, Art. 56bis (inserted by the Act of 2.12.1992).
Under the Order, the Minister for Economic Affairs and Ministry officials
on the one hand and the ‘Conseil de la Concurrence’ (Competition
Council) on the other, have the powers to apply Articles 81 and 82 that
they normally have to apply French competition law.

GWB (Gesetz gegen Wettbewerbsbeschra¨ nkungen), Article 47
In order to exercise the powers conferred on the authorities of the Member
States by Articles 84 and 85 of the EC Treaty, and by the regulations based
on Article 83 of the Treaty, the ‘Bundeskartellamt’ is competent as regards
the application of the GWB.

Nomos (Act) 703/1977 peri prostassias tou elephterou antagonismou (on
the protection of free competition), as amended by Article 13b(3) of
Nomos (Act) 2296/1995: the Competition Commission and its Secretariat
perform the tasks which have been assigned to the national authorities of
the Member States by Articles 84 and 85 of the Treaty establishing of the
European Economic Community, and by regulations adopted pursuant to
Article 83 of the Treaty in conjunction with other enabling provisions
thereof. To perform these tasks the Competition Commission and its
Secretariat have the powers granted to them under the present Act.

Legge comunitaria 1994, Article 54(5) : The ‘Autorita` garante della
concorrenza’ applies Articles 81(1) and 82, using the powers conferred
law on competition (Act No 287 of
upon it by the national
10 October 1990).

Competition law (‘Mededingingswet’) of 22 May 1997, Article 88: the
Director General of the Competition Authority (‘Mededingingsautoriteit’)
is empowered under the regulations based on Article 83 of the EC Treaty
to apply Articles 81(1) and 82 of the Treaty.

362 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Decreto-lei 371/93, de 29 de Outubro, Article 12(2): the Directorate
General for Competition and Prices is empowered to carry out the tasks
for which the authorities of the Member States are responsible under the
regulations based on Article 83 of the EC Treaty.

‘Real Decreto 295/1998, de 27 de febrero’ regarding the application in
Spain of the European competition laws:
Art. 1: ‘El Tribunal de Defensa de la Competencia’ is the competent
authority for the application in Spain of Articles 81(1) and 82 of the EC
Treaty.
Art. 3: ‘El Servicio de Defensa de la Competencia’ is the body entrusted
with carrying out the procedures for implementing Articles 81(1) and 82 of
the EC Treaty.

PORTUGAL

YES

SPAIN

YES

SWEDEN

UNITED
KINGDOM

NO

NO

Conclusions

Of the 15 Member States, eight administrative authorities of those Member States can directly

1.
apply Articles 81 and 82, whereas seven cannot.

2.
The eight which can are Belgium, France, Germany, Greece, Italy, the Netherlands, Portugal
and Spain. The seven which cannot are Austria, Denmark, Finland, Ireland, Luxembourg, Sweden and
the United Kingdom.

COMPETITION REPORT 1998

VI — STATISTICS

A — Articles 81, 82 and 86 of the EC Treaty + Article 65 of the ECSC Treaty

STATISTICS 363

1. Activities in 1998

1.1. New cases opened during 1998

Type

Notifications

Complaints
Ex officio 270

TOTAL

Number

216

192

101

509

%

42

38

20

100

1.2. Cases closed during 1998

By formal decisions

Infringement of Article 82 with fine

Exemption

Rejection of complaint

Non-opposition

By informal procedure

1

0

Comfort letter 81(1)

Comfort letter 81(3)

24 Rejection of complaint

7 Administrative closure

Infringement of Article 65 ECSC

1 Discomfort letter

Article 86 decision

TOTAL

9

42

TOTAL

77

75

100

278

9

539

2. Four-year overview

2.1. Evolution of stock of cases

Cases open at the end of the calendar year

Notifications

Complaints

Ex officio

TOTAL

95

625

371

121

96

726

368

127

97

589

450

223

1 117

1 221

1 262

98

538

441

225

1204

270 An ex-officio case is one opened on the Commission’s own initiative.

COMPETITION REPORT 1998

364 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

2.2. Evolution of input

New cases registered during the year

Notifications

Complaints

Ex officio

TOTAL

2.3. Evolution of output

Cases closed during the year

Formal decisions

Informal procedures

TOTAL

B — Merger Regulation

1. Notifications received

95

360

114

47

521

95

14

403

417

96

206

159

82

447

96

21

367

388

97

221

177

101

499

97

27

490

517

Cases notified

Notifications withdrawn

Total cases closed by final decision

94

95

6

91

95

110

4

109

96

131

6

125

97

172

9

142

2. Article 6 decisions

98

216

192

101

509

98

42

539

581

98

235

9

238

94

95

96

97

98

Article 6(1)(a)

Article 6(1)(b)

Article 6(1)(c)

TOTAL

Cases in which undertakings ac-
cepted during phase 1

3. Article 8 decisions

5

80

6

91

2

5%

88

7

9

93

7

8%

85

7

100

109

100

121

100

6

5%

4

3%

6

3%

109

6

90

5

0

89

8

100

120

11

135

2

92

5

100

219

12

237

12

Article 8(2) with conditions and
obligations

Article 8(2) without conditions
and obligations

94

2

2

40%

40

95

42%

29

96

3

1

43%

14

97

7

1

78%

11

98

5

2

56%

22

COMPETITION REPORT 1998

3

3

2

1

5

20

100

2

7

29

100

3

7

43

100

STATISTICS 365

11

100

1

9

2

22

100

2

9

0

94

1

94

12

1

2

95

0

95

12

2

2

96

3

96

17

3

5

97

7

1

97

36

5

17

98

4

98

10

13

20

Article 8(3) prohibition

TOTAL

Article 8(4) divestiture orders

Article 8(5) revocation of pre-
viously approved decisions

4. Referral decisions

Article 9 (to a Member State)

Article 22(3) (to the Commission)

5. Procedural decisions

Article 7(2) continuing suspensive
effect

Article 7(4) terminating suspensive
effect

Article 4(2) Regulation 2367/90
notification declared incomplete

C — State aid

1. New cases registered in 1998

Agriculture Transport

Fisheries

Coal

Other

TOTAL

Notified aid N

Non-notified-
aid

NN

Existing aid E

Total

276

32

0

308

34

10

0

44

45

7

0

52

6

0

0

6

342

97

5

444

703

146

5

854

82.32 %

17.10 %

0.58 %

100 %

36.06 %

5.15 %

6.09 %

0.70 %

52 %

100 %

2. Cases being examined as at 31 December 1998

Agriculture Transport

Fisheries

Coal

Other

TOTAL

Notified aid N

Non-notified-
aid

NN

Existing aid E

125

102

24

14

12

2

19

15

0

3

0

0

130

78

9

291

207

42 67 %

30 35 %

35

5 13 %

COMPETITION REPORT 1998

366 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Initiationpro-
cedures

C

Total

55

306

14

42

4

38

0

3

76

293

149

21 85 %

682

44 87 %

6 16 %

5 57 %

0 44 %

42 96 %

100 %

3. Cases dealt with in 1998 according to the register in which they were recorded

3.1. Cases closed by Commission decision

Agriculture Transport

Fisheries

Coal

Other

TOTAL

Notified aid

Non-notified aid

Existing aid

Procedures under way

Total

N

NN

E

C

207

17

2

38

264

22

9

0

4

35

38

0

0

0

38

3

0

0

0

3

317

86

3

65

471

587

112

5

107

811

3.2. Cases removed from Commission registers

Agriculture Transport

Fisheries

Coal

Other

TOTAL

At request of Member State

De minimis

Other

Total

13

0

30

43

5

0

8

13

1

0

5

6

0

0

0

0

81

7

26

114

100

7

69

176

The number of cases dealt with is larger than the number of Commission decisions because decisions
often cover more than one case.

COMPETITION REPORT 1998

4. Decisions taken by the Commission in 1998

STATISTICS 367

No objection

Decisions as
part of the
formal
scrutiny
procedure

Initiation

Positive

Negative

Conditional

Appropriate measures

Other decisions

Total

Agriculture Transport

Fisheries

Coal

Other

TOTAL

204

25

5

6

2

2

0

19

11

2

2

0

0

1

38

0

0

0

0

0

0

244

35

380

4

0

2

1

0

0

0

7

308

573

73,08 %

66

16

31

8

3

28

460

102

13 %

25

40

10

5

29

3,18 %

5,10 %

1,27 %

0,68 %

3,69 %

784

100%

31,12 %

4,46 %

4,85 % 0,90 % 58,67 %u`

100 %

5. Evolution over the period 1989-98

Decisions taken

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

No objection

259

415

493

473

399

440

504

373

385

308

Decision as
part of the
formal
scrutiny
procedure

Initiation

Positive

Negative

Conditional

Appropriate measures/other
decisions

36

21

16

0

11

34

20

14

0

9

54

28

7

2

13

30

25

8

7

9

32

19

6

1

10

40

15

3

2

27

57

22

9

5

22

43

14

23

3

18

68

18

9

5

17

66

16

31

8

31

Total

342

492

597

552

467

527

619

474

502

460

COMPETITION REPORT 1998

368 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

6. Decisions broken down by Member State

DE AT BE DK ES FIN F EL IRL I

LU NL

P UK SE EU

No objection

Decisions as
part of the
formal
scrutiny
procedure

Initiation*

Positive

Negative**

Conditional

Appropriate measures

Other decisions***

89

29

8

15

1

0

12

18

19

5

0

3

1

0

1

2

0

0

0

0

1

Total

154

28

22

9

0

0

0

0

0

0

9

26

4

1

4

0

0

1

36

7

1

0

0

0

0

0

8

12

7

2

2

2

0

2

27

8

1

0

0

0

0

0

9

1

0

0

0

0

1

0

2

46

13

2

5

4

0

7

77

1

0

0

1

0

0

1

3

31

3

1

1

0

0

2

38

1

1

1

0

0

0

0

3

17

1 286

0

0

0

0

1

0

0

1

0

0

1

1

66

16

31

8

3

28

18

4 438

*

Initiation including extensions of proceedings already initiated.

** Negative decision including partly negative decisions.

*** Other decisions including orders, referrals to the Court of Justice or Council, withdrawals of

notifications, linguistic revision, and corrections to previous decisions.

COMPETITION REPORT 1998

VII — STUDIES

STUDIES 369

DG IV commissioned 13 studies in 1998. Eight of them will be completed in 1999. Of the five studies
completed this year, four must remain strictly confidential and will not be covered in this report. One
other confidential study was completed; only its title is given below:

Energy contracts in the framework of state aid case No C 83/97 Dow/Buna SOW
Leuna Olefinverbund GmbH (BSL), Germany (Saxony-Anhalt)

Seven studies commissioned the previous year were also completed in 1998. One of them concerns an
individual case and must remain strictly confidential; it is therefore not covered here. Three other
confidential studies were completed; only their titles are given below:

Study on the policies of Member States’ competition authorities towards
horizontal cooperation agreements between companies
Study on the retail market for motor fuel and associated products
Assessment of and developments in the exemption, provided for in Regulation
(EEC) No 1617/93, of consultations on tariffs for the carriage of passengers by air
within the Community

The other three studies completed in 1998 are summarised below:

Study of the balance between the respective rights and obligations and financial
resources of public and private television in Austria, Finland, Sweden, Norway,
Liechtenstein and Iceland

The study analyses legislation, television markets and their development, the various television stations
and the costs and income linked both to the obligations laid on public and private stations and to the
privileges they are granted. However, it confines itself to examining stations which had a significant
economic impact on television markets during the period 1994-97.

First, the study identifies the obligations and privileges of the television stations and their financial
impact on domestic and international markets. The information collected shows that obligations
incumbent on broadcasters are either set out in current legislation or laid on them in an informal
manner by higher authorities. It should be pointed out that public and private television broadcasters
differ not only in terms of their shareholders but also in the number of obligations laid on them,
although in no case is there any precise definition of the concept of public service obligation.

The study also shows that public broadcasters are financed partly or in full by the licence fees paid by
all households which possess a television. Legislation explicitly provides that, since all sections of the
audience have to pay the licence fee, public television stations must broadcast to all households and,
ideally, ensure that their programmes take account of the preferences of all viewers. Consequently,
public service obligations extend to the provision not only of cultural and educational programmes of
all kinds and directed at all minorities but also of programmes which attract mass audiences. Public and
private broadcasters therefore compete fiercely to reach all these audiences and to offer them the
widest possible choice of programmes.

COMPETITION REPORT 1998

370 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

A number of problems follow from these findings:

— there is no definition of public service obligations such as would allow a quantitative analysis or an

assessment of costs to be carried out;

— there is broad scope for interpreting the concept of public service obligation;

— lastly, the accounts of certain broadcasters are not transparent and do not allow detailed analysis.

A more in-depth study of the costs/income structure of public and private television broadcasters
cannot therefore be carried out in future unless clear and precise obligations are first defined.

There are no plans to publish this study.

Study on how national courts apply the state aid rules

Exhaustive study and analysis by Member State of how national courts apply the state aid rules when
actions are brought by competitors, aid recipients or national authorities (recovery, etc.).

In 1995 the Commission adopted a notice on cooperation between national courts and the Commission
in the state aid field. In it, the Commission drew attention to the scope for action at national level as
regards state aid. In some cases, national courts may be better placed to deal with presumed
infringements of the state aid rules. The study’s purpose was to examine, on the basis of the case-law
established by national courts, the extent to which the various parties involved in the aid field take
advantage of these possibilities for action and in which respects there are problems.

