Commission staff working document - Annex to the report from the Commission Report on Competition Policy 2007 {COM(2008) 368}
Date: 2008-06-16
Institutions: European Commission
Subjects: competition policy, control of State aid, merger control, report

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 16.6.2008 
SEC(2008) 2038 

COMMISSION STAFF WORKING DOCUMENT 

Annex to the 

REPORT FROM THE COMMISSION 

Report on Competition Policy 2007 

{COM(2008) 368} 

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TABLE OF CONTENTS 

I – Instruments............................................................................................................................ 9 

A – Antitrust – Articles 81, 82 and 86 EC ................................................................................. 9 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

2. 

2.1. 

2.2. 

Applicable rules ........................................................................................................... 9 

Continuing the fight against cartels.............................................................................. 9 

Other agreements and concerted practices................................................................... 9 

Abuse of dominant positions (Article 82 EC)............................................................ 10 

State measures............................................................................................................ 10 

Application of Articles 81, 82 and 86 EC .................................................................. 10 

Cartels ........................................................................................................................ 10 

Other agreements and concerted practices................................................................. 12 

2.2.1.  Antitrust enforcement in the financial services sector ............................................... 12 

2.3. 

Abuse of dominant positions (Article 82 EC)............................................................ 13 

2.3.1.  Margin squeeze in a regulated sector ......................................................................... 13 

2.3.2.  Commission Decision providing guidance on long-term agreements in the Distrigas 

case............................................................................................................................. 13 

2.4. 

State measures............................................................................................................ 14 

2.4.1.  Full application of competition law in the regulated electronic communications 

sector .......................................................................................................................... 14 

2.4.2.  Effective use of the periodic penalty payments tool under Article 228 EC............... 15 

2.4.3. 

Infringement proceedings concerning failure to implement the Financial 
Transparency Directive .............................................................................................. 16 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

Selected Court cases................................................................................................... 16 

The CFI reiterates settled case law on refusal to supply in the Microsoft case ......... 16 

The CFI upholds the Commission's decision on predatory pricing by Wanadoo ...... 17 

The CFI finds that Commission letters cannot be appealed in the context of the 
Article 7 procedure..................................................................................................... 18 

CFI judgment in Akzo defines the limits of legal professional privilege ................... 19 

CFI judgment in the DSD case concerning abuses within the German system for the 
collection and recycling of packaging waste ............................................................. 20 

B – Merger control ................................................................................................................... 21 

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1. 

1.1. 

1.2. 

1.3. 

2. 

2.1. 

2.2. 

3. 

Applicable rules ......................................................................................................... 21 

Guidance on jurisdiction in merger control: Commission Consolidated Notice on 
Jurisdiction ................................................................................................................. 21 

Guidance on the assessment of mergers: Commission Guidelines on Non-horizontal 
mergers....................................................................................................................... 22 

Guidance on the assessment of mergers: draft Revised Commission Notice on 
Remedies .................................................................................................................... 23 

Application of the merger control rules ..................................................................... 24 

Overview .................................................................................................................... 24 

Remedies in non-horizontal cases.............................................................................. 25 

Selected Court cases................................................................................................... 26 

3.1. 

Jurisdiction in merger cases ....................................................................................... 26 

3.1.1.  Cementbouw v Commission ...................................................................................... 26 

3.2. 

Substantive assessment of mergers ............................................................................ 27 

3.2.1.  Sun Chemicals and others v Commission.................................................................. 27 

3.3. 

Damages for alleged losses resulting from a Commission merger decision.............. 28 

3.3.1.  Schneider Electric v Commission .............................................................................. 28 

C – State aid control ................................................................................................................. 29 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

2.7. 

2.8. 

2.9. 

Applicable rules ......................................................................................................... 29 

Application of the State aid rules ............................................................................... 30 

Overview .................................................................................................................... 30 

Applying regional aid rules........................................................................................ 31 

Applying the State aid framework for Research, Development and Innovation 
(R&D&I) .................................................................................................................... 32 

Assessing risk capital financing for SMEs................................................................. 33 

Assessing training aid ................................................................................................ 33 

Taxation cases ............................................................................................................ 34 

Aid for rescuing and restructuring firms in difficulty................................................ 34 

Aid for environmental protection............................................................................... 35 

Enforcing and monitoring State aid decisions ........................................................... 36 

2.10. 

The application of State aid rules in particular sectors .............................................. 37 

2.10.1.  Steel............................................................................................................................ 37 

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2.10.2.  Shipbuilding ............................................................................................................... 38 

2.10.3.  Coal ............................................................................................................................ 38 

2.10.4.  Agriculture ................................................................................................................. 39 

2.10.5.  Fisheries ..................................................................................................................... 39 

3. 

3.1. 

3.2. 

3.3. 

Selected Court cases................................................................................................... 40 

Definition of aid ......................................................................................................... 40 

Procedural issues........................................................................................................ 40 

Recovery of aid .......................................................................................................... 43 

D - The role of competition policy in the wider policy framework ......................................... 44 

II – Sector Developments......................................................................................................... 45 

A – Energy ............................................................................................................................... 45 

1. 

2. 

2.1. 

2.2. 

2.3. 

Overview of the sector ............................................................................................... 45 

Policy developments .................................................................................................. 46 

Antitrust enforcement................................................................................................. 47 

Mergers: concurrent application of internal market and competition rules (Article 21 
of the Merger Regulation).......................................................................................... 49 

State aid: investigations opened in respect of regulated electricity tariffs that may 
favour certain undertakings........................................................................................ 50 

B – Financial services .............................................................................................................. 52 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

2.7. 

Overview of the sector ............................................................................................... 52 

Policy developments .................................................................................................. 53 

Sector inquiry into retail banking............................................................................... 53 

The Commission prohibits MasterCard's Multilateral Interchange Fees for certain 
cross-border card payments in the EEA..................................................................... 54 

Morgan Stanley/Visa International and Visa Europe................................................. 55 

Groupement des Cartes Bancaires ............................................................................. 57 

Business insurance sector inquiry .............................................................................. 58 

State aid in the financial services sector .................................................................... 59 

Mergers in the financial services sector ..................................................................... 61 

C – Electronic communications ............................................................................................... 61 

1. 

Overview of the sector ............................................................................................... 61 

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2. 

2.1. 

2.2. 

2.3. 

Policy developments .................................................................................................. 62 

Review of the Regulatory Framework: reduction of markets subject to ex ante 
regulation.................................................................................................................... 62 

Application of the Regulatory Framework and other policy developments .............. 64 

Developments in the area of State aid........................................................................ 65 

2.3.1.  Support for broadband services.................................................................................. 65 

2.3.2.  Aid to Greek incumbent operator............................................................................... 67 

2.4. 

Merger Control........................................................................................................... 67 

D – Information technology ..................................................................................................... 68 

1. 

2. 

Overview of the sector ............................................................................................... 68 

Policy developments .................................................................................................. 69 

E – Media and Sport................................................................................................................. 71 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

Overview of the sector ............................................................................................... 71 

Policy developments .................................................................................................. 73 

Digital Broadcasting................................................................................................... 73 

Public service broadcasting........................................................................................ 74 

Rights management and online distribution............................................................... 75 

Premium sport content ............................................................................................... 76 

2.5.  White Paper on Sport ................................................................................................. 77 

2.6. 

2.7. 

Film and other audiovisual works .............................................................................. 77 

Application of merger control.................................................................................... 78 

F – Automotive industry .......................................................................................................... 78 

1. 

2. 

2.1. 

2.2. 

2.3. 

Overview of the sector ............................................................................................... 78 

Policy developments .................................................................................................. 79 

Antitrust enforcement................................................................................................. 80 

Merger Control........................................................................................................... 81 

State aid control.......................................................................................................... 82 

G – Transport ........................................................................................................................... 83 

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2. 

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Overview of the sector ............................................................................................... 83 

Policy developments .................................................................................................. 85 

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2.1. 

2.2. 

Road Transport........................................................................................................... 85 

Rail Transport and Combined Transport.................................................................... 86 

2.2.1.  Railways liberalisation: further integration of European rail transport markets........ 86 

2.2.2.  Applying Merger Rules to rail transport – DeutscheBahn /EWS .............................. 87 

2.2.3.  Applying State aid rules to rail transport ................................................................... 88 

2.3. 

2.4. 

Inland Navigation....................................................................................................... 88 

Maritime Transport .................................................................................................... 88 

2.4.1.  Policy developments .................................................................................................. 88 

2.4.2.  Applying State Aid Rules to Maritime Transport ...................................................... 89 

2.5. 

Aviation...................................................................................................................... 90 

2.5.1.  Enforcement of Article 81 – SkyTeam airline alliance.............................................. 90 

2.5.2.  Applying merger rules to aviation.............................................................................. 91 

2.5.3. 

International Aviation Policy – Application of Regulation (EC) No 847/2004......... 92 

2.5.4. 

International aviation policy – application of the Horizontal Mandate ..................... 92 

2.5.5.  Applying State Aid Rules to Air Transport................................................................ 93 

2.5.6. 

International aviation policy – EU-US open aviation agreement .............................. 94 

H – Postal services ................................................................................................................... 94 

1. 

2. 

2.1. 

2.2. 

Overview of the sector ............................................................................................... 94 

Policy developments .................................................................................................. 95 

Objectives of the Commission ................................................................................... 95 

Initiatives of the Commission .................................................................................... 96 

III – The European Competition Network and cooperation with National Courts .................. 98 

A – General overview .............................................................................................................. 98 

1. 

1.1. 

COOPERATION ON POLICY ISSUES ................................................................... 99 

Further convergence of national laws and instruments in the context of enforcement 
of Regulation 1/2003 by NCAs................................................................................ 100 

1.2. 

Cooperation in individual cases ............................................................................... 100 

1.2.1.  Case allocation ......................................................................................................... 101 

1.2.2.  Coherent application of the rules ............................................................................. 101 

2. 

Application of EU Competition rules by National Courts In The EU: Report on the 
implementation of Article 15 of Regulation 1/2003 ................................................ 102 

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2.1. 

Assistance in the form of information or in the form of an opinion ........................ 102 

2.1.1.  The opinions requested by Swedish courts .............................................................. 102 

2.1.2.  The opinion requested by a Spanish court ............................................................... 103 

2.2. 

2.3. 

2.4. 

Judgments of national courts.................................................................................... 104 

Amicus curiae intervention under Article 15(3) of Regulation 1/2003 ................... 104 

Financing the training of national judges in EU competition law ........................... 105 

IV – International activities.................................................................................................... 105 

A – Enlargement, Western Balkans and Neighbourhood policy ........................................... 105 

B – Bilateral co-operation ...................................................................................................... 106 

1. 

2. 

Agreements with the USA, Canada and Japan......................................................... 106 

Cooperation with other countries and regions ......................................................... 107 

C – Multilateral co-operation ................................................................................................. 108 

1. 

International Competition Network ......................................................................... 108 

1.1.  Working Groups....................................................................................................... 108 

1.2. 

OECD....................................................................................................................... 109 

V – Outlook for 2008 ............................................................................................................. 110 

A – Antitrust........................................................................................................................... 110 

B – Mergers............................................................................................................................ 110 

C – State aid ........................................................................................................................... 110 

D – International activities ..................................................................................................... 110 

E – Sector Developments ....................................................................................................... 111 

1. 

2. 

3. 

4. 

5. 

6. 

Electronic communications...................................................................................... 111 

Information Technology........................................................................................... 112 

MEDIA..................................................................................................................... 112 

Health-related markets ............................................................................................. 113 

Financial services sector .......................................................................................... 114 

Postal services .......................................................................................................... 115 

VI – Interinstitutional cooperation ......................................................................................... 116 

1. 

European Parliament ................................................................................................ 116 

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2. 

3. 

Council ..................................................................................................................... 117 

European Economic and Social Committee and Committee of the Regions........... 117 

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I – Instruments 

A – ANTITRUST – ARTICLES 81, 82 AND 86 EC 

1. 

APPLICABLE RULES 

1.1. 

Continuing the fight against cartels 

1. 

2. 

A  key  aspect  in  the  detection  of  cartels  is  the  Commission  leniency  policy,  which 
offers incentives to cartelists to report their illegal activities. December 2006 saw the 
introduction of a revised leniency notice (the 2006 Notice)1. The 2006 Notice is the 
Commission's third leniency notice following earlier versions in 1996 and 2002, and 
applications  under  the  revised  notice  have  been  forthcoming  in  2007.  The 
Commission  received  20  applications  for  immunity2  and  11  applications  for  a 
reduction of fines under the 2006 Notice from the date of its introduction to the end 
of 2007. 

In  particular,  the  2006  Notice  subjects  not  only  immunity  applicants  but  also 
applicants for a reduction of fines to a number of conditions in order to qualify for 
lenient treatment. Accordingly, all applicants must cooperate fully and continuously 
with the Commission, must immediately cease participation in the infringement and 
must  not  have  tampered  with  evidence  or  disclosed  the  fact  or  content  of  their 
application.  One  remaining  distinction  between  conditions  for  immunity  and 
reduction  of  fines  is  that  applicants  that  have  coerced  other  undertakings  to 
participate in the cartel will not be eligible for immunity, although they may qualify 
for reduction. The Commission carefully assesses compliance with these cumulative 
conditions. 

1.2. 

Other agreements and concerted practices 

3. 