First, the study reviews the various types of case which might be brought before a national court, such
as:

— cases concerning the direct effect of Article 88(3);

— various types of action brought in the context of the implementation or non-implementation of a
negative decision requiring that aid be recovered (Member State, recipient, competitors, etc.);

— various redress procedures by means of which competitors may contest the validity of Commission

decisions (in particular where aid schemes have been approved).

The bulk of the study consists of 15 chapters (one per Member State) which review the means of
redress available under the relevant Member State’s law and list the various cases in which Articles 87
and 88 of the EC Treaty have been applied, with a summary of each case.

The last part contains a critical and comparative analysis of national case-law, data and conclusions.

The study draws several conclusions of importance with regard to state aid policy:

In all Member States, means of redress exist to protect third parties.

COMPETITION REPORT 1998

STUDIES 371

None the less, the number of state aid cases brought before national courts is very small.

Instruments are already in place, but insufficient use is made of them. Consequently, it is a question of
how to publicise and make use of means of redress at national level.

As regards the type of case most frequently brought, i.e. a competitor bringing an action against
unlawful aid, there have been only two such cases in which the proceedings resulted in the economic
outcome envisaged by the competitor.

Actions for damages brought by competitors against the Member State, while possible in all Member
States, remain only a theoretical possibility owing to the difficulty of proving the causal link between
the infringement and the damage suffered.

This study will be published.

Remedies in EU competition law: the policy and practice of the European
Commission

This study of undertakings in competition cases under the Merger Regulation and under Articles 81
and 82 is organised under three headings:

— a theoretical and taxonomic section that provides a summary of economic aspects of competition
concerns, a classification of the different remedies available and their rationale and general legal
appraisal;

— a comparative economic and legal analysis of relevant international practice among other

competition authorities within the EU and outside it;

— qualitative and quantitative in-depth analysis of a number of previous cases.

Its principal conclusions are:

— remedies should address barriers to entry and seek to reduce or eliminate them so as to create

competition through entry of new firms;

— the focus should be on creating genuine competition and not just a new competitor;

— structural remedies are to be advocated because they are more effective;

— a matrix of competition problems and appropriate remedies is set out;

— the effective role of fines in specific situations is outlined;

— Commission policy is in line with current antitrust economic reasoning.

There are no plans to publish this study.

COMPETITION REPORT 1998

VIII — REACTIONS TO THE TWENTY-SEVENTH REPORT

REACTIONS TO THE TWENTY-SEVENTH REPORT 373

A — European Parliament

1. Resolution on the XXVII report by the Commission on Competition Policy — 1997

(SEC(98)0636 — C4-0379/98)

The European Parliament,

— having regard to the XXVII report by the Commission on Competition Policy — 1997

(SEC(98)0636 — C4-0379/98),

— having regard to the Communication from the Commission to the Member States on the links

between regional and competition policy (C(98)0673 — C4-0247/98), 271

— having regard to the report from the Commission on the Sixth Survey on State Aid in the European

Union in the manufacturing and certain other sectors (COM(98)0417),

— having regard to its resolutions of 13 November 1996 272 on the XXVth report on Competition

Policy and of 18 July 1997 273 on the Commission’s Green Paper on vertical restraints,

— having regard to the report of the Committee on Economic and Monetary Affairs and Industrial
Policy and the opinion of the Committee on Legal Affairs and Citizens’ Rights (A4-0421/98),

A. Whereas the EU’s competition policy ’must adapt to the economic realities of the contemporary
world’ while current ’legislation and practice are still rooted in the early years of the common market’,

B.
Whereas there is a need for competition legislation in order to achieve certain priority
objectives of the European Union, namely economic and social cohesion, an adequate level of research
and development, environmental protection, the growth of SMEs and structural adjustment,

C.
Whereas the proper development of competition and the quest for equal opportunities for all
businesses constitute essential preconditions for the smooth functioning of the internal market,
especially following the introduction of the single currency,

D. Whereas in its judgment of 18 June 1998 in Case C-35/96 the Court of Justice ruled that
members of liberal professions were entrepreneurs and, as such, were subject to the competition rules
laid down in Articles 85 and 86 of the Treaty in the same way as any other form of undertaking, thus
endorsing the interpretation already used in the past by the Commission,

Whereas limits to free-market competition result from State intervention, the interdependence

E.
of national economies and the need to preserve regional and social cohesion,

271 OJ C 152, 18.5.1998, p. 3.
272 OJ C 362, 2.12.96, p. 135.
273 OJ C 286, 22.9.1997, p. 326 and 347.

COMPETITION REPORT 1998

374 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Whereas Monetary Union demands a higher degree of control of competition distortion to
F.
safeguard the internal market, in particular of the State Aids given by Member States sharing the same
currency,

G. Whereas the existing structure and resources of the Commission to control practices prejudicial
to fair competition continue to be inadequate,

H. Whereas safeguarding competition inside the Monetary Union needs further coordination of
the Commission services with the different Member States’ Competition Authorities,

I.
Whereas the allocation of State Aid in breach of the EC Treaty is counter productive, and
favours the inefficient over the efficient, distorts competition between regions and companies and
imposes an excessive burden on public budgets,

J.
Whereas negotiations have begun on the accession of new Member States from Eastern Europe,
which need to take into account the transitional nature of these economies and the effects of
competition legislation on their development,

1.
Welcomes the XXVIIth report on Competition Policy and considers it a useful document upon
which the accountability of the Commission in pursuing its Treaty duties and responsibilities could be
exercised, bring thus Community competition policy closer to the public; in this context, supports the
Commission’s DG IV in its endeavour to be equipped with adequate human resources and with the
proper legal instruments;

Further encourages the Commission and the Member States to better coordinate and integrate
2.
their resources in order to establish an efficient EU system and structure to safeguard fair competition;

3.
Believes that further exchanges of staff between the Commission and national authorities would
increase the knowledge base and skills available to Member States and the Commission when dealing
with complex competition cases; is appreciative of the work undertaken by the Commission and its
staff, especially in the field of mergers, which is a politically sensitive field;

As Regards Democratic Accountability

4.
Calls for the Commission to undertake formally to send the European Parliament all draft
Commission implementing proposals in the field of Community competition policy, such as draft block
exemptions pursuant to Article 85(3) of the Treaty and Commission initiatives taken pursuant to
Article 90(3) of the Treaty affecting public undertakings;

5.
While appreciative of the current excellent dialogue with the Commission, and especially with
the Commissioner, calls for a further strengthening of the democratic control of competition policy in
the European Union and for the regular information meetings already organised between the
Commissioner for Competition Policy and the European Parliament’s relevant committee to become a
matter of standard practice for the future at a rhythm of at least once every 3 months in common
agreement between the Committee concerned and the Commissioner;

COMPETITION REPORT 1998

Calls again for greater efforts to be made, within the framework of the Annual Report, to assess
6.
the impact of competition policy on other policy areas, in particular, social, regional and environmental
policy;

REACTIONS TO THE TWENTY-SEVENTH REPORT 375

Calls on the Commission to launch a debate on the application of the competition rules to the
7.
regulated professions, taking account of the special role which some professions play in society in the
public interest;

As regards the application of Articles 85 and 86

Reiterates its position as stated in its resolution of 18 July 1997 on the Commission’s Green

8.
Paper on vertical restraints;

9.
Welcomes the introduction of the new de minimis notice of 15 October 1997; wishes to be
assured that this notice will provide legal certainty, especially for SMEs, over the criteria for vertical
and horizontal agreements;

10.
Asks the Commission to publish an analysis of the de minimis threshold for agreements of
minor importance to demonstrate its assertion that ’such agreements have no significant effect either
on competition or on intra-Community trade’ while minimising bureaucracy and legal costs for SMEs;
further asks that future Competition Policy reports demonstrate how the Commission uses the de
minimis notice in certain cases;

Believes that the Commission is correct to assert that SMEs are rarely capable of significantly

11.
affecting competition in cross-border trade;

12.
Is firmly of the belief, however, that the new de minimis notice should not lead to any
‘renationalisation’ of competition policy; there is a need to ensure, with the introduction of the single
currency, that competition policy remains at a supra-national level, and a partnership between the
Commission and the Parliament, in order to guarantee a level playing field for companies from all
Member States and a transparency of policy;

13.

Recalls its resolution on the Green Paper on vertical restraints, especially in relation to:

— the examination of including other parameters other than market share as threshold value;

— block exemption regulations for selective distribution agreements;

— a system in which the lowest market segment is exempted from the prohibition laid down in Article

85 (1) on the basis of the de minimis notice;

— the ceiling for the rules on de minimis to become the threshold value for the field of application of

the block exemption.

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376 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

As regards the abuse of a dominant position

Recalls its position as stated in its resolution of 13 November 1996 274 and, in particular,
14.
paragraphs 2, 3 and 4, and requests the Commission to examine, on the basis of the ownership
criterion, predatory pricing and other unfair practices, regulatory and non-regulatory barriers in the
fields of telecommunications in both mobile and satellite communications as well as on-line services, of
media, of air transport and of the banking and financial sectors;

Believes that the Commission should publish suitable guidelines and criteria, aimed especially
15.
at SMEs, on the definition of the relevant market in Competition Policy regulation so as to allow SMEs
to evaluate their position with regards to their relevant product and geographic markets and to see if
further legal investigation is recommended;

As regards State monopolies and the Amsterdam Treaty

16. Welcomes the examination by the Commission, as requested, of
the implications for
competition policy of the Treaty of Amsterdam, and in particular, Article 7d on services of general
economic interest and believes that this will provide the best framework for employment creation; this
confirms the Community’s role in contributing to the promotion of services of general interest while
not calling into question the allocation of powers between the Commission and the Member States;

Believes that the future development of a liberalised Competition Policy under the Treaty of
17.
Amsterdam should be coupled with the development of an enhanced consumer policy, so that
consumers are able to benefit from the transparent prices across the single currency area; believes that
consumers in those countries not participating in the single currency should also benefit from
European-wide price reductions as a result of increased price transparency;

18.
Considers that consumer protection must lie at the heart of all measures taken in the field of
European Union competition policy, which must keep a watchful eye not only on the increasing
number of products and services offered to consumers but also on the quality thereof;

Draws attention to the need for competition policy to help boost employment by means of an

19.
improved system of allocating resources.

As regards State Aid

20.

Recalls the main findings of the VIth Survey on State Aid over the period 1994-1996:

a)

the overall level of aid amounted on average over the period 1994-96 to almost ECU 84 000
million, which is an underestimate due to missing data from Member States on expenditure in
the agricultural sector; on the basis on the data available, State Aids account for at least 1.4% of
EUR15 GDP, ECU 573 per person employed and 2.6% of government expenditure;

b)

overall State Aids given by some Member States are extremely high;

274 OJ C 362, 2.12.96, p.135.

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REACTIONS TO THE TWENTY-SEVENTH REPORT 377

c)

d)

about 46% of overall aid (i.e. 38 318 million ECU on average over the period 1994-96) went to
the manufacturing sector; the disparities in the level of aid between Member States is huge, in
percent of value added the highest aid level is nine times the lowest aid level; allowing this level
of aid for manufacturing, when it is concentrated in certain Member States, is creating a
potential distortion of competition;

State Aid to the manufacturing sector was distributed as follows: 30% for horizontal objectives
(i.e. R&D, environment, SMEs, trade, energy saving etc.), 13% for shipbuilding, steel and other
sectors, and 56% for regional objectives; aid for horizontal objectives has fallen from 40% of
overall aid in 1988-90 (for the EUR12) to around 30% in 1994-96 (for the EUR 15) while sector
specific interventions have risen slightly; this trend should be reversed as sectorial objectives
have the potential to create even greater distortive effects than horizontal objectives;

Reaffirms its support for State Aid deemed to be in the common interest, such as R&D, SMEs,
21.
training, energy saving and environmental aid; yet it notes that such aid has been decreasing while aid
granted to individual enterprises has been rising;

22.
Notes the links between State Aids and competition policy, as set out in the Communication
from the Commission to the Member States of 17 March 1998; agrees with the need for increased
consistency between national aid schemes, Union aid schemes and competition policy;

23.
Believes, nevertheless, that the volume of overall aid in the Community is massive, and indicates
a stable tendency which distorts fair competition, is incompatible with the internal market and
undermines the EU’s commitment to a free world market;

24.
Calls for the introduction of a published and regularly updated register of all State Aids,
including State Aids agreed under block exemptions; this would provide information to third parties
about the level of State Aids and allow the Commission to produce accurate and up-to-date figures on
State Aids; believes that the Commission should also publish on its web-site all State Aid agreements,
including those individual agreements covered by block exemptions, as soon as they have been agreed,
giving the name of the companies involved, the purpose of the aid, the amount of aid given and the
locations where these aids will be disbursed; this information should be available in all official
European languages; believes that there should also be a simple facility, via this site, for third parties to
have complaints about individual State Aids independently investigated;

25. Welcomes the adoption of the ’enabling regulation’ which forms part of the Commission’s
contribution to improving the administrative management of certain sectors of competition policy, and
believes that the Commission should make the principles laid down in the 1997 Notice concerning ’de
minimis agreements’ binding;