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The Commission's 2005 Green Paper on damages actions for breach of the EC anti-
trust rules received strong support in a European Parliament resolution calling on the 
Commission  to  prepare  a  White  Paper  with  detailed  proposals  to  ensure  more 
effective antitrust damages claims3. In preparing this White Paper, the Commission 
consulted  widely  with  representatives  of  Member  State  governments,  judges  from 
national  courts,  representatives  of  industry,  consumer  associations,  the  legal 
community  and  many  other  stakeholders.  In  parallel,  the  Commission  services 
drafted an extensive impact assessment report analysing the problems in this area and 
possible  solutions.  In  order  to  assist  the  Commission  services  in  this  task,  a 

Commission notice on immunity from fines and reduction of fines in cartel cases, OJ C 298, 8.12.2006, 
p. 17. 
Where several applications for immunity have been received for the same alleged infringement, the first 
application  is  counted  as  an  immunity  application  and  the  subsequent  ones  as  applications  for  a 
reduction of fines unless the first application is rejected. 
European Parliament resolution of 25 April 2007 on the Green Paper on Damages actions for breach of 
the 
at: 
http://www.europarl.europa.eu/oeil/file.jsp?id=5378362 

(2006/2207 

available 

antitrust 

(INI)), 

rules 

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consortium  of  independent  experts  drafted  a  very  comprehensive  study  on  the 
welfare  impact  and  potential  scenarios  involved  in  more  effective  claims  for 
damages. Both the impact assessment report and the study are due to be published at 
the same time as the White Paper. 

4. 

Following a consultation, on 13 September the Commission adopted draft Guidelines 
on the application of Article 81 of the EC Treaty to maritime transport services, with 
a  view  to  final  adoption  in  20084.  The  Guidelines  set  out  the  principles  that  the 
Commission  will  follow  when  defining  markets  and  assessing  cooperation 
agreements  involving  maritime  cabotage,  liner  and/or  tramp  vessel  services, 
following  the  repeal  of  Regulation  4056/86  containing  the  liner  conference  block 
exemption, and the extension of the scope of Regulation 1/2003 to include cabotage 
and tramp vessel services. 

1.3. 

Abuse of dominant positions (Article 82 EC) 

5. 

During 2007, the Commission services continued their reflections on the feedback it 
received in response to the DG COMP Discussion Paper on the application of Article 
82  of  the  Treaty  to  exclusionary  abuses,  and  are  in  the  process  of  analysing  the 
comments received and of the Commission's ongoing enforcement experience in this 
area.  In  this  context,  the  judgment  of  the  Court  of  First  Instance  in  September 
upholding the Commission's substantive finding that Microsoft abused its dominant 
position,  thereby  supporting  the  Commission's  analytical  approach  in  the  areas  of 
tying and refusal to supply, is a welcome development. 

1.4. 

State measures 

6. 

As  part  of  the  Single  Market  Review  concluded  by  the  Commission  on  20 
November,  particular  attention  was  given  to  the  issue  of  services  of  general 
economic interest (SGIs), including social services of general interest (SSGI) in the 
form of a Communication5 which notes that, in the field of State aid, the decision and 
the  framework  on  State  aid  in  the  form  of  public  service  compensation  adopted  in 
2005  (often  referred  to  as  the  'Altmark  package'),  has  already  made  a  significant 
contribution  to  simplifying  the  applicable  rules.  An  accompanying  Staff  Working 
Paper  provides  technical  guidance  in  the  form  of  answers  to  frequently  asked 
questions, including on the basis of legislation, case law and Commission decisions 
related to SGEIs and in particular SSGI6. 

2. 

APPLICATION OF ARTICLES 81, 82 AND 86 EC 

2.1. 

Cartels 

7. 

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The Commission continued to attach high priority to the detection, investigation and 
sanctioning  of  cartels  in  2007.  The  focus  of  the  Commission's  activities  was  on 
significant hard core cartels, in particular those with a European or worldwide scope. 

OJ C 215, 14.9.2007, p. 3; see also Press release IP/07/1325, 13.9.2007. 
See COM(2007) 725 final. 
SEC(2007) 1516. 

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The  Commission  issued  eight  final  decisions7  in  which  it  fined  418  undertakings  a 
total  of  EUR  3 334 million  (compared  with  2006  when  there  were  seven  final 
decisions,  419  undertakings  fined  and  a  total  of  EUR  1 846 million).  The 
Commission imposed the highest fine per cartel case to date of EUR 992 million in 
the  Elevators  and  Escalators  case  and  also,  in  the  same  case,  the  highest  fine  per 
undertaking  for  a  cartel  violation  with  the  imposition  of  a  penalty  of  EUR 
477 million on the ThyssenKrupp group. 

The  Commission  has  been  able  to  detect  a  number  of  cartels  on  its  own  initiative. 
The recent cases of Elevators and Escalators, Fasteners, Professional Videotape and 
Flat  Glass  demonstrate  that,  although  the  Commission's  leniency  policy  is  an 
effective  tool  in  detecting  cartels,  the  Commission  is  not  dependant  on  evidence 
provided  by  leniency  applicants  to  uncover  cartel  behaviour.  The  Commission 
continues to place considerable weight on such ex officio investigations, which may 
result  from  market  monitoring,  sector  enquiries,  complaints  and  via  the  national 
competition authorities in the European Competition Network. 

On-site  inspections  covering  a  wide  variety  of  sectors  included  calcium  carbide10, 
transformers11,  marine  hoses12,  hardware  for  windows  and  doors13, 
power 
international freight forwarding14, cathode ray tubes15 and exotic fruit16. A number of 
these  inspections  were  coordinated  with  other  competition  authorities  around  the 
world.  In  addition,  in  the  Marine  Hoses  case,  which  itself  involved  cooperation 
between the EU, US, UK and Japanese authorities, the Commission exercised for the 
first time its power to conduct a search of a private home. 

The  Commission  has  also  sought  to  impose  appropriate  sanctions  to  punish  those 
participating  in  cartels  and  to  ensure  effective  deterrence  from  entering  into  cartel 
behaviour. The new Guidelines on Fines17, introduced in 2006, were applied for the 
first  time  in  Professional  Videotape  and  employed  subsequently  in  Flat  Glass  and 
Chloroprene  Rubber.  Under  the  new  guidelines,  fines  better  reflect  the  overall 
economic  significance  of  the  infringement  as  well  as  the  respective  shares  of  the 
companies involved. 