26. Welcomes the forthcoming adoption of a ’procedural regulation’ on state aids and the fact that
this regulation includes fresh guarantees on the protection of third parties, and highlights the need to
maintain a certain degree of consistency and homogeneity with regard to the judicial protection
reserved for undertakings and private persons under Community competition law, without prejudice to
the principle of the useful effect of that law;

27.
Considers that, with regard to the supervision of state aid for regional development purposes,
account must be taken of the need to ensure economic and social cohesion and the method of
determining resources must take account of the legal concept of ultraperipherality;

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378 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

Believes that the introduction of a ’scoreboard’ similar to the internal market scoreboard would
28.
be a useful publication in highlighting which Member States provide the highest and the lowest levels
of State Aids;

Proposes that stability and convergence programmes including State budget objectives should
29.
also be subject to competition considerations, as to limit excessive overall State Aid given by any
Member State;

Stresses that more account must be taken, in studies on state aids and competition, of tax
30.
exemptions or tax relief which have an equivalent effect to aids and distort competition, and that such
fiscal arrangements must be prohibited;

As regards international cooperation

31.
Believes that the determining factors of globalisation: technology progress, deregulation of
markets, liberalisation of key sectors and intensification of trade in goods and of capital markets
influence the effectiveness of the traditional forms of European policy, one of them being competition
policy;

32.
Is of the opinion that the resulting interdependence due to globalisation of production, of
distribution and of exchange and pronounced international dimension of competition problems
necessitate a new approach to EU competition policy;

33.
Favours an increasing role for the World Trade Organisation (WTO) in international
competition policy; asks therefore the Council to mandate the Commission — while taking account
of the Agreement between the EU and the Government of the USA regarding the application of their
competition laws and of the successful outcome of the dispute over the merger of McDonnell Douglas
and Boeing — to pursue negotiations with the aim of reaching a multilateral agreement on
international competition law in the form of a supplement to the Agreement Establishing the WTO,
containing the following rules:

a)

b)

c)

d)

the establishment of uniform minimum standards to prevent anti-competitive behaviour such as
the formation of cartels, the abuse of a dominant market position or vertical and horizontal
restrictions on competition;

the requirement for all signatory States to set up an independent regulatory authority to ensure
compliance with minimum competitive standards, and the provision of a mechanism for
cooperation between the national competition authorities with a view to achieving
approximation of standards;

the requirement for all signatory States to apply their national competition law to states of
affairs outside their own territory only when this is clearly in the public interest;

the incorporation at WTO level of the principle of ’positive comity’ as set out in Articles III to
V of the Agreement between the European Communities and the Government of the United
States of America regarding the application of positive comity principles in the enforcement of
their competition rules;

COMPETITION REPORT 1998

REACTIONS TO THE TWENTY-SEVENTH REPORT 379

e)

the extension of the Dispute settlement mechanism contained in the Agreement Establishing
the WTO to cover disputes in connection with the enforcement of international minimum
competitive standards;

Considers that the Trade Policy Review Mechanism set out in Article III(4) in conjunction with
34.
Annex 3 of the Agreement Establishing the World Trade Organisation should be supplemented by the
requirement for any signatory state which has been subject to such review to draw up at the request of
a contracting State a report on the operation of the national competition system in another State;

Believes that enlargement to the countries of central and eastern Europe could create tensions
35.
over the adoption of competition policy legislation; therefore welcomes the assistance given by the
Commission for the application of antitrust cases in these countries;

36.

Instructs its President to forward this resolution to the Commission and to the Council.

2. Reply by the Commission to Parliament’s Resolution on the XXVIIth Report on

Competition Policy

Rapporteur: Mrs Karin RIIS-JØRGENSEN

EP No: A4-0421/98

Date of adoption of the report: 9 February 1999

Subject

Report by the Commission on Competition Policy

Parliamentary Committee responsible

Committee on Economic and Monetary Affairs and Industrial Policy

Background

By letter of 16 April 1998 the Commission forwarded to Parliament the XXVIIth report on
Competition Policy — 1997.

At the sitting on 1 July 1998 the President of Parliament announced that he had referred the report to
the Committee on Economic and Monetary Affairs and Industrial Policy as the committee responsible
and to the Committee on Legal Affairs and Citizens’ Rights for its opinion.

At its meeting on 21 January 1998 the Committee on Economic and Monetary Affairs and Industrial
Policy had appointed Mrs Riis-Jørgensen rapporteur.

It considered the draft report at its meetings on 26 May, 24 September and 10 November 1998.

At the last of these meetings it adopted the motion for a resolution unanimously.

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380 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

European Parliament

Commission

— having regard to the XXVIIth report by the
Commission on Competition Policy — 1997
(SEC(98)0636 — C4-0379/98),

— having regard to the Communication from the
Commission to the Member States of 17 March
1998 on the links between regional and competition
policy (C(98)0673 — C4-0247/98),

— having regard to the report from the Commission on
the Sixth Survey on State Aid in the European
Union in the manufacturing and certain other
sectors (COM(98)0417),

— having regard to its resolutions of 13 November 1996
on the XXVth report on Competition Policy and of
18 July 1997 on the Commission’s Green Paper on
vertical restraints and EU competition policy,

— having regard to the report of the Committee on
Economic and Monetary Affairs and Industrial
Policy and the opinion of the Committee on Legal
Affairs and Citizens’ Rights (A4-00421/98),

A. whereas the EU’s competition policy ’must adapt
to the economic realities of the contemporary
world’ while current ’legislation and practice are
still rooted in the early years of the common
market’,

B. whereas there is a need for competition legislation
in order to achieve certain priority objectives of
the European Union, namely economic and social
cohesion, an adequate level of research and
development, environmental protection,
the
growth of SMEs and structural adjustment,

C. whereas the proper development of competition
and the quest
for equal opportunities for all
businesses constitute essential preconditions for
the smooth functioning of the internal market,
especially following the introduction of the single
currency,

D. whereas in its judgment of 18 June 1998 in Case C-
35/96 the Court of Justice ruled that members of
liberal professions were entrepreneurs and, as
such, were subject to the competition rules laid
down in Articles 85 and 86 of the Treaty in the
same way as any other form of undertaking, thus
endorsing the interpretation already used in the
past by the Commission,

E. whereas limits to free-market competition result
from State intervention, the interdependence of
national economies and the need to preserve
regional and social cohesion,

The Commission agrees with Parliament that legislation
and decision-making practice in the field of Community
competition law need to be updated. The Commission
launched a modernisation process two years ago.

The Commission shares Parliament’s view as regards
the importance of effective competition rules in relation
to the achievement of those European Union objectives
referred to by Parliament.

Like Parliament, the Commission considers that the
development of a competitive environment
is an
essential precondition for the success of the single
market, especially after the introduction of the single
currency.

The Commission endorses Parliament’s view as regards
the importance of the Court’s judgment in Case C-35/
96.

the
The Commission agrees with Parliament
principle of regional and social cohesion should be
taken into account.

that

F.

whereas Economic and Monetary Union demands
a higher degree of control of competition
in
distortion to safeguard the internal market,
particular of the State Aids given by Member
States sharing the same currency,

The Commission agrees that the control of state aid
needs to be enforced, regardless of the currency in
which the aid is granted. This would not influence its
effect on the common market. Indeed, a common
currency makes distortions of competition more visible.

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REACTIONS TO THE TWENTY-SEVENTH REPORT 381

G. whereas the existing structure and resources of the
Commission to control practices prejudicial to fair
competition continue to be inadequate,

H. whereas safeguarding competition inside the
Monetary Union requires further coordination of
the Commission services with the different
Member States’ Competition Authorities,

I.

J.

whereas the allocation of State aid in breach of the
EC Treaty is counter-productive, and favours the
inefficient over the efficient, distorts competition
between regions and companies and imposes an
excessive burden on public budgets,

whereas the negotiations which have begun on the
accession of new Member States from Eastern
Europe need to take into account the transitional
nature of
these economies and the effects of
competition legislation on their development,

The Commission has observed a considerable increase
in work load in certain areas of activity and will take all
possible steps to increase resources in the departments
concerned.

Like Parliament, the Commission is convinced of the
importance of stepping up coordination between its
departments and the competition authorities in the
Member States. It considers the implementation of its
notice on cooperation between itself and the national
authorities in handling cases falling within the scope of
Article 85 or 86 (renumbered under the Amsterdam
Treaty as Articles 81 and 82 respectively) to be a good
example of such closer coordination.

The Commission considers that
the concept of
‘competition between regions’ is not justified in the
context of regional aid. However, it does think that the
granting of state aid may,
lead to
inappropriate decisions on the location of investments
by conferring undue advantages on some regions and
not on others. It therefore intends to control regional
aid more effectively, in line with the Treaty provisions
laying down the principle of a prohibition on state aid
while providing for exceptions which are to be
interpreted strictly.

in certain cases,

The Commission’s view is that the Community rules are
such as to allow the competition rules to be phased in
prior to accession (for example, by phasing in the rules
on exemptions).

1. Welcomes the XXVIIth report on Competition
Policy and considers it a useful document upon
which the accountability of the Commission in
pursuing its Treaty duties and responsibilities can
be assessed, thus bringing Community competition
policy closer to the public; in this context, supports
the Commission’s DG IV in its endeavour to be
equipped with adequate human resources and with
the proper legal instruments;

The Commission welcomes the fact that Parliament is
satisfied with the quality and usefulness of
the
Competition Report. It agrees with Parliament that
the report is a useful information and transparency tool
for the public which Parliament represents. Lastly, the
Commission particularly appreciates the support of
its
Parliament as regards both the reinforcing of
human resources and the modernisation of
the
legislative instruments.

The Commission undertakes to continue to cooperate
closely with Member States in the interests of fair
competition, in particular through exchanges between
Community and national officials.

2.

3.

Further encourages the Commission and the
Member States to better coordinate and integrate
their resources in order to establish an efficient
EU system and structure to safeguard fair
competition;

Believes that further exchanges of staff between
the Commission and national authorities would
increase the knowledge base and skills available to
Member States and the Commission when dealing
with complex competition cases; is appreciative of
the work undertaken by the Commission and its
staff, especially in the field of mergers, which is a
politically sensitive field;

As regards democratic accountability

4.

Calls on the Commission to undertake formally to
send the European Parliament all draft
Commission implementing proposals in the field
of Community competition policy, such as draft
block exemptions pursuant to Article 85(3) of the
Treaty and Commission initiatives taken pursuant
to Article 90(3) of the Treaty affecting public
undertakings;

The Commission already sends draft block exemption
regulations pursuant to Article 85(3) (renumbered as
the relevant
Article 81(3))
to the Chair of
Parliamentary committee for
information and
discussion. Only draft regulations adopted by the
Commission for publication in the OJ may be sent in
this way; preliminary drafts, which are merely informal
drafts produced by Commission departments, may not
be sent.

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382 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

to Article 90(3) (renumbered as Article
Pursuant
86(3)),
the Commission merely imposes obligations
already enshrined in the Treaty. Even if it does this by
means of a directive, it is only applying existing rules
and is not creating new obligations for the undertakings
covered by Article 90. None the less, the Commission
also sends draft directives pursuant to Article 90(3) to
the Chair of the relevant Parliamentary committee for
information and discussion. Such texts can be sent only
once the Commission has adopted the draft directive.
Informal drafts by Commission departments cannot, of
course, be sent.

The practice of organising regular information meetings
between the relevant Parliamentary committee and the
Commissioner with special
responsibility for
competition has proved to be very useful and
beneficial
it also increases
transparency in the implementation of competition
policy. For these reasons, the Commission considers
that the practice should continue in the future.

for both institutions;

The Commission takes note of Parliament’s request for
a better assessment to be made in the report of the
impact of competition policy on other Community
policy areas, and in particular on social, regional and
environmental policy.
to meet
Parliament’s concerns as far as possible in the next
report but would stress that the XXVIIth report already
contains comments on these areas.

It undertakes

The Commission notes Parliament’s proposal with
interest but does not see any urgent need to launch a
debate on this subject since the number of cases
involving the regulated professions remains small.

See point 13.

5. While appreciative of

the current excellent
dialogue with the Commission, and especially
with the relevant Commissioner, calls for a
further strengthening of the democratic control
of competition policy in the European Union and
for the regular information meetings already
for
organised between the Commissioner
C o m p e t i t i o n Po l i c y a n d t h e E u r o p e a n
Parliament’s relevant committee to become a
matter of standard practice for the future at a
rhythm of at least once every 3 months in common
agreement between the Committee concerned and
the Commissioner;

6.

7.

Calls again for greater efforts to be made, within
the framework of the Annual Report, to assess the
impact of competition policy on other policy areas,
in particular, social, regional and environmental
policy;

Calls on the Commission to launch a debate on the
the competition rules to the
application of
regulated professions,
the
special role which some professions play in
society in the public interest;

taking account of

As regards the application of Articles 85 and 86

8. Reiterat es

stated in its
aforementioned resolution of 18 July 1997 on the
Commission’s Green Paper on vertical restraints;

its position as

9. Welcomes the introduction of the new de minimis
notice of 15 October 1997; wishes to be assured
that
this notice will provide legal certainty,
especially for SMEs, over the criteria for vertical
and horizontal agreements;

10. Asks the Commission to publish an analysis of the
de minimis threshold for agreements of minor
importance to demonstrate its assertion that ’such
agreements have no significant effect either on
competition or on intra-Community trade’ while
minimising bureaucracy and legal costs for SMEs;
further asks that future Competition Policy reports
demonstrate how the Commission uses the de
minimis notice in certain cases;

increase legal certainty,

The Commission assures Parliament that the de minimis
notice will
in particular for
SMEs, as regards the criteria for vertical and horizontal
agreements since it clarifies these criteria and increases
the de minimis threshold from 5% to 10% for vertical
agreements.