Case  COMP/38.899  Gas  Insulated  Switchgear  Commission  decision,  24.1.2007;  Case  COMP/38.823 
Elevators  and  Escalators  Commission  decision,  21.2.2007;  Case  COMP/37.766  Netherlands  Beer 
Commission  decision,  18.4.2007;  Case  COMP/39.168  Hard  Haberdashery:Fasteners  Commission 
decision,  19.9.2007;  Case  COMP/38.710  Bitumen  Spain  Commission  decision  3.10.2007;  Case 
COMP/38.432  Professional  Videotapes  Commission  decision,  20.11.2007;  Case  COMP/39.165  Flat 
Glass  Commission  decision,  28.11.2007;  Case  COMP/38.629  Chloroprene  Rubber  Commission 
decision, 5.12.2007. 
This figure does not include the companies that received immunity from fines for cooperation under the 
Leniency Notice. 
This figure includes two undertakings where decisions have been readopted. 
MEMO/07/22, 18.1.2007. 
MEMO/07/53, 13.2.2007. 
MEMO/07/163, 3.5.2007. 
MEMO/07/276, 4.7.2007. 
MEMO/07/406, 11.10.2007. 
MEMO/07/453, 8.11.2007. 
MEMO/07/534, 30.11.2007. 
Guidelines  on  the  method  of  setting  fines  imposed  pursuant  to  Article  23(2)(a)  of  Regulation 
No 1/2003. OJ C 210, 1.9.2006, pp. 2-5. 

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11. 

12. 

13. 

Three  points  in  particular  emerge  from  the  Commission's  fining  decisions.  First, 
there  continued  to  be  a  significant  increase  in  the  amount  of  the  fine  imposed  on 
repeat offenders. In Elevators and Escalators the fines for ThyssenKrupp companies 
were  increased  by  50%,  in  Gas  Insulated  Switchgear  ABB's  fine  was  increased  by 
50% and in Chloroprene Rubber the fines of Bayer and ENI were increased by 50% 
and  60%  respectively.  The  seriousness  with  which  the  Commission  views  repeat 
offences is reflected in the new Guidelines on Fines, which provide for increases of 
up to 100% for such instances of recidivism. 

Second,  obstructing  a  Commission  investigation  during  on-site  inspections  incurs 
severe  penalties.  Sony's  fine  in  the  Professional  Videotape  case  was  increased  by 
30%  for  a  refusal  by  one  of  its  employees  to  answer  questions  when  under  an 
obligation  to  respond,  while  another  Sony  employee  was  found  to  have  shredded 
documents during the inspection. 

Third,  leaders  of  the  cartel  are  likely  to  have  the  level  of  their  fines  increased.  In 
Bitumen  Spain,  the  fine  for  Repsol  and  Proas  was  increased  by  30%  for  their 
leadership  role.  In  Gas  Insulated  Switchgear,  fines  were  increased  by  50%  for 
Siemens, Alstom and Areva for their leadership role as secretary of the cartel. 

2.2. 

Other agreements and concerted practices 

2.2.1.  Antitrust enforcement in the financial services sector 

14. 

15. 

16. 

The  decisions  adopted  by  the  Commission  during  the  second  half  of  2007  in 
Groupement  des  Cartes  Bancaires  (see  II.B.2.4.),  Morgan  Stanley/Visa  (see 
II.B.2.3.) and MasterCard (see II.B.2.2.) provide useful guidance with respect to the 
competition  principles  to  be  applied  to  the  payments  sector.  Such  guidance  is 
important for the integration of the payments, especially so in the context of Single 
Euro Payments Area (SEPA). SEPA is an initiative set up by the European banking 
industry,  represented  by  the  European  Payments  Council,  to  create  an  integrated 
market  for  payment  services  which  is  subject  to  effective  competition  and  where 
there is no distinction between cross-border and national payments within Europe. 

The  decision  in  Groupement  des  Cartes  Bancaires  illustrates  that  behaviour  by  a 
payment card scheme that forecloses national markets by keeping competitors at bay 
will  not  be  tolerated.  The  decision  in  Morgan  Stanley/Visa  makes  clear  that 
unjustified  exclusion  from  the  market  of  certain  members  without  valid  reasons 
which  leads  to  foreclosure  is  prohibited.  It  signals  that  membership  rules  and 
competition clauses are likely to be closely scrutinised by competition authorities to 
ensure the non-discriminatory and proportional application of such schemes. 

Finally,  in  MasterCard,  the  Commission  analysed  MasterCard's  cross  border  intra-
EEA  multilateral  interchange  fees  (MIFs)  for  MasterCard  branded  consumer  credit 
and  charge  cards  and  for  MasterCard  or  Maestro  branded  debit  cards.  While  the 
decision  does  not  declare  MIFs  illegal  as  such,  it  does  make  clear  that,  in  order  to 
comply  with  Article  81  EC,  such  fees  must  contribute  to  technical  and  economic 
progress and benefit consumers. 

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2.3. 

Abuse of dominant positions (Article 82 EC) 

2.3.1.  Margin squeeze in a regulated sector 

17. 

18. 

19. 

On  4  July,  the  Commission  adopted  a  decision  against  the  Spanish  incumbent 
telecoms operator Telefónica for a very serious abuse of its dominant position in the 
Spanish  broadband  market.  The  fine  imposed  on  Telefónica  amounted  to  EUR 
151 875 000. The Commission found that Telefónica had imposed a margin squeeze 
between the wholesale prices it charged to competitors and the retail prices it charged 
to  its  own  customers  from  2001  to  2006.  Telefónica's  competitors  were  forced  to 
make  losses  if  they  wanted  to  match  Telefónica's  retail  prices.  The  conduct 
contributed to consumers paying among the highest retail prices in the fifteen old EU 
Member States (EU-15), and broadband penetration remained well below the average 
EU-15 rate. The abuse ended with the Spanish regulator's decision of 21 December 
2006 to lower Telefónica's wholesale prices (a reduction of between 22% and 61% 
depending on the download speed of the offer). 

This  decision  shows  that  the  Commission  is  ready  to  act  forcefully  against  price 
abuses, even in a scenario where the industry under examination is subject to sector-
specific regulation. In the present case, regulation did not preclude Telefónica from 
taking the initiative to avoid the margin squeeze by decreasing its wholesale prices or 
increasing its retail prices. 

Both Telefónica and the Spanish Government have appealed against the Commission 
decision  before  the  Court  of  First  Instance  (CFI)18.  The  decision  also  gave  rise  to 
private  enforcement  for  harm  caused  by  violations  against  competition  law,  which 
the  Commission  in  principle  encourages19.  For  example,  on  6  November  the 
consumers  association,  Ausbanc  Consumo,  filed  a  claim  against  Telefónica  for 
damages  for  harm  caused  to  all  consumers  and  the  Spanish  market.  According  to 
Ausbanc, the harm caused amounted to EUR 458 million. 

2.3.2.  Commission Decision providing guidance on long-term agreements in the Distrigas 

case20 

20. 

21. 

On 11 October the Commission adopted an Article 9 Decision concerning the long-
term  gas  supply  contracts  concluded  by  Distrigas  in  Belgium.  Under  this  decision, 
the Commission makes legally binding until 2011 a set of commitments offered by 
Distrigas  to  address  concerns  raised  by  the  Commission  in  the  course  of  an 
investigation under Article 82. 

The Commission’s concerns were that Distrigas could be dominant on the market for 
the  supply  of  gas  to  large  customers  in  Belgium  and  that  its  long-term  gas  supply 
contracts in this market could make it difficult for other gas suppliers to build up a 
portfolio of customers. The concerns focused on two related factors: the duration of 
the contracts and the volumes of gas tied to Distrigas. 

18 
19 
20 

Case T-336/07, OJ C 269, 10.11.2007, p. 55. 
White Paper on Damages Actions for Breach of the EC antitrust rules, COM(2008) 165 final, 2.4.2008. 
Case COMP/37.966 Distrigas. 

EN 

13 

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22. 

23. 

24. 

25. 

To  address  these  concerns,  Distrigas  proposed  to  conclude  no  new  gas  supply 
contracts  with  gas  resellers  for  a  term  of  more  than  two  years.  The  maximum 
duration of new contracts with other large gas customers (industrial consumers and 
electricity generators) would be five years, except for new gas-fired power plants, for 
which  a  longer  duration  may  be  justified  on  efficiency  grounds.  Furthermore, 
Distrigas  would  ensure  that  an  average  of  70%  of  the  gas  demand  that  it  has 
contracted  to  supply  to  these  customers  would  return  to  the  market  every  year  (in 
principle because the contract expires). 

While Distrigas enjoys some flexibility in meeting this average over the lifetime of 
the  commitments,  at  least  65%  of  its  total  contracted  volumes  must  return  to  the 
market  each  year  (and  on  average,  over  the  whole  period  of  commitments,  at  least 
70%).  The  commitments  also  ensure  that,  even  if  its  sales  volumes  decrease, 
Distrigas  would  be  able  to  tie  a  certain  fixed  volume  of  gas  for  more  than  a  year 
ahead. This maximum fixed volume represents about 20% of the total sales to these 
customers. 

The  commitments  also  ensure  that  the  rights  of  Distrigas'  existing  customers  under 
long-term contracts would not be affected. For such customers, Distrigas will grant 
unilateral rights of termination with prior notice without indemnity. These contracts 
will be treated as short-term contracts for the purpose of the commitments. 

The effect of these commitments is to ensure that Distrigas does not tie an excessive 
proportion  of  customers  for  more  than  one  year  ahead,  while  allowing  Distrigas  as 
much flexibility as possible in managing its portfolio of contracts. 

2.4. 

State measures 

2.4.1.  Full  application  of  competition  law  in  the  regulated  electronic  communications 

sector 

26. 

27. 

In  June  the  Commission  closed  an  infringement  procedure  against  the  Czech 
Republic  which  had  limited  the  power  of  the  Czech  Competition  Authority  (Czech 
NCA) to apply Articles 81 and 82 EC to anticompetitive behaviour in the electronic 
communications  sector21.  Following  a  reasoned  opinion  in  March22  the  contested 
provision of the Czech Competition Act was repealed and EU competition rules can 
now be fully applied by the Czech NCA. 

The  contested  provision  ruled  out  the  applicability  of  the  Czech  Competition  Act 
(which  inter  alia  contains  the  conditions  under  which  the  Czech  NCA  applies 
Articles  81  and  82)  to  anticompetitive  behaviour  which  was  at  the  same  time  in 
breach  of  obligations  under 
the  EU  regulatory  framework  for  electronic 
communications  (Regulatory  Framework)23.  This  was  contrary  to  EU  law,  which 
does not allow any such limitation of the applicability of EU competition rules. On 

21 
22 

23 

See Press Release IP/07/956, 28.6.2007. 
See Press Release IP/07/400, 23.3.2007. The reasoned opinion was the second step of the infringement 
procedure under Article 226 EC and followed the sending of a letter of formal notice in July 2006. 
See Directives 2002/21/EC (Framework Directive), 2002/20/EC (Authorisation Directive), 2002/19/EC 
(Access Directive), 2002/22/EC (Universal Service Directive). 

EN 

14 

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28. 

29. 

the contrary, it provides that both competition law and sector-specific regulation can 
apply to the same set of facts. 

More  specifically,  neither  the  EC  Treaty  nor  secondary  Community  legislation, 
notably Regulation 1/2003, allows any exemptions from the applicability of Articles 
81  and  82  to  the  electronic  communications  sector.  The  Regulatory  Framework 
cannot  –  and  does  not  –  exclude  the  application  of  Articles  81  and  82  either.  The 
decision  against  the  Spanish  incumbent  telecoms  operator  Telefónica  for  a  very 
serious  abuse  of  its  dominant  position  in  the  Spanish  broadband  market  referred 
above (paragraph 17) is a clear example of this. In fact, the Regulatory Framework 
explicitly  acknowledges  the  primary  role  of  competition  law  remedies  in  the 
electronic communications sector. 

Therefore,  the  Commission  considered  that  the  Czech  Republic  had  not  met  its 
obligations to take all appropriate measures to fulfil its obligations arising from the 
EC  Treaty  (Article  10),  in  combination  with  its  obligations  to  designate  a 
competition  authority  or  authorities  with  the  power  to  apply  Articles  81  and  82  in 
individual cases and so ensure effective compliance with  these  articles  (Articles  35 
and 5 of Regulation 1/2003). 

2.4.2.  Effective use of the periodic penalty payments tool under Article 228 EC 

30. 

31. 

In  enforcing  Directive  2002/77/EC  on  competition  in  the  markets  for  electronic 
communications  networks  and  services24  (based  on  Article  86  EC), 
the 
Commission’s  right  under  Article  228  to  ask  the  Court  of  Justice  (ECJ)  to  impose 
periodic penalty payments proved to be an effective tool. In response to a reasoned 
opinion based on Article 228 issued to Luxembourg for failure to comply with a ECJ 
ruling25,  Luxembourg  announced  the  adoption  of  two  new  regulations  establishing 
transparent  procedures  for  operators  wishing  to  roll  out  their  networks  alongside 
State and municipal roads, thereby ending the infringement. 

In  most  infringement  procedures  the  Member  States  complied  before  Article  228 
procedure was started. For example, in July the Commission withdrew26 its pending 
appeal  at  the  ECJ  under  Article  226  against  Hungary  after  the  latter  abolished  a 
provision of its Media Act that prevented cable operators from providing cable TV 
services to more than one third of the Hungarian population. This restriction, which 
infringed  Directive  2002/77/EC  on  competition  in  the  markets  for  electronic 
communications  networks  and  services,  prevented  investments  for  the  provision  of 
broadband  services,  including  ‘triple  play’  services  (voice  telephony,  broadband 
internet access and cable TV distribution) by the cable TV operators in competition 
with the incumbent operator which offered its services throughout the whole of the 
country. 

24 
25 
26 

Directive 2002/77/EC of 16.9.2002 (Liberalisation Consolidation), OJ L 249, 17.9.2002, p. 21. 
See Press Release IP/07/10, 28/6/2007. 
See Press Release IP/07/1137, 19.6.2007. 

EN 

15 

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2.4.3. 

Infringement  proceedings  concerning 
Transparency Directive 

failure 

to 

implement 

the  Financial 

32. 