The Commission considers that the criteria set out in
the notice, which are expressed in figures and based on
its experience, already allow corroboration of
its
assertion that the agreements covered by the notice
have no significant effect on competition or on intra-
Community trade; at the same time, they minimise red
tape and costs for SMEs. It is able to assure Parliament
that future reports on competition policy will illustrate
how the Commission uses the de minimis notice,
starting with the 1998 report (XXVIIIth report).

11. Believes that the Commission is correct to assert
that SMEs are rarely capable of significantly
affecting competition in cross-border trade;

The Commission notes that Parliament approves its
assertion that SMEs only rarely affect intra-Community
trade.

COMPETITION REPORT 1998

REACTIONS TO THE TWENTY-SEVENTH REPORT 383

12.

Is firmly of the belief, however, that the new de
minimis notice should not lead to any ‘renationa-
lisation’ of competition policy; there is a need to
ensure, with the introduction of
the single
currency, that competition policy remains at a
supra-national level, and a partnership between
the Commission and the Parliament, in order to
guarantee a level playing field for companies from
all Member States and a transparency of policy;

13. Recalls its resolution of 18 July 1997 on the Green
Paper on vertical restraints, in particular as regards
the following:
— considering whether to include parameters
other than market share as threshold value;

— block exemption regulations for selective

distribution agreements;

The Commission shares Parliament’s desire to
guarantee equal conditions of competition for firms
from all Member States and to ensure that policies are
transparent. It believes that the introduction of the euro
will make some distortions of competition more visible
and undertakes to take energetic action to prevent such
distortions. It would stress that the adoption of the de
minimis notice was based on a broad consensus between
Member States. It therefore considers it highly unlikely
that the domestic policies of these same Member States
would restrict agreements covered by the Community
notice. As regards agreements which are threatening
enough not to fall within its scope, the notice provides
for a division of labour between the Commission and
the authorities and courts in the Member States. The
Commission ‘will only intervene in such cases when it
considers that
the Community so
demands, and in particular if the agreements impair
the proper functioning of the internal market’. In other
cases, it ‘considers that in the first instance it is for the
authorities and courts of the Member States to take
action’, preferably applying Community law, which the
courts of all Member States and the authorities of most
of them are entitled to do.

the interest of

The Commission took account, where possible, of the
opinion expressed by Parliament in the Thyssen report
when drafting the follow-up to the Green Paper.

— a system in which the lowest market segment is
exempted from the prohibition laid down in
Article 85(1) on the basis of the de minimis
notice;

Parliament is asked to give its opinion on this follow-up
(a Communication from the Commission (COM(1998)
544 final) and a proposal for two Council Regulations
(COM(1998) 546 final)).

- the ceiling for the rules on de minimis to become
the threshold value for the field of application of
the block exemption;

As regards the abuse of a dominant position

14. Recalls its position as stated in its aforementioned
in particular
resolution of 13 November 1996,
the
paragraphs 2, 3 and 4, and requests
Commission to examine, on the basis of
the
ownership criterion, predatory pricing and other
unfair practices, regulatory and non-regulatory
barriers in the fields of telecommunications in
both mobile and satellite communications as well
as on-line services, of media, of air transport and of
the banking and financial sectors;

The Commission takes note of the fact that Parliament
has requested once again that the Commission ensure
that in certain industries an ‘ownership criterion’
is
applied in examinations of predatory pricing and unfair
competition practices. Bearing in mind that
the
industries mentioned were mostly former state
monopolies,
is
referring here to public undertakings and to the State
as shareholder.

it would appear that Parliament

Generally speaking, examinations of predatory pricing
or unfair practices are conducted in cases involving the
practices covered by Article 86 of the Treaty (abuse of a
dominant position — renumbered as Article 82). If the
body responsible for such practices is a public
undertaking, the Commission has no problem applying
the provisions of that Article. Furthermore, if the State
as a public authority is involved in one way or another,
the Commission can also apply Article 90 (renumbered
as Article 86). It does not therefore consider that the
shareholder’s ‘ownership’
is a relevant criterion for
making assessments in application of Community
competition law.

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384 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

15. Believes that

the Commission should publish
suitable guidelines and criteria, aimed especially
at SMEs, on the definition of the relevant market
in Competition Policy regulation so as to allow
SMEs to evaluate their position with regards to
their relevant product and geographic markets and
i n v es ti g at i o n is
to s ee if
recommended;

f u r th er

l eg a l

16. Calls on the Commission to present to the relevant
committee of
the European Parliament a
comprehensive overview of the implications of
the liberalisation and privatisation process in the
telecommunications and energy sectors in the
different Member States for competition policy,
with particular regard to ownership structures and
the overweening influence of certain large players
in decisions regarding future development of the
two sectors; calls for an examination of possible
abuses of dominant positions and of the links
between these two sectors, given the technological
overlap between them ; calls
too for an
examination of links between these two sectors
and the banking sector;

The Commission would draw Parliament’s attention to
the fact that the existing notice on the definition of
relevant markets for the purpose of making assessments
under the competition rules applies in any case to
SMEs, as it does to all businesses, whatever their size. It
therefore does not intend to publish a specific notice for
SMEs.

Liberalisation is closely monitored by Commission
departments
in a highly transparent manner.
Generally speaking, the annual report on competition
policy regularly gives an update on the liberalisation
process in the various sectors which it covers.

the Commission has

As regards telecommunications, the Commission has
been conducting investigations for several years and
more particularly since 1 January 1998 into the opening-
up of this sector to competition. In 1998 it produced two
reports on progress in implementing the liberalisation
directives, both of which have been published
(COM(1998)80 and COM(1998)594). Following these
investigations,
initiated
infringement proceedings against several Member
States. Furthermore,
it makes sure that the former
monopolies are not abusing dominant positions that
they may still hold or hindering competition by means
of agreements. Proceedings have been initiated in
several cases and decisions adopted. The same applies
to mergers and acquisitions. These decisions are
published in the Official Journal, reported on in the
Competition Policy Newsletter and summarised in the
annual competition report.

As for the energy sector,
it has only just been
liberalised. The next competition report (1998)
devotes considerable attention to the subject.

The Commission therefore considers that the strict
monitoring of the implementation of liberalisation and
the transparency of its own action in this area are
assured. If possible links between telecommunications
operators, energy producers, banks or other economic
operators were to lead to agreements which restricted
competition or to abuses of a dominant position, the
Commission would obviously deal with such cases
under the provisions in force without needing to
conduct preliminary studies. For example, in one case
the Commission investigated the conditions in which an
agreement between a telecommunications operator
(Ce´ ge´tel) and the SNCF was implemented.

Lastly,
the Commission regularly carries out or
commissions studies on network industries in Europe
in order to assess the impact of
the deregulation
process. Examples include the study entitled ‘Europe’s
Network Industries: Conflicting Priorities (telecommu-
nications)’, which was published in September 1998, and
the joint study currently being conducted by DG II and
the University of Toulouse on network industries.

COMPETITION REPORT 1998

REACTIONS TO THE TWENTY-SEVENTH REPORT 385

The Commission welcomes Parliament’s satisfaction
with its follow-up to the latter’s request to spell out the
implications for competition policy of the Treaty of
Amsterdam. It agrees with Parliament’s reading of the
new Article 7d, (renumbered as Article 16) which
highlights the balance struck between the powers of the
Commission and those of the Member States.

The Commission shares Parliament’s view of the need
to develop a consumer information policy in order to
ensure the success of the single currency. Consumers in
the Union must be able to benefit from the price
transparency which the euro is certain to create and
stimulate.

that

the
The Commission agrees with Parliament
consumer
from the
should ultimately benefit
competitive process and that safeguarding competition
and defending consumer interests therefore go hand in
hand. It would point out, for example, that the opening-
up of telecommunications markets to competition has
had a positive impact by expanding supply, fostering
innovation and improving the quality of goods and
services.

The Commission agrees that competition policy should
contribute to the promotion of employment. Indeed, a
competitive industry in an environment of undistorted
competition is the best guarantee for the sustainable
development of employment.

The Commission welcomes Parliament’s interest in the
Sixth Survey on state aid in the Union.

As regards state monopolies and the Amsterdam Treaty

17. Welcomes the examination by the Commission, as
requested, of
the implications for competition
policy of the Treaty of Amsterdam, in particular
Article 7d on services of general economic interest,
this will provide the best
and believes that
framework for employment creation ;
this
confirms the Community’s role in contributing to
the promotion of services of general interest while
not calling into question the allocation of powers
between the Commission and the Member States;

18. Believes that

the future development of a
liberalised Competition Policy should be coupled
with the development of an enhanced consumer
policy, so that consumers are able to benefit from
the transparent prices across the single currency
area; believes that consumers in those countries
not participating in the single currency should also
benefit from European-wide price reductions as a
result of increased price transparency;

19. Considers that consumer protection must lie at the
heart of all measures taken in the field of
European Union competition policy, which must
keep a watchful eye not only on the increasing
number of products and services offered to
consumers but also on the quality thereof;

20. Draws attention to the need for competition policy
to help boost employment by means of an
improved system of allocating resources;

As regards State aid

21. Recalls the main findings of the VIth Survey on

State Aid over the period 1994-1996:
a) the overall level of aid amounted on average
over the period 1994-96 to almost ECU 84 000
million, which is an underestimate due to
missing data from Member States on
expenditure in the agricultural sector; on the
basis of the data available, State aids account
for at least 1 4% of EUR15 GDP, ECU 573 per
person employed and 2 6% of government
expenditure;

b) overall State aids given by some Member States

are extremely high;

c) about 46% of overall aid (i.e. ECU 38 318
million on average over the period 1994-96)
went to the manufacturing sector; the disparities
in the level of aid between Member States are
huge: in percent of value added the highest aid
level is nine times the lowest aid level; allowing
this level of aid for manufacturing, when it is
concentrated in certain Member States,
is
creating a potential distortion of competition;

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386 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

d) State aid to the manufacturing sector was
distributed as follows: 30% for horizontal
objectives (i.e. R&D, environment, SMEs,
t r a d e, e n e r g y s a v i n g e t c . ) , 1 3 % f o r
shipbuilding, steel and other sectors, and 56%
for regional objectives; aid for horizontal
objectives has fallen from 40% of overall aid
in 1988-90 (for the EUR12) to around 30% in
1994-96 (for the EUR 15) while sector-specific
interventions have risen slightly;
this trend
should be reversed as sectoral objectives have
the potential to create even greater distortive
effects than horizontal objectives;

22 Reaffirms its support for State aid deemed to be in
the common interest, such as R&D, SMEs,
training, energy saving and environmental aid;
notes however that such aid has been decreasing
while aid granted to individual enterprises has
been rising;

23. Notes

the links between State aids and
i n t h e
c o m p e t i t i o n p o l i c y, a s
Communication from the Commission to the
Member States of 17 March 1998; agrees with
the need for increased consistency between
national aid schemes, Union aid schemes and
competition policy;

s e t o u t

24. Believes nevertheless that the volume of overall
aid in the Community is massive, and indicates a
stable tendency which distorts fair competition, is
incompatible with the internal market and
undermines the EU’s commitment
to a free
world market;

25. Calls for the introduction of a published and
regularly updated register of all State aids,
including State aids agreed under block
exemptions; this would provide information to
third parties about the level of State aids and allow
the Commission to produce accurate and up-to-
date figures on such aids; believes that
the
Commission should also publish on its web-site
all State aid agreements, including those individual
agreements covered by block exemptions, as soon
as they have been agreed, giving the name of the
companies involved, the purpose of the aid, the
amount of aid given and the locations where these
aids will be disbursed; this information should be
available in all official European languages;
believes that
there should also be a simple
facility, via this site, for third parties to have
i n d i v i d u a l S t a t e a i d s
c o m p l a i n t s a b o u t
independently investigated;

The Commission shares Parliament’s opinion, provided
that such aid does not give rise to abuses (R&D,
training) or threaten by its amount the liberalisation of
for electricity
certain markets
such as
(environmental protection);
the
Commission would highlight the adoption in July 1998
of the framework on training aid. The Commission has
also observed the same trend as Parliament as regards
the amounts granted in horizontal aid and those granted
to individual companies.

in this connection,

that

The Commission has no comment to make on this
subject.

The overall volume of aid is indeed very high. The
Commission has launched a dialogue with Member
States on this problem. The system of state aid control,
however, provides that the Commission looks, on a case
by case basis, only at a single aid scheme or measure to
ensure its compatibility with the common market. Such
an examination cannot take account of other subsidies
paid by the Member State concerned to other
enterprises.

The Commission is already tackling the issue of state
aid in the form of
taxation arrangements. A
communication, setting out the Commission’s views
and strategy on the matter, was adopted on 11
November 1998.

The Commission’s survey of state aid, based on the
annual reporting from the Member States, provides
extensive information on the level and structure of state
aid granted in the Member States. From 1998 the survey,
which is available in all official language versions on the
Internet, will be published annually. Furthermore, all
decisions are published in the Official Journal, which is
also available on the Internet. The publication contains
the information desired by Parliament.

In so far as block exemptions are concerned,
the
Commission has laid down detailed rules that will
apply to Member States to ensure transparency and
satisfactory monitoring of aid. For example, as regards
implementation of aid schemes or individual aid
measures not forming part of any scheme which have
been exempted pursuant to such rules, Member States
are required to forward to the Commission, with a view
to publication in the Official Journal, summaries of the
relevant information.

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REACTIONS TO THE TWENTY-SEVENTH REPORT 387

In order to improve access to information, the Annual
Competition Policy Report, which lists all individual
state aid decisions adopted and gives a detailed
overview of the important cases, is also available to
the general public by way of the Internet. In the
meantime the Commission is continually seeking to
improve access to state aid information.

26. Welcomes

the adoption of

the ’enabling
regulation’ which forms part of the Commission’s
contribution to improving the administrative
management of certain sectors of competition
policy, and believes that the Commission should
make the principles laid down in the 1997 Notice
concerning de minimis agreements binding;

27. Welcomes

the forthcoming adoption of a
’procedural regulation’ on State aids and the fact
that this regulation includes fresh guarantees on
the protection of third parties, and highlights the
need to maintain a certain degree of consistency
and homogeneity with regard to the judicial
protection reserved for undertakings and private
persons under Community competition law,
without prejudice to the principle of the useful
effect of that law;

28. Considers that, with regard to the supervision of
State aid for regional development purposes,
account must be taken of the need to ensure
economic and social cohesion and the method of
determining resources must take account of the
legal concept of ultraperipherality;

Like Parliament, the Commission believes that the
effectiveness of regional aid as an instrument of
regional development must be ensured. Eligibility for
regional aid gives the regions concerned a relative
advantage over other regions which are not eligible for
aid. Too broad a coverage would diminish this relative
advantage, rendering the aid ineffective and leading to a
misallocation of state resources. That
is why the
Commission has decided to reduce current regional
aid coverage by 4 percentage points and to set the
overall ceiling at 42 7% of the Community’s population.
In this connection, the provisions of the new guidelines
on national regional aid, especially the reduction in
admissible aid intensities for large firms, are of
particular importance. This reduction meets the
concern that distortions of competition caused by such
aid should be mitigated, while retaining cohesion as an
overriding objective. In addition to the general
reduction in intensities,
the Commission also laid
down specific rules for the differentiation of maximum
aid intensities according to the seriousness and extent of
regional problems.

suffer

The Commission also recognises that the most remote
regions
from a number of permanent
disadvantages as a result of their location. That is why,
under the guidelines on national regional aid, aid
intended to compensate in part
for additional
transport costs may be authorised in all the most
remote regions which qualify for one of the regional
derogations. Furthermore, higher aid intensities may be
granted in these regions: up to 65% net in Article
92(3)(a) regions and up to 30% in Article 92(3)(c)
regions (renumbered as Articles 87(3)(a) and 87(3)(c)
respectively).

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388 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

29. Believes that the introduction of a ’scoreboard’
similar to the internal market scoreboard would be
a useful publication in highlighting which Member
States provide the highest and the lowest levels of
State aids;

30. Proposes

that

stability and convergence
programmes including State budget objectives
s h o u l d a l s o b e s u b j e c t
t o c o m p e t i t i o n
considerations, so as to limit excessive overall
State aid given by any Member State;

As regards highlighting the disparities in the absolute
levels of state aid granted by different Member States,
the approximate nature of the information on the
overall level of aid, particularly in agriculture, would
risk distorting the results of such a scoreboard.
Furthermore, it would be too mechanical an approach
since the divergent underlying structures of the Member
States’ aid schemes would remain hidden. Nevertheless,
in order to allow comparisons between Member States,
the notion of a scoreboard has been included in state aid
surveys; however, as is the case when dealing with
economic statistics, in order to avoid the presentation of
misleading information, the data are combined with
various economic indicators.

See point 23.

31. Stresses that more account must be taken,

in
tax
studies on State aids and competition, of
exemptions or
tax relief which have an
equivalent effect to aids and distort competition,
and that such fiscal arrangements must be
prohibited;

The Commission is indeed addressing this issue. Its
current approach is outlined in its November 1998
notice on the application of the state aid rules to
measures relating to direct business taxation.

32. Calls on the Commission’s DG IV to provide the
relevant committee of the European Parliament
with an in-depth analysis of the implications of the
provisions contained in the Energy Market
Liberalisation Directive (96/92/EC) concerning
stranded costs; urges the Commission to ensure
that these provisions do not facilitate illegal state
aids and emphasises
the interests of
that
consumers must be protected;

DGs IV and XVII and the Legal Service are working
closely together on the matter of
the transitional
arrangements resulting from Article 24 of Directive
96/92/EC and ‘stranded costs’. The Directive itself does
not provide for the granting of state aid and any
transitional arrangements accompanied by state aid
should therefore be notified to the Commission in
accordance with Article 93 of
the EC Treaty
(renumbered as Article 88).

The Commission will assess any such aid measures in
accordance with its policy on competition and will
ensure that such aid does not have effects that run
counter to the objectives of the common market.

33. Believes that accepting the principle whereby the
costs of
the transition to competition in the
electricity sector should be recognised as a
charge to be borne primarily by the consumer
sets a dangerous legal precedent for liberalisation
processes as a whole; calls on the Commission to
for these
analyse thoroughly the potential
undertakings to use some of
the intended
arrangements governing the transition to
competition in the electricity sector as a means
of funding new investment which obstructs free
competition and the emergence of new
competitors in the energy and telecommunications
sectors;

As regards international cooperation

34. Believes

that

the determining factors of
technology progress, deregulation
globalisation:
of markets,
liberalisation of key sectors and
intensification of trade in goods and of capital
markets influence the effectiveness of
the
traditional
forms of European policy, one of
them being competition policy;

The Commission shares Parliament’s view of the impact
of globalisation on competition policy.

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REACTIONS TO THE TWENTY-SEVENTH REPORT 389

35.

Is of the opinion that the resulting interdepen-
dence due to globalisation of production, of
distribution and of
trade and the pronounced
international dimension of competition problems
necessitate a new approach to EU competition
policy;

36. Favours an increasing role for the World Trade
Organisation (WTO) in international competition
policy; therefore asks the Council to mandate the
Commission — while taking account of
the
A g r e e m e n t b e t w e e n t h e E U a n d t h e
the USA regarding the
Government of
application of their competition laws and of the
successful outcome of the dispute over the merger
of McDonnell Douglas and Boeing — to pursue
negotiations with the aim of reaching a multilateral
agreement on international competition law in the
form of a supplement
to the Agreement
establishing the WTO, containing the following
rules:

a) the establishment of uniform minimum
standards
to prevent anti-competitive
behaviour such as the formation of cartels, the
abuse of a dominant market position or vertical
and horizontal restrictions on competition;

b) the requirement for all signatory States to set
up an independent regulatory authority to
ensure compliance with minimum competitive
standards, and the provision of a mechanism for
cooperation between the national competition
aut hor it ie s w it h a view t o a chiev in g
approximation of standards;

c) the requirement for all signatory States to apply
their national competition law to states of
affairs outside their own territory only when
this is clearly in the public interest;

d) the incorporation at WTO level of the principle
of ’positive comity’ as set out in Articles III to
V of the Agreement between the European
Communities and the Government of
the
United States of America regarding the
application of positive comity principles in the
enforcement of their competition rules;

e) the extension of

the dispute settlement
mechanism contained in the Agreement
establishing the WTO to cover disputes in
c o n n e c t i o n w i t h t h e e n f o r c e m e n t o f
international minimum competitive standards;

37. Considers

that

the Trade Policy Review
in
in Article III(4)
Mechanism set out
conjunction with Annex 3 of
the Agreement
establishing the WTO should be supplemented
by the requirement for any signatory state which
has been subject to such review to draw up at the
request of a contracting State a report on the
operation of its national competition system;

This interdependence implies not only closer bilateral
cooperation in the competition field but also the
establishment of a multilateral
framework for
competition rules.

The Commission fully endorses Parliament’s desire to
see trade negotiations launched which extend to the
competition field.

However, establishing minimum standards is not always
possible. The Commission therefore prefers to take a
more flexible approach aimed at adopting common
ways of combating anti-competitive behaviour which
has an effect on trade and investment. Such an
approach would include, among other things,
the
following:

— prohibition of the behaviour usually banned by
those countries which have competition rules (price
cartels; agreements on public procurement, market-
sharing, etc.);

— definition of criteria to assess practices where there
is a lesser degree of convergence (vertical
restrictions, abuses of dominant positions, etc.).

framework for competition rules
An international
established under the aegis of
the WTO should
include an undertaking by each member country to set
in place competition rules and structures. In this
context, the competition authorities should publish an
annual report, which would be one way of allowing
them to establish that
they have fulfilled that
undertaking. The publication of an annual report
could thus be imposed without it being necessary to
amend Annex 3.

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390 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

38. Believes that enlargement

to the countries of
central and eastern Europe could create tensions
the adoption of competition policy
over
legislation;
therefore welcomes the assistance
given by the Commission for the application of
anti-trust legislation in these countries;

39.

Instructs its President to forward this resolution to
the Commission and to the Council.

The Commission welcomes Parliament’s satisfaction
with the assistance granted to the CEECs with a view to
applying the competition rules.

B — Economic and Social Committee

1. Opinion of the Economic and Social Committee on the XXVIIth Report on

Competition Policy (1997) (SEC (1998) 636 final)

On 24 April 1998 the Commission decided to consult the Economic and Social Committee, under
Article 198 of the Treaty establishing the European Community, on the XXVIIth Report on
Competition Policy (1997) (SEC(1998) 636 final).

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 19 January 1999. The rapporteur was Mr
Sepi.

At its 360th plenary session (meeting of 27 January 1999), the Economic and Social Committee
adopted the following opinion by 37 votes to three, with four abstentions.

1.

Introduction

1.1

1.2

1.3

1.4

The Economic and Social Committee first and foremost welcomes the inclusion in the XXVIIth
Competition Report of a foreword by Commissioner Van Miert outlining the prospects, role
and general objectives of this policy sector.

The Committee has, in fact, always been in favour of viewing the Commission’s work on
competition policy as an instrument for pursuing the general objectives of EU economic policy
and not as an end in itself.

In numerous opinions 275 on past reports, it has been stressed that excessively juridical and
formalistic interpretations of competition policy should be avoided. Instead more emphasis
should be placed on economic and societal factors.

It is important, therefore, to highlight this new approach (which, in the Committee’s view, is not
merely formal) whereby this report is not just an account of the work carried out by the bodies
responsible, but is also an outline of the future prospects which constitute the framework for
Commission action.

275 Reports on Competition Policy

1996, rapporteur Mr Simpson, OJ C 73 of 9.3.1998
1995, rapporteur Mr Bagliano, OJ C 75 of 10.3.1997, and
1994, rapporteur Mr Sepi, OJ C 39 of 12.2.1995

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REACTIONS TO THE TWENTY-SEVENTH REPORT 391

1.5

1.6

1.7

1.8

The Committee believes that this is an important message for the business world and, more
generally, for the EU public, who can bear it in mind before making decisions.

This kind of approach is essential at a time when economic integration is about to make a
quantum leap with EMU, which will complete the single market, and when EU enlargement is
on the horizon.

In this context, it is equally important that the Commission continue its streamlining of
legislation, so as to ensure that the Treaty is applied more effectively and consistently.

Lastly, the Committee wishes to highlight the growing importance of market globalization for
several products and services. Greater weight must be given to this when assessing the effective
implementation of the Treaty articles, as when the latter were drawn up globalization had only
just begun.

1.9

The Commission must therefore take account of European companies which operate on the
international market, and must keep this broader context in mind when it applies the rules.

1.10 The Committee draws attention to the excessive time lag between its opinion and the events
illustrated in the Commission report. It therefore calls for a more streamlined presentation/
communication schedule between the Commission and the ESC, to enable opinions to impact
more quickly and effectively on the other institutions.

2.

The report

2.1

2.2

2.3

As previously stated, the report contains a political foreword by the Commissioner for
competition policy, Mr Van Miert, which highlights the relationship between competition policy
and the general economic objectives of the EU.

The report acknowledges the new situation brought into being by the Treaty of Amsterdam,
notably the new Article 7d which deals with services of general interest and their role in
furthering economic and social cohesion.

The Commission underlines the need to modernize competition policy, which is ‘still rooted in
the early years of the common market’.

2.4 With regard to the antitrust aspects, the report highlights the efforts made to modernize both
the vertical restraint policy, which should culminate in concrete legislative measures in 1998,
and the policy on horizontal agreements, the updating of which has only just begun. There are
three objectives: to adapt the legislation and to make it more effective, to ensure transparency
and to apply the principle of subsidiarity.

2.5

2.6

As for mergers, the report mentions the amendment of EEC Regulation No. 4064/89, which
makes it simpler and more effective, particularly because of the new definition of ‘joint
venture’, but also because it confirms the single-authority principle for cross-border mergers.

The Committee stresses the importance of the notice on the new definition of agreements of
‘minor importance’ which are not normally covered by Article 85(1) of the EC Treaty.