In  2007  the  infringement  proceedings  against  Austria,  Spain,  Slovenia  and  Poland 
were  closed  following  the  adoption  of  the  required  measures  to  transpose 
Commission Directive 80/723/EEC (the Transparency Directive)27, as amended, into 
national  law.  New  infringement  proceedings  were  initiated  against  seven  Member 
States  for  non-communication  or  non-conformity  of  the  national  transposition 
measures  (Belgium,  Denmark,  Italy,  Luxembourg,  the  United  Kingdom,  Slovakia 
and  Latvia).  The  Transparency  Directive 
imposes  a  general  obligation  of 
transparency 
relations  between  public  authorities  and  public 
financial 
undertakings.  This  is  crucial  in  terms  of  enabling  the  Commission  to  check  that 
public money is used to pay for the provision of public services. 

in 

3. 

SELECTED COURT CASES 

3.1. 

The CFI reiterates settled case law on refusal to supply in the Microsoft case 

33. 

34. 

35. 

On  17  September  the  CFI  delivered  its  judgment28  on  Microsoft's  application  for 
annulment  of  the  Commission's  2004  Decision,  which  found  that  Microsoft  had 
abusively  leveraged  its  PC  operating  system  dominance  onto  the  market  in  work 
group  server  operating  systems  by  withholding  essential  interface  information 
necessary to enable competing work group server operating systems to communicate 
with  the  Windows  PC  operating  system.  The  2004  Decision  also  established  that 
Microsoft  abusively  leveraged  its  dominant  position  in  the  PC  operating  system 
market  onto  the  streaming  media  player  market  by  distributing  its  Windows  PC 
operating system only together with Windows Media Player. 

The CFI upheld all substantive findings of the Commission, i.e. the findings of abuse 
with  regard  to  the  refusal  to  disclose  interoperability  information  and  the  tying  of 
Windows Media Player to Windows, as well as the findings with regard to the fine. 
The  Court  annulled  only  the  provisions  relating  to  the  powers  granted  to  the 
Monitoring Trustee and the order that Microsoft bear the associated costs. Microsoft 
did not appeal against the CFI judgment. 

As regards refusal to supply, the CFI reiterated well-established case law29 stating 
that the exercise of an exclusive right by the owner of the intellectual property right 
may give rise to an abuse only in "exceptional circumstances". The Court noted that 
"the following circumstances, in particular, must be considered to be exceptional:  

–  in the first place, the refusal relates to a product or service indispensable to the 

exercise of a particular activity on a neighbouring market; 

27 

28 
29 

Commission  Directive  2006/111/EC  of  16.11.2006  codified  and  replaced  the  original  Transparency 
Directive and its amendments. 
Case T-201/04 Microsoft v Commission. 
Case  238/87  Volvo  [1988]  ECR  6211,  Joined  Cases  C  241/91  P  and  C  242/91  P  RTE  and  ITP  v 
Commission [1995] ECR I 743 ("Magill"), Case C 418/01 IMS Health [2004] ECR I 5039. 

EN 

16 

   EN 

 
                                                 
–  in  the  second  place,  the  refusal  is  of  such  a  kind  as  to  exclude  any  effective 

competition on that neighbouring market; 

–  in the third place, the refusal prevents the appearance of a new product for which 

there is potential consumer demand." 30 

36. 

As  regards  tying,  the  CFI  fully  confirmed  the  2004  decision's  findings  that  (i) 
Microsoft  is  dominant  in  the  tying  product  market  (PC  operating  systems);  (ii)  the 
tying  and  tied  products  (Windows  PC  operating  system  and  the  Windows  Media 
Player)  are  two  separate  products;  (iii)  Microsoft  afforded  consumers  no  choice  to 
obtain  the  tying  product  without  the  tied  product;  (iv)  the  tying  foreclosed 
competition and (v) there was no objective justification for the tying. 

3.2. 

The CFI upholds the Commission's decision on predatory pricing by Wanadoo 

37. 

38. 

39. 

40. 

41. 

On 30 January, in the France Télécom (formerly Wanadoo) v Commission31 case, the 
CFI  upheld  the  Commission’s  decision  and  confirmed  that  France  Télécom  had 
abused its dominant position on the French high-speed internet access market32. 

On 16 July 2003 the Commission imposed a fine of EUR 10.35 million on Wanadoo 
for charging predatory prices for its Pack eXtense and Wanadoo ADSL services33. 

The CFI confirmed the Commission's market definition of high-speed internet access 
for  residential  customers,  separate  from  the  low-speed  internet  access  market.  The 
CFI  held  that  the  rapid  growth  of  the  sector  does  not  preclude  the  application  of 
competition rules. 

On  predatory  pricing  the  CFI  restated  previous  case  law34,  ruling  that  prices  below 
average  variable  costs  give  grounds  for  assuming  that  a  pricing  practice  is 
eliminatory  and  that,  if  the  prices  are  below  average  total  costs  but  above  average 
variable costs, those prices must be regarded as abusive if they are determined as part 
of a plan for eliminating a competitor. 

The  CFI  also  ruled  that  the  Commission  enjoys  broad  discretion  as  regards  the 
method of calculation as to the rate of recovery of costs and that it is for the applicant 
to  prove  the  unlawfulness  of  any  such  methodology.  Concluding  that  the 
Commission applied the correct methodology in establishing that there was predatory 
pricing, the CFI found that the Commission provided solid and consistent evidence 
as to the existence of a plan of predation for the entire infringement period. 

30 
31 
32 

33 
34 

Paragraph 332 of the judgment. 
Case T-340/03 France Télécom SA (formerly Wanadoo SA) v Commission [2007] (not yet reported). 
France Télécom decided to appeal against the CFI judgment. The case is pending before the ECJ – see 
case C-202/07 P France Télécom SA v Commission. 
Case COMP/38.233 Commission decision, 16.7.2003. 
Case C-62/86 AKZO v Commission [1991] ECR I-3359. 

EN 

17 

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3.3. 

42. 

43. 

44. 

45. 

46. 

The CFI finds that Commission letters cannot be appealed in the context of the 
Article 7 procedure 

On  12  December  the  CFI  adopted  an  order  in  the  Vodafone  Spain  v  Commission 
case35 declaring Vodafone's action for annulment inadmissible and clarifying that a 
Commission  letter  of  comments  issued  within  the  Community  consultation 
mechanism  under  Article  7  of  the  Framework  Directive  does  not  constitute  an  act 
producing binding legal effects and is therefore not amenable to judicial review36. 

National  regulatory  authorities  (NRAs)  are  required  under  the  EU  Regulatory 
framework  for  electronic  communications  (Regulatory  Framework)  to  define  and 
analyse  relevant  markets  susceptible  to  sector-specific  ex  ante  regulation37  and  to 
make the respective draft measures accessible to the Commission and the NRAs in 
other Member States for comments. The NRA concerned shall then take the utmost 
account of such comments before adopting the final decision38. 