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2.7

2.8

Another innovation is the establishment of criteria and procedures for cooperation between the
Commission and national competition authorities, confirming the single-authority principle.

The Commission has taken significant action on state aid, submitting a proposal for regulation
on horizontal state aid and, subsequently, one on procedures applying to state aid, published in
1998. In this connection the Commission has issued a notice with the objective of ‘clarifying and
reinforcing the application of the state aid rules in order to reduce distortions of competition in
the single market’ 276.

2.9

The Commission states that EU enlargement will inevitably lead to considerable difficulties in
monitoring state aid.

2.10

In 1997, supervisory activity was particularly intense. The Commission dealt with 1338 cases —
a significant increase of 92 cases over 1996. However, while the total number of state aid cases
remained more or less stable, merger cases grew by 31%. 1,165 of all cases have been closed.

2.11 The Commission frequently highlights the successes of the liberalization of public services, ‘in
accordance with the principle of access for all Union citizens’. Particular progress has been
made in the transport and telecommunications sectors. The main problem for the future lies in
the liberalization of the energy sector.

2.12 The Commission report also underlines the two main problems in the field of international
relations: the adoption of the competition rules by applicant countries and cooperation with
competition authorities outside Europe, notably with the US Antitrust Commission.

3.

General comments

3.1

3.2

In emphasizing DG IV’s commitment to pursuing, amongst other things, the EU’s general social
objectives via competition policy, the foreword on strategy reveals how this aspect may have
been sometimes neglected in the past. While reiterating the considerable merits of DG IV’s
drive to modernize EU economies and businesses — not least because of the benefits to
consumers — the Committee notes that DG IV displays an excess of formalism. Moreover, it
calls on the Commission to redouble its efforts to raise public awareness of the results of its
work.

The foreword states that EMU and, might we add, the single market, will lead to a huge
restructuring of the economy. This will inevitably increase the number of mergers, although this
is not necessarily detrimental for European competitiveness in certain globalized markets —
hence the need for closer supervision to ensure that consumers and other economic operators
are not put at a disadvantage.

276 OJ C 384 of 10.12.1998

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REACTIONS TO THE TWENTY-SEVENTH REPORT 393

3.3

3.4

The Committee wishes to emphasize that the internal (EMU, single market etc.) and external
(enlargement, international cooperation) changes that are to take place over the next few years
will demand careful consideration of the relationship between the new tasks and the resources
needed to accomplish them. These new tasks and the increasing complexity of existing tasks will
require an enhanced intervention capability.

The Committee believes that reforms are needed on four fronts: more efficient working
patterns; judicious selection of cases to be handled at EU level; decentralization to the national
authorities; and the adoption of clearer and more consistent legislation.

3.5 More effective monitoring is a necessary (albeit insufficient) condition for ‘downward price
convergence’ — one of the advantages that European consumers are expecting from monetary
union.

3.6

3.7

3.8

3.9

The Committee also draws the Commission’s attention to the fact that the anticipated increase
in mergers and acquisitions will bring a need for new rules, together with new instruments to
cushion the social
impact of restructuring. The single currency could also facilitate the
formation of cartels (explicit or otherwise), and anti-trust controls will be needed.

For an effective employment policy, the Luxembourg summit suggested that ‘it is important to
focus on aid arrangements which favour economic efficiency and employment without causing
distortions of competition’. To determine suitable guidelines on the matter, the Commission
should urgently put forward its ideas on competition and other aspects and establish which
instruments to use in order to pursue them.

The foreword acknowledges this need but does not indicate how it is to be addressed. In
particular, it is not clear whether the Commission intends to treat this objective as a side-effect
of improved competitiveness, or whether — as the Luxembourg summit seems to suggest —
new, employment-oriented criteria for the Commission’s action are being drawn up.

It is also essential to modernize the instruments and procedures involved in the liberalization of
public services. The balance between the market and citizens’ access to such services needs to be
further redressed in pursuance of Article 7d of the Amsterdam Treaty.

3.10 An issue that has in the past been exclusively a matter for the Member States, but is now of
considerable interest due to the advent of the single currency and the growth in competition, is
that of taxation and social security contributions. Several countries are calling for coordination
in this field. The Committee believes that failure to coordinate could lead to serious distortions
of competition and a shift in the tax burden towards taxation of labour rather than of financial
returns.

3.11

In any event, these new areas of Community policy will increasingly require an extension of the
three-way dialogue between all the parties concerned, in view of the impact of competition on
EU social and industrial policies.

3.12 EU competition policy must be a living instrument that keeps in step with the market and with
market trends. When considering or taking decisions on this policy, careful thought must
therefore be given to the best way of tackling new circumstances (as the Commission itself
acknowledges in point 2.3). Here the Committee would highlight the concentration in the

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394 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

consumer product distribution sector and the resultant economic dependence vis-a`-vis industry,
the situation of the defence industry, or certain agreements on minimum fees; although these
areas are somewhat delicate, they could affect general competitiveness.

3.13

3.14

Since the McDonnell Douglas/Boeing case, the problem of international controls for certain
raw materials and advanced technology sectors has raised its head in many other sectors. A
global competition policy requires international control instruments, and the Committee urges
the Commission to pursue its negotiations with this aim in mind.

In several technological sectors in economic areas outside Europe, public support is far more
widespread and multi-faceted than in the EU. The Committee asks the Commission to consider
the case for introducing similar industrial policy instruments, so that European industry will not
be at a disadvantage in these sectors (space, defence, aeronautics), which are of strategic
importance to the economy and are global market players.

4.

Specific comments

4.1

4.2

4.3

Numerous Committee opinions 277 (e.g. those on state aid and vertical restraints) have already
set out the Committee’s position on individual Commission regulations and communications.
The present opinion therefore makes no comment on the latter, but merely confirms the validity
of previous opinions. It should, however, be stressed that, as recommended in previous
Committee opinions 278, the Commission’s ‘legislative’ initiatives (i.e. regulations and directives)
and ‘quasi-legislative’ initiatives (communications) are becoming more important than case law.

There is a certain tendency to off-load part of competition policy to national authorities. The
Committee agrees that this would help to avoid an overload of cases in Brussels, but believes
that the rules should be harmonized and that competition authorities should be set up in all
Member States with the same basic powers as those conferred upon the Commission by the
Treaties. The Member States must ensure that decentralization does not lead to confused or
inconsistent enforcement of the rules.

Here the Committee notes that the Commission communication mentioned in point 12 of the
report is not binding on the Member States. Close vigilance will therefore be necessary,
particularly in cases where the national authorities do not have appropriate machinery for
enforcing EU rules.

4.3.1 The Committee feels that the proposed new regulations and policy on vertical restraints should

place more emphasis on market data, rather than on abstract legal definitions.

4.4

The Committee emphasizes the need to fully revise the rules, to give legislative substance to
Commission procedures and Court rulings, thus providing European citizens with a practical,

277 State Aid OJ C 129 of 27.4.1998

Competition policy/vertical restraints OJ C 295 of 29.9.1997
Aid to shipbuilding OJ C 129 of 27.4.1998
Defence-related industries OJ C 284 of 14.9.1998
Green Paper on public procurement OJ C 287 of 22.9.1997

278 State aid OJ C 129 of 27.4.1998

Competition policy/vertical restraints OJ C 295 of 29.9.1997

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REACTIONS TO THE TWENTY-SEVENTH REPORT 395

transparent system and enabling applicant countries to adapt their systems rapidly. In this
context, the Commission’s proposals are positive, particularly the one on control procedures
and sanctions on illegitimate state aid, as it demonstrates the Commission’s aim to overcome
the differences in the commercial law of Member States.

Given the above, and the Commission’s position, an in-depth study should be made of taxation
and social security contributions, with a view to competition regulations being included in the
‘code of conduct’ that the Commission has recently proposed. The Committee would be happy
to contribute to this debate, which it hopes can be brought to a swift, fruitful conclusion.

Decisions sometimes take too long. The Committee stresses the need to set firm deadlines for
the adoption of decisions in all fields of competition policy.

The Committee observes that merger notifications have increased, but there have been fewer
infringements than in 1996, while the reverse is true for state aid. This clearly depends on the
acceleration of certain economic processes. However, it might be expedient to re-examine state
aid issues, particularly in the light of the above-mentioned restructuring.

4.5

4.6

4.7

4.8 With regard to regional state aid provided under Article 92(3) of the Treaty, the Committee
notes the Commission proposal that areas eligible for Structural Funds support under
Objectives 1 and 2 of the Funds should be the same as those areas assisted by Member States.
Whilst the Committee accepts that this should be the case generally, it also recognizes that
increased national support may be a corollary to intensifying the degree of concentration in the
application of EU structural funding, and therefore would stress that regional state aid under
Article 92(3) is a separate instrument of national economic policy which a Member State should
be able to use at its discretion where the relevant case for so doing can be established.

4.9

In this regard, it has to be said that under the current system, and despite the Commission’s
valiant efforts, there are still great imbalances in state aid, which favour the larger countries.

4.10 As announced in the annual report 279,

in November 1998 the Commission published a
‘framework’ for vocational training aid which establishes new rules and procedures, on the
grounds that some training aid can be considered as state aid. The Commission document
introduces the rather vague concept of ‘training that is in the interests of the company’.

4.11 Life-long training is essential in today’s information society. Reducing or obstructing workers’
training in this field, notwithstanding the employment and training objectives announced by the
European Council at various summits, could make it even more difficult
to respect
commitments between now and the end of 1999 — the last year of the current programming
period for the Structural Funds.

4.12 A qualitative shift of public aid towards horizontal objectives such as research, SMEs and
vocational training should be encouraged, while at the same time reducing public aid for
operating costs.

279 Point 293

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396 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

4.13 The Committee welcomes the recent agreement with the US antitrust authorities. However, the
OECD and WTO must work for truly international regulations and make sure that these are
enforced.

4.14

In order to fulfil its growing range of duties in this field, the Commission should set up in-house
research facilities and promote external studies on specific issues.

4.15 The annual report is becoming increasingly user-friendly. The flow of information throughout
the year should also be stepped up, in order to explain particularly significant initiatives and to
give details of studies which have been conducted with a view to defining the most important
cases.

4.16

In the Committee’s view, the task of introducing the Member States’ competition policies in the
candidate countries remains extremely difficult, despite the Commission’s efforts. Applying
these policies too rigorously would have dramatic social consequences, but not applying them
would seriously distort competition. A transitional stage is thus needed, to take account of the
social as well as economic aspects of enlargement in this sector.

4.17 The WTO negotiations and bilateral agreements must always take account of ILO conventions

on working conditions, which should dovetail with international trade rules.

Brussels, 27 January 1999

The President of the Economic and Social Committee
Beatrice Rangoni Machiavelli

The Secretary-General of the Economic and Social Committee
Patrick Venturini

2. Reply by the Commission to the opinion on the XXVIIth Report on Competition Policy

XXVIIth Report on competition policy (1997) —
SEC (1998) 636 final

Rapporteur: Mr. Sepi

ESC Opinion

1.

Introduction

1.1 The Committee first and foremost welcomes the
inclusion in the XXVIIth Report of a foreword by
Commissioner Van Miert outlining the prospects,
role and general objectives of this policy sector.

1.2 The Committee has, in fact, always been in favour
of viewing the Commission’s work on competition
policy as an instrument for pursuing the general
objectives of EU economic policy and not as an
end in itself.

Commission position

The Commission shares the view of the ESC that
competition policy helps to achieve the general
objectives of EU economic policy.

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REACTIONS TO THE TWENTY-SEVENTH REPORT 397

1.3

1.4

In numerous opinions on past reports, it has been
stressed that excessively juridical and formalistic
interpretations of competition policy should be
avoided. Instead more emphasis should be placed
on economic and societal factors.

It is important, therefore, to highlight this new
approach (which, in the Committee’s view, is not
merely formal) whereby this report is not just an
account of the work carried out by the bodies
responsible, but is also an outline of the future
prospects which constitute the framework for
Commission action.

The Commission has taken account of that request and,
in 1995, it remodelled the Report so that it now includes
a more ‘political’ and less formal part. However, it
should be borne in mind that competition policy
essentially consists in implementing statutory rules to
protect competition. The Report
therefore has to
reconcile the twofold need for transparency and
exactitude which may sometimes give a formal tone.

The Commission welcomes the fact that the foreword
by Mr Van Miert is viewed so positively by the ESC.
The Committee clearly identified the reason for the
innovation, i.e. to incorporate competition policy into
the context of the major objectives of the Community.

The Committee notes in particular that the Commission
should pay particular attention to the globalisation of
markets. The Commission certainly concurs with that
analysis, which is why the foreword to the next
Competition Report will be dealing with the
Commission’s international activities relating to
competition.

1.5 The Committee believes that this is an important
message for the business world and, more
generally, for the EU public, who can bear it in
mind before making decisions.

see 1.4

1.6 This kind of approach is essential at a time when
economic integration is about to make a quantum
leap with EMU, which will complete the single
market, and when EU enlargement is on the
horizon.

see 1.4

1.7

In this context, it is equally important that the
Commission continue its
streamlining of
legislation, so as to ensure that the Treaty is
applied more effectively and consistently.

1.8 Lastly, the Committee wishes to highlight the
growing importance of market globalisation for
several products and services. Greater weight must
be given to this when assessing the effective
implementation of the Treaty articles, as when
the latter were drawn up globalisation had only
just begun.

see 1.4

1.9 The Commission must therefore take account of
European companies which operate on the
international market, and must keep this broader
context in mind when it applies the rules.

see 1.4

1.10 The Committee draws attention to the excessive
time lag between its opinion and the events
illustrated in the Commission report. It therefore
calls for a more streamlined presentation/
c o m m u n i c a t i o n s c h e d u l e b e t w e e n t h e
Commission and the ESC, to enable opinions to
impact more quickly and effectively on the other
institutions.

The Commission points out that the report on the
preceding year is usually adopted at the end of March/
beginning of April of the following year, and that the
institutions receive a copy of
the adopted report
immediately. It feels it would be difficult to produce
the report earlier, in particular in view of the rules on
interdepartmental consultation and translation
constraints.

2.

The report

2.1 As previously stated, the report contains a political
foreword by the Commissioner responsible for
competition policy, Mr Van Miert, which highlights
the relationship between competition policy and
the general economic objectives of the EU.

Identical reply to that given to points 1.4 to 1.9.

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398 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

The Commission has noted this consideration.

2.2 The report acknowledges the new situation
brought into being by the Treaty of Amsterdam,
notably the new Article 7d which deals with
services of general
interest and their role in
furthering economic and social cohesion.

2.3 The Commission underlines the need to modernise
competition policy, which is ‘still rooted in the
early years of the common market’.

2.4 With regard to the antitrust aspects, the report
highlights the efforts made to modernise both the
vertical restraint policy, which should culminate in
concrete legislative measures in 1998, and the
policy on horizontal agreements, the updating of
which has only just begun. There are three
objectives: to adapt the legislation and to make it
more effective, to ensure transparency and to
apply the principle of subsidiarity.

2.5 As

for mergers,

the report mentions

the
amendment of EEC Regulation No 4064/89,
which makes it simpler and more effective,
particularly because of
the new definition of
‘joint venture’, but also because it confirms the
single-authority principle for cross-border mergers.

2.6 The Committee stresses the importance of the
notice on the new definition of agreements of
‘minor importance’ which are not normally
covered by Article 85(1) of the EC Treaty.

2.7 Another innovation is the establishment of criteria
and procedures for cooperation between the
Commission and national competition authorities,
confirming the single-authority principle.

2.8 The Commission has taken significant action on
state aid, including a proposal for a regulation on
horizontal state aid and, subsequently, one on
procedures applying to state aid, published in 1998.
In this connection the Commission has issued a
notice with the objective of
‘clarifying and
reinforcing the application of the state aid rules
in order to reduce distortions of competition in the
single market.’

2.9 The Commission states that EU enlargement will
inevitably lead to considerable difficulties in
monitoring state aid.

2.10 In 1997, supervisory activity was particularly
intense. The Commission dealt with 1 338 new
cases, a significant increase of 92 cases over 1996.
However, while the total number of state aid cases
remained more or less stable, merger cases grew by
31%. 1 165 of all cases have been closed.

2.11 The Commission frequently highlights

the
successes of the liberalisation of public services,
‘in accordance with the principle of access for all
Union citizens’. Particular progress has been made
in the transport and telecommunications sectors.
The main problem for the future lies in the
liberalisation of the energy sectors.

The Commission points out that the notice referred to
specifically states that the state aid rules are applicable
to measures relating to the direct taxation of companies.

The sharp increase in the number of mergers monitored
at Community level rose again in 1998 to reach a record
level (an increase of 65% over the preceding year),
showing once again the need to amend the rules applied
by the Commission and to adjust the resources allocated
for that purpose to the rapid evolution of the economic
environment.

On this matter the ESC fully reflects the views of the
Commission.

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REACTIONS TO THE TWENTY-SEVENTH REPORT 399

2.12 The Commission report also underlines the two
main problems in the field of
international
relations: the adoption of the competition rules
by applicant countries and cooperation with
competition authorities outside Europe, notably
with the US Antitrust Commission.

The Commission indeed considers that relations with
Central and East European countries and with the
antitrust authorities of the US (i.e. the Department of
Justice and the Federal Trade Commission) are an
important issue. Relations with the US in this area have
been close and productive and contributed to resolving
a number of difficult cases. The good results of this
ongoing cooperation were reported by the Commission
at regular intervals in the following reports to the
Council and the Parliament: first report covering the
period from 10.4.95 (when the 1991 Agreement entered
into force) to 30.6.96, second report covering the period
from 1.7.96 to 31.12.96, and third report covering the
period from 1.1.97 to 31.12.97.

3. General comments

3.1

In emphasising DG IV’s commitment to pursuing,
amongst other things, the EU’s general social
objectives via competition policy, the foreword on
strategy reveals how this aspect may have been
sometimes neglected in the past. While reiterating
the considerable merits of DG IV’s drive to
modernise EU economies and businesses — not
least because of the benefits to consumers — the
Committee notes that DG IV displays an excess of
formalism. Moreover, it calls on the Commission
to redouble its efforts to raise public awareness of
the results of its work.

The Commission believes that a misunderstanding with
the Committee has arisen. Through its competition
policy, the Commission has always pursued the general
social objectives of the Community. Its first aim is to
ensure that the European consumer enjoys the benefits
of a dynamic competitive process, whether in the form
of the lowest prices, technological innovation or the
availability of a wide range of products and services.
Furthermore, in helping to strengthen the competitive-
the European economy, Community
ness of
competition policy helps to create or maintain stable
and lasting employment.

The Committee refers to excessive formalism in the
drive to modernisation. The Commission can only deny
such an assessment of the efforts it has made in the last
few years to make its laws and regulations closer to
economic reality, e.g. the ‘de minimis’ notice or its
review of the vertical restraints policy. It is true that
there is still a ‘formal’ framework inasmuch as the
Commission’s activities are governed by the Treaty, the
regulations and an abundant case-law.

Lastly, the Committee asks the Commission to improve
communication and information. In addition to the
Competition Report,
the Commission publishes a
specialised review four times a year (Competition
Policy Newsletter),
regularly produces press
statements,
in particular via an Internet site, and
publishes its decisions in the Official Journal. The
Commission representatives,
starting with the
Commissioner responsible for competition, respond to
a number of invitations to comment on competition
policy. Consequently, the Commission would like to
know what new efforts
the Committee would
recommend?

The Committee’s observation provides an accurate
reflection of events in 1998, as regards both the
increase in the total number of transactions monitored
and the number of mergers posing competition
problems and leading either to the initiation of an in-
depth investigation or to the imposition of remedies in
the first stage of the examination.

3.2 The foreword states that EMU and, might we add,
the single market, will lead to a huge restructuring
of the economy. This will inevitably increase the
number of mergers, although this is not necessarily
detrimental
for European competitiveness in
certain globalised markets, hence the need for
closer supervision to ensure that consumers and
other economic operators are not put at a
disadvantage.

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400 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

3.3 The Committee wishes to emphasise that

the
internal (EMU, single market, etc.) and external
(enlargement, international cooperation) changes
that are to take place over the next few years will
demand careful consideration of the relationship
between the new tasks and the resources needed to
accomplish them. These new tasks and the
increasing complexity of existing tasks will
require an enhanced intervention capability.

3.4 The Committee believes that reforms are needed
on four fronts: more efficient working patterns;
judicious selection of cases to be handled at EU
level; decentralisation to the national authorities;
and the adoption of clearer and more consistent
legislation.

The Commission is very much aware of
the new
challenges with which its departments will have to
cope in spite of increasingly rare allocations of new
resources.

structures

The Commission agrees with the Committee’s proposed
reforms, especially since they are already being studied
or implemented by the Commission. As regards
the Commission is constantly
working patterns,
adapting its
to the requirements of
monitoring,
for example by setting up recently a
second directorate for state aid and a new ‘cartels’
unit. As regards the judicious selection of cases, the
Commission redirected its monitoring activities towards
cases with a clear Community interest, through its new
‘de minimis’ notice and a review of its policy on vertical
restraints. As regards decentralisation, it invited the
national competition authorities to take a more active
part in the process by adopting a notice on cooperation
between the Commission and the national authorities.
Lastly, as
improved transparency and
consistency of Community legislation, the Commission
has in recent years simplified its legal instruments and
clarified its decision-making policy through the medium
of notices (e.g. the notices accompanying the review of
the merger control regulation, and the notices on the
liberalisation of telecommunications). It is however
aware that improvements are still needed and will
present proposals in the course of 1999.

regards

3.5 More effective monitoring is a necessary (albeit
insufficient) condition for ‘downward price
convergence’ — one of
the advantages that
European consumers are expecting from
monetary union.

The Commission shares the Committee’s opinion.

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REACTIONS TO THE TWENTY-SEVENTH REPORT 401

3.6 The Committee also draws the Commission’s
attention to the fact that the anticipated increase
in mergers and acquisitions will bring a need for
together with new instruments to
new rules,
cushion the social
impact of restructuring. The
single currency could also facilitate the formation
of cartels (explicit or otherwise), and anti-trust
controls will be needed.

As regards antitrust controls which could hamper the
construction of EMU, the Commission has in recent
months displayed greater severity by imposing fines on
several price-fixing cartels or other commercial
agreements. It has also created a new unit responsible
for cartels.

The Commission considers that
increasing merger
c o n t r o l u r g e n t l y r e q u i r e s m o r e s t a f f o r a
reorganisation of departments rather than new rules,
as proposed by the Committee. The Merger Control
Regulation is the most effective instrument for a priori
control of mergers and acquisitions, especially with the
greater flexibility introduced by the review in 1997 in
the area of commitments and remedies in the first stage
of the examination. It can still be improved if necessary,
in particular by rationalising and simplifying
procedures. That will be the aim of the next review,
consultations on this topic between the Commission and
the national competition authorities already being
under way.

Lastly, the Committee calls for the development of
social instruments in connection with merger control.
The Commission shares the Committee’s concern to
ensure that mergers benefit all economic actors. That is
the intention of the thirteenth recital of the Regulation
the Commission must place its
which states that
the
appraisal within the general
achievement of
the
Treat y,
str engt hen ing the
Community’s economic and social cohesion. However,
the Commission believes in a consistent Merger Control
i.e. one which favours a competitive
Regulation,
analysis. That policy was not called into question
during the review of the Regulation.

framework of
the fundamental objectives of

in cluding t hat of

The Commission agrees with the view that competition
policy should contribute to the promotion of
employment. Indeed, a competitive industry in an
environment of undistorted competition is the best
guarantee of sustainable development of employment.

The Commission agrees with the Committee that
liberalisation policy should take account of the need
to maintain good quality services of general interest for
all Union citizens. It has consistently worked to that
end. However, it does not believe it is necessary to
adopt new legal or procedural instruments. The existing
texts are sufficient to ensure a balance is maintained
between a universal service and competition, as
evidenced in its work in the telecommunications
sector, for example.

3.7 For an effective employment policy,

suggested that

the
Luxembourg summit
is
important to focus on aid arrangements which
favour economic efficiency and employment
without causing distortions of competition’. To
determine suitable guidelines on the matter, the
Commission should urgently put forward its ideas
on competition and other aspects and establish
which instruments to use in order to pursue them.

‘it

3.8 The foreword acknowledges this need but does not
indicate how it is to be addressed. In particular, it
is not clear whether the Commission intends to
treat this objective as a side-effect of improved
competitiveness, or whether — as the Luxembourg
summit seems to suggest — new, employment-
oriented criteria for the Commission’s action are
being drawn up.

3.9

It is also essential to modernise the instruments
and procedures involved in the liberalisation of
public services. The balance between the market
and citizens’ access to such services needs to be
further redressed in pursuance of Article 7d of the
Amsterdam Treaty.

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402 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

3.10 An issue that has in the past been exclusively a
matter for the Member States, but is now of
considerable interest due to the advent of the
single currency and the growth in competition, is
that of taxation and social security contributions.
Several countries are calling for coordination in
this field. The Committee believes that failure to
coordinate could lead to serious distortions of
competition and a shift in the tax burden towards
taxation of labour rather than of financial returns.

3.11 In any event, these new areas of Community policy
will increasingly require an extension of the three-
way dialogue between all the parties concerned, in
view of the impact of competition on EU social
and industrial policies.

3.12 EU competition policy must be a living instrument
that keeps in step with the market and with market
trends. When considering or taking decisions on
this policy, careful thought must therefore be given
to the best way of tackling new circumstances (as
the Commission itself acknowledges in point 2.3).
Here the Committee would highlight
the
c on c en t ra t i on in th e c o ns um e r pr o du c t
distribution sector and the resultant economic
dependence vis-a` -vis industry, the situation of the
defence industry, or certain agreements on
minimum fees ; although these areas are
somewhat delicate,
they could affect general
competitiveness.

3.13 Since the McDonnell Douglas/Boeing case, the
problem of international controls for certain raw
materials and advanced technology sectors has
raised its head in many other sectors. A global
competition policy requires international control
instruments, and the Committee urges the
Commission to pursue its negotiations with this
aim in mind.

3.14 In several technological sectors in economic areas
is far more
outside Europe, public support
widespread and multi-faceted than in the EU.
The Committee asks the Commission to consider
the case for introducing similar industrial policy
instruments, so that European industry will not be
at a disadvantage in these sectors (space, defence,
aeronautics), which are of strategic importance to
the economy and are global market players.

4.