In the case at issue, the Spanish NRA notified a draft measure39 proposing, first, to 
find  that  Vodafone  and  two  other  companies  jointly  enjoyed  significant  market 
power (SMP)40 in the wholesale market for the supply of access and call origination 
on  public  mobile  telecommunications  networks  in  Spain and,  second,  to  impose  an 
obligation  on  Vodafone  and  the  other  two  companies  to  respond  to  reasonable 
requests for access to their networks and to offer reasonable terms for the supply of 
access services. 

The Commission sent the Spanish NRA a letter with comments regarding joint SMP 
(equivalent  to  collective  dominance)  and  the  relevant  market.  While  the  comments 
expressed  the  Commission's  satisfaction  that  there  was  sufficient  evidence  to 
conclude  that  joint  SMP  existed,  it  was  also  noted  that  any  concrete  evidence  of 
developments  in  the  retail  market  not  linked  to  the  regulatory  measures  in  the 
relevant market that would cast doubt on the sustainability of the joint SMP would 
require a review of the relevant market. 

The Spanish NRA then adopted the final measure, against which Vodafone appealed 
before the Spanish Supreme Court. Vodafone brought an action for annulment of the 
Commission's letter of comments before the CFI. In dismissing Vodafone's action as 
inadmissible, the CFI significantly clarified the nature of both a letter of comments 
under Article 7 of the Framework Directive (FD) and of the Community consultation 
mechanism. 

47. 

The CFI concluded in casu that neither the content of the contested act nor the legal 
context  in  which  it  was  adopted  shows  that  it  constitutes  an  act  producing  binding 
legal effects. According to the CFI, the wording of Article 7(5) FD ("shall take the 

35 

36 

37 
38 
39 
40 

Order of the CFI adopted on 12.12.2007 in Case T-109/06 Vodafone España SA and Vodafone Group 
plc v Commission. 
Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common 
regulatory framework for electronic communications networks and services (Framework Directive) (OJ 
L 108, 24.4.2002, p. 33). The Framework Directive is the cornerstone of the Regulatory Framework. 
Articles 15 and 16 FD. 
Article 7(3) and 7(5) FD respectively. 
Draft measure ES/2005/0330. 
Significant market power is equivalent to dominance under EU competition law. 

EN 

18 

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utmost  account  of  comments")  underlines  the  non-binding  nature  of  a  Commission 
letter under Article 7(3) FD. The context of the consultation mechanism also shows 
that the letter of comments constitutes a preparatory Community act that cannot be 
the subject of an independent action for annulment. 

48. 

Finally, the CFI found that the contested act was in any event not of direct concern to 
Vodafone, arguing that although the NRA concerned must "take the utmost account" 
of Commission comments, it has some leeway to determine the content of the final 
measure,  so  that  a  Community  act  based  on  Article  7(3)  FD  cannot  be  regarded  as 
directly affecting the legal situation of the undertakings concerned. 

3.4. 

CFI judgment in Akzo defines the limits of legal professional privilege 

49. 

50. 

51. 

52. 

On  17  September,  the  Court  of  First  Instance  delivered  its  judgement  in  an  action 
lodged  by  Akzo  dealing  mainly  with  the  issue  of  legal  professional  privilege41. 
Although  the  Court  found  that  the  Commission  had  committed  some  procedural 
errors, it rejected the main pleas, dismissing the broad interpretation of the concept of 
legal professional privilege advanced by Akzo. 

On  the  first  main  substantive  point  the  Court  ruled  that  the  material  scope  of  legal 
professional privilege extends only to documents which were drawn up exclusively 
for the purpose of seeking advice from an external lawyer in exercise of the rights of 
defence.  Second,  the  Court  clarified  that  the  personal  scope  of  legal  professional 
privilege excludes in-house lawyers, even where they are members of the bar in their 
Member States. The rationale for this narrow interpretation is that in-house lawyers 
are  functionally,  structurally  and  hierarchically  integrated  in  the  companies  that 
employ them and are, therefore, not independent. 

In  terms  of  procedure,  the  Court  rules  that  undertakings  do  not  have  to  disclose 
documents that are protected by legal professional privilege until (i) the Commission 
has decided that the document must be disclosed and (ii) the time-limit for appealing 
this  decision  before  the  Court  has  lapsed.  Undertakings  must  immediately  upon 
request  of  the  Commission  inspectors  substantiate  any  claim  that  a  document  falls 
under  legal  professional  privilege.  In  order  to  determine  if  such  a  claim  is  well-
founded, the Commission officials are entitled to take a cursory look at the document 
unless  the  undertaking  provides  appropriate  reasons  why  even  such  a  cursory  look 
would give the Commission access to information that is covered by privilege. 

Where  an  undertaking  abuses  claims  of  legal  professional  privilege,  the  “Court 
would  point  out  that  the  Commission  has  the  means,  where  appropriate,  to 
discourage and penalise such conduct. In fact, such conduct may be penalised under 
Article 23(1) of Regulation No 1/2003 (…) or be taken into account as aggravating 
circumstances  when  calculating  any  fine  imposed  in  the  context  of  a  decision 
imposing a penalty under the competition rules”42. 

41 
42 

Joined Cases T-125/03 and T-253/03 Akzo Nobel Chemicals and Akzo Chemicals v Commission. 
Paragraph 89 of the judgment. 

EN 

19 

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3.5. 

53. 

54. 

55. 

56. 

CFI judgment in the DSD case concerning abuses within the German system for 
the collection and recycling of packaging waste 

On  24  May  the  CFI43  upheld  the  Commission  decision  of  April  200144  concerning 
the payment provision in an agreement between the German system for the collection 
and recycling of packaging waste called Duales System Deutschland (DSD) and its 
clients. This originally industry-led system serves to meet recycling requirements in 
the form of quotas laid down in the German packaging ordinance implementing EC 
Directive 94/62 on packaging and packaging waste. Manufacturers and retailers, who 
have the legal obligation to take back sales packaging, conclude a contract with DSD 
which guarantees to install a collection and recycling service in such a way that the 
companies are exempted from their legal obligations. The contract also regulates the 
use of the Green Dot trademark on the packaging and determines the fee to be paid 
by DSD's clients. 

The  Commission  found  that  DSD  had  abused  its  dominant  position  by  obliging  its 
clients to pay for all packaging brought on to the German market that bears the Green 
Dot  trademark,  whether  DSD  actually  provides  its  exemption  service  or  not. 
Whenever  the  client  intends  to  use  the  services  of  competitors  for  parts  of  its 
packaging, the provision leads to a double payment situation for the clients or forces 
them  to  introduce  costly  double-packaging  lines,  given  that  DSD  requires  the 
packaging exempted by its system to be marked with the Green Dot. 

The  CFI  found  that  the  Commission  rightly  concluded  that  there  was  a  mismatch 
between the service provided by DSD and the fee due by its clients, and recognised 
that  selective  marking  as  required  by  DSD  to  avoid  the  double-payment  situation 
leads  to  significant  additional  costs  for  manufacturers  and  distributors  of  sales 
packaging  and  therefore  has  the  effect  of  dissuading  them  from  using  competing 
systems. 

Given  the  practical  functioning  of  the  collection  and  recovery  system  operated  by 
DSD,  CFI  disagreed  with  DSD's  description  of  the  function  of  the  Green  Dot.  The 
CFI confirmed that the decision does not adversely affect the essential function of the 
Green  Dot  as  a  trademark.  The  CFI  found  that  the  remedy45  ordered  by  the 
Commission was proportionate and did not constitute an imposition of a compulsory 
licence. 

43 

44 
45 

Judgment  of  24.5.2007  in  case  T-151/01  DSD  v  Commission  not  yet  reported.  DSD  filed  an  appeal 
against the judgment to the ECJ. 
Case COMP/34.493 DSD OJ L 166, 21.6.2001, p. 1. 
The remedy prevented DSD from charging a fee for the part of the sales packaging bearing the “Green 
Dot”  for which  it  can  be  shown  that  the  take-back  and  recovery  obligation,  as  set  out  in  the  German 
packaging ordinance, has been properly fulfilled by another party (see MEMO/07/205, 24.5.2007). 

EN 

20 

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B – MERGER CONTROL 

1. 

APPLICABLE RULES 

1.1. 

57. 

58. 

59. 

60. 

61. 

62. 

46 

47 

48 
49 
50 
51 
52 
53 

Guidance  on  jurisdiction  in  merger  control:  Commission  Consolidated  Notice 
on Jurisdiction 

On  10  July  the  Commission  adopted  the  Commission  Consolidated  Jurisdictional 
Notice  under  the  Merger  Regulation  (the  "Jurisdictional  Notice"  or  the  "Notice")46. 
The  Jurisdictional  Notice  replaces 
the  four  previous  Notices  dealing  with 
jurisdictional issues under the Merger Regulation, a measure was strongly welcomed 
in the course of the consultation47. 

All  previous  Notices  were  adopted  by  the  Commission  in  1998  under  the  previous 
Merger  Regulation  4064/89.  These  are  (i)  the  Notice  on  the  concept  of 
concentration48,  (ii)  the  Notice  on  the  concept  of  full-function  joint  ventures49,  (iii) 
the  Notice  on  the  concept  of  undertakings  concerned50  and  (iv)  the  Notice  on 
calculation of turnover51. 

The  Notice  covers  all  issues  relevant  for  the  Commission's  jurisdiction  under  the 
Merger  Regulation,  with  the  exception  of  referrals52.  The  rationale  of  the 
consolidation  of  the  four  previous  Notices  in  one  document  was  to  make  the 
Jurisdictional  Notice  more  user-friendly  and  to  allow  notifying  parties  to  establish 
more easily whether the Commission is competent for an envisaged transaction. This 
consolidation also removes the overlaps between four notices and thus eliminates the 
possibility of conflicting interpretations. 

The adoption of the Jurisdictional Notice was not only an exercise of consolidation 
as is clear from the sources used in amending the Notice: 

First, the Jurisdictional Notice takes into account the changes introduced by the new 
Merger Regulation in relation to jurisdictional issues. 

Second, it also incorporates recent case-law. For example, a number of issues arising 
from the judgments of the Court of First Instance ("CFI") in the cases Cementbouw53 
and Endesa54 are included in the Jurisdictional Notice. 

can 

and 

DG 

French 

German 

comments 

Commission  Consolidated  Jurisdictional  Notice  under  Council  Regulation  (EC)  No  139/2004  on  the 
control  of  concentrations  between  undertakings.  Currently,  the  Jurisdictional  Notice  can  be  found  in 
English, 
under 
on 
http://ec.europa.eu/comm/competition/mergers/legislation/draft_jn.html 
The 
be 
http://ec.europa.eu/comm/competition/mergers/legislation/draft_jn.html 
OJ C 66, 2.3.1998, p. 5. 
OJ C 66, 2.3.1998, p. 1. 
OJ C 66, 2.3.1998, p. 14. 
OJ C 66, 2.3.1998, p. 25. 
See Commission Notice on Case Referral in respect of concentrations, OJ C 56, 5.3.2005, p. 2. 
Judgment  in  Case  T-282/02  Cementbouw  v  Commission  [2006]  ECR  II-319;  see  also  opinion  of  AG 
Kokott in Case C-202/06 Cementbouw v Commission 26.4.2007, paragraph 56 (not yet reported). 

COMP's 

COMP's 

web-site 

web-site 

found 

under 

DG 

on 

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21 

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63. 

1.2. 

64. 

65. 

66. 

67. 

68. 

69. 

70. 

54 
55 

Third, the developments in the Commission’s decisional practice in recent years are 
reflected in the Jurisdictional Notice. 

Guidance  on  the  assessment  of  mergers:  Commission  Guidelines  on  Non-
horizontal mergers 

On  28  November  the  Commission  adopted  Guidelines55  on  the  assessment  of  non-
horizontal  mergers  under  the  Merger  Regulation.  Non-horizontal  mergers  include 
vertical mergers, such as the acquisition of a supplier by a customer (for example, a 
car  manufacturer  acquiring  a  gearbox  supplier),  and  conglomerate  mergers,  which 
concern  companies  whose  activities  are  complementary  or  otherwise  related  (for 
instance, a company producing razors buying a company producing shaving foam). 

The  Guidelines,  which  provide  guidance  to  companies  as  to  how  the  Commission 
will  analyse  the  impact  of  such  mergers  on  competition,  complement  the  existing 
Guidelines  on  horizontal  mergers,  which  deal  with  mergers  of  companies  who 
compete on the same markets. 

Horizontal  mergers  can  lead  to  the  loss  of  direct  competition  between  the  merging 
firms. By contrast, vertical and conglomerate mergers do not immediately change the 
number  of  competitors  active  in  any  given  market.  As  a  result,  the  main  potential 
source  of  anti-competitive  effects  in  horizontal  mergers  is  absent  from  vertical  and 
conglomerate mergers. The latter are thus generally less likely to create competition 
concerns  than  horizontal  mergers.  In  addition,  vertical  and  conglomerate  mergers 
may  also  improve  a  company's  efficiency  by  better  co-ordinating  their  different 
production stages. 

The  Guidelines  were  adopted  after  extensive  consultation  with  Member  States  and 
the  general  public.  Thirty-two  papers  were  submitted  in  response  to  the  public 
consultation  launched  on  13  February.  The  vast  majority  of  respondents  supported 
the issuing of guidelines. In addition, the consultation produced a number of valuable 
comments on individual sections of the draft, which have been taken into account in 
the  final  text.  Member  States'  experts  endorsed  the  Guidelines  in  several  rounds  of 
consultation