Specific comments

4.1 Numerous Committee opinions (e.g. those on state
aid and vertical restraints) have already set out the
Committee’s position on individual Commission
regulations and communications. The present
opinion therefore makes no comment on the
latter, but merely confirms the validity of
previous opinions. It should, however, be stressed
that, as recommended in previous Committee
opinions, the Commission’s ‘legislative’ initiatives
(i.e. regulations and directives) and ‘quasi-
legislative’
initiatives (communications) are
becoming more important than case-law.

The Commission shares the opinion that a certain
degree of coordination of taxation policies and social
security contributions
in Member States could
contribute to the proper functioning of the common
market. In this context the proceedings of the Code of
Conduct group are of particular importance.

The Commission considers that dialogue between the
interested parties on new competition developments is
of considerable value. That is why it regularly reports on
its work to Parliament or the Economic and Social
Committee where all the economic and social actors are
represented.

the risks

European competition policy is certainly able to adjust
instruments and decision-making policy to
its legal
trends. There are many examples of such
market
consistent efforts, notably the recent
taking into
account of
resulting from excessive
purchasing power in the examination of mergers in
the distribution sector, or the revised policy with regard
to vertical restraints, aimed at taking greater account of
financial criteria in order to ‘adhere’ better to market
realities. Similarly,
the policy accompanying
liberalisation of the telecommunications sector, which
poses new and complex problems of analysis or, at
international
the signing of positive comity
agreements with the US, clearly reflect the ability of
the Commission to adapt.

level,

As far as transactions (agreements, alliances or
mergers) between private firms operating in
international markets in any sector are concerned, the
Commission will continue to assert
jurisdiction
(provided that
the transactions are implemented
within the European Union) and apply to the full the
competition rules of the Treaty as it did in the Boeing/
MDD case. Moreover,
the Commission is actively
promoting the establishment of international antitrust
rules within the framework of the WTO.

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REACTIONS TO THE TWENTY-SEVENTH REPORT 403

4.2 There is a certain tendency to off-load part of
competition policy to national authorities. The
Committee agrees that this would help to avoid an
overload of cases in Brussels, but believes that the
rules should be harmonised and that competition
authorities should be set up in all Member Sates
with the same basic powers as those conferred
upon the Commission by the Treaties. The
Member States must ensure that decentralisation
does not
lead to confused or inconsistent
enforcement of the rules.

4.3 Here the Committee notes that the Commission
communication mentioned in point 12 of
the
is not binding on the Member States.
report
Close vigilance will
therefore be necessary,
particularly in cases where the national
authorities do not have appropriate machinery
for enforcing EU rules.

The Commission agrees that decentralisation must be
accompanied by certain precautions. It notes with
satisfaction that in 1998, harmonisation of the laws of
the Member States with Community law continued. The
new Danish and Dutch laws, harmonised with
Community law, entered into force on 1 January 1998.
New laws, similar to the Community rules, were
adopted in Germany and the United Kingdom. The
new Finnish law on mergers is also based on the
European model. These statutory amendments go hand
in hand with a strengthening of the powers and the
resources of the competition authorities concerned.

The Commission points out that the communication on
cooperation with the national competition authorities in
handling cases falling within the scope of Articles 85 or
86 itself provides for mechanisms aimed at avoiding
discrepancies and inconsistencies in the application of
the law on restrictive practices and dominant positions.
It assures the Committee that it keeps a close watch on
the actual application of the notice, especially as regards
national authorities without the necessary legislation to
apply Articles 85 and 86 themselves.

4.3.1 The Committee feels that

the proposed new
regulations and policy on vertical restraints
should place more emphasis on market data,
rather than on abstract legal definitions.

One of the main aims of the Commission’s new policy
on vertical restraints and of the draft implementing
regulations is precisely to give greater importance to
market data.

The Commission has responded to this point by
continuing its work in 1998 in the field of restrictive
practices and dominant positions,
in particular as
regards vertical and horizontal restraints, the greatest
progress having been achieved in the former. As regards
procedure in this area, it adopted Regulation No 2842/
98 on hearings, whilst considering the possibility of
amending Council Regulation No 17. The regulations
and notices on merger control adopted in 1998 and
ongoing proposals also form part of an extensive
modernisation plan aimed at giving statutory or quasi-
statutory value to Court case-law and Commission
procedures. The fruit of such activities included, in 1998,
Council Regulation No 1310/97, which entered into
force on 1 March 1998, Commission Regulation No 447/
98 on notifications, time limits and hearings, to which
was attached the new Form CO and several explanatory
notes, a number of interpretative notices aimed at
increasing the legal certainty of the economic operators
concerned with regard to the notion of mergers,
relevant firms, ‘full function’ joint ventures, calculation
of turnover, definition of the relevant market and
approximation of merger control procedures under the
ECSC and EC Treaties. A notice on ancillary restraints
is being drafted which will replace the 1990 notice, and a
notice on practice with regard to remedies. The
Commission believes that each of
these measures,
based on experience, is and will continue to provide
clarification for all concerned as well as applicant
countries.

It is inevitable that in the years to come cooperation in
fiscal policy will be the subject of discussion. An in-
depth study in the field of direct taxation or social
security contributions could certainly improve the
transparency of such a debate.

4.4 The Committee emphasises the need to fully revise
the rules,
to give legislative substance to
Commission procedures and Court rulings, thus
providing European citizens with a practical,
system and enabling applicant
transparent
countries to adapt their systems rapidly. In this
context, the Commission’s proposals are positive,
particularly the one on control procedures and
sanctions on illegitimate state aid, as
it
demonstrates the Commission’s aim to overcome
the differences in the commercial law of Member
States.

4.5 Given the above, and the Commission’s position,
an in-depth study should be made of taxation and
social security contributions, with a view to
competition regulations being included in the
‘code of conduct’
the Commission has
recently proposed. The Committee would be
happy to contribute to this debate, which it hopes
can be brought to a swift, fruitful conclusion.

that

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404 APPLICATION OF THE COMPETITION RULES IN THE EUROPEAN UNION

4.6 Decisions

sometimes

take too long. The
Committee stresses the need to set firm deadlines
for the adoption of decisions in all
fields of
competition policy.

4.7 The Committee observes that merger notifications
have increased, but
there have been fewer
infringements than in 1996, while the reverse is
true for state aid. This clearly depends on the
acceleration of certain economic processes.
However,
it might be expedient to re-examine
state aid issues, particularly in the light of the
above-mentioned restructuring.

4.8 With regard to regional state aid provided for
under Article 92(3) of the Treaty, the Committee
notes the Commission proposal that areas eligible
for Structural Funds support under Objectives 1
and 2 of the Funds should be the same as those
areas assisted by Member States. Whilst
the
Committee accepts that this should be the case
generally, it also recognises that increased national
support may be a corollary to intensifying the
degree of concentration in the application of EU
structural funds, and therefore would stress that
regional state aid under Article 92(3) is a separate
instrument of national economic policy which a
its
Member State should be able to use at
discretion where the relevant case for so doing
can be established.

4.9

In this regard, it has to be said that under the
current system, and despite the Commission’s
valiant efforts, there are still great imbalances in
state aid, which favour the larger countries.

4.10 As announced in the annual report, in November
1998 the Commission published a ‘framework’ for
vocational training aid which establishes new rules
and procedures, on the grounds that some training
aid can be considered state aid. The Commission
document introduces the rather vague concept of
‘training that is in the interests of the company’.

The Commission is aware that some procedures are too
lengthy and is considering ways of shortening them.
That is why, for example, it recently modified certain
itself deadlines for
procedural rules. It also set
responding in cases of structural
joint ventures. It
considers, however, that cases should be dealt with
still more quickly and is studying this matter in the
context of its modernisation project.

The Commission would point out
in reply to the
Committee’s comment on the merger statistics that
Community control
takes place a priori. Thus,
infringements cannot exist. The
technically,
Commission prohibits or authorises on certain
conditions merger plans which,
if they went ahead,
would create or strengthen a dominant position.
Nonetheless, the Commission refers to its reply in
point 3.2 in which it underlined the increase in mergers
liable to harm competition in 1998.

Like the Committee, the Commission believes that
regional aid must be an effective regional development
tool as eligibility for regional aid gives the regions
concerned an edge over other, ineligible regions. Too
broad a cover would dull that edge, making the aid
ineffective and resulting in a poor allocation of public
resources. The Commission therefore plans to control
regional aid more effectively, in accordance with the
Treaty which in principle bans state aid although
providing for exceptions
to restrictive
interpretation.

subject

The Commission shares this concern; however, it notes
that since 1994 there has been a gradual and continuing
reduction in the imbalances.

The framework for training aid distinguishes between
two types of training, from the standpoint of their
external aspects: general
training which provides
workers with additional skills that are directly
transferable to other firms and specific training which
meets the specific needs of the employer with regard to
the employee and the job. The framework therefore
takes the view that the level of aid needed to encourage
firms to implement training projects is greater in the
former case than in the latter.

4.11 Life-long training is essential

in today’s
information society. Reducing or obstructing
workers’ training in this field, notwithstanding
the employment and training objectives
announced by the European Council at various
summits, could make it even more difficult to
respect commitments between now and the end of
1999 — the last year of the current programming
period for the Structural Funds.

The Commission considers that the compatibility rules
contained in the framework make it possible to
encourage training of workers through large amounts
of state aid compared with its usual practice but having
an effect on competition and trade between Member
States that is in proportion to its objectives. As stated in
point 36 of the framework, the Commission does not
plan to question Structural Fund commitments until the
end of 1999.

4.12 A qualitative shift of public aid towards horizontal
objectives such as research, SMEs and vocational
training should be encouraged, while at the same
time reducing public aid for operating costs.

The Commission shares the Committee’s opinion,
although it is necessary to ensure that the shift in
question does not lead to misuse. The Commission has
improved the practical aspects of its monitoring of
research aid and recently adopted and published a
framework on training aid.

COMPETITION REPORT 1998

REACTIONS TO THE TWENTY-SEVENTH REPORT 405

4.13 The Committee welcomes the recent agreement
with the US antitrust authorities. However, the
O E C D a n d W TO m u s t w o r k f o r
t r u l y
international regulations and make sure that
these are enforced.

4.14 In order to fulfil its growing range of duties in this
field,
the Commission should set up in-house
research facilities and promote external studies
on specific issues.

4.15 The annual report is becoming increasingly user-
friendly. The flow of information throughout the
year should also be stepped up, in order to explain
particularly significant
initiatives and to give
details of studies which have been conducted
with a view to defining the most important cases.

4.16 In the Committee’s view, the task of introducing
the Member States’ competition policies in the
candidate countries remains extremely difficult,
despite the Commission’s efforts. Applying these
policies too rigorously would have dramatic social
consequences, but not applying them would
seriously distort competition. A transitional stage
is thus needed, to take account of the social as well
as economic aspects of enlargement in this sector.

4.17 The WTO negotiations and bilateral agreements
must always take account of ILO conventions on
working conditions, which should dovetail with
international trade rules.

The Commission also considers that deeper bilateral
cooperation should be supplemented by the creation of
an international
framework of competition rules.
Discussions on this matter have started within the
WTO working party on the relationships between trade
and competition policy. The work is being conducted in
i n t e r n a t i o n a l
c l o s e c o o p e r a t i o n w i t h o t h e r
organisations, including the OECD.

The setting-up of an international
framework for
competition rules calls for considerable reflection. The
Commission is making such efforts both within the
Union (Commission Committee of experts on trade and
competition) and outside (in its bilateral relations with
its main partners, and also multilaterally with the WTO,
or plurilaterally with the OECD).

The Commission welcomes the interest shown by the
Committee in the annual report. In reply to its request
for further information, the Commission would ask the
Committee to refer to its reply to point 3.1.

For the Commission it is important that companies and
public authorities in the candidate countries have
become used to a competition discipline similar to
that of the Community well before accession. This
requires not only the necessary alignment of
competition rules, but also an effective and credible
enforcement of these rules. The Commission does not,
however, require blind copying of Community rules.
Due account must be taken of the particular problems
inherited from former, centrally-planned economies
and of
the generally low level of economic
development of the countries concerned. Necessary
tools for a reasonable, progressive and dynamic
application of the Community competition principles
before accession are therefore provided. This applies
for example to state aid, in particular as regards the
possibility of granting regional aid and restructuring aid
to the steel sector. What is important, however, is that
realistic targets are set for moving gradually towards
competitive markets. The Commission is of the opinion
that a vigorous application of competition policy paves
the way for sustained economic growth, thereby helping
these countries also to alleviate the acknowledged social
problems. Furthermore, there are other Community
policies, such as regional policy,
that will directly
contribute to a solution to the problems.

COMPETITION REPORT 1998

European Commission

XXVIIIth Report on Competition Policy — 1998

Luxembourg: Office for Official Publications of the European Communities

1999 — 405 pp. — 16.2 (cid:143) 22.9 cm

ISBN 92-828-7198-3

Price (excluding VAT) in Luxembourg: EUR 22

The Report on Competition Policy is published annually by the European Commission in response to
the request of the European Parliament made by a Resolution of 7 June 1971. This Report, which is
published in conjunction with the General Report on the Activities of the European Union, is
designed to give a general view of the competition policy followed during the past year.

o

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Price  (excluding VAT) in Luxembourg:  EUR  22

ISBN  1E-flEfl-7nfl-3

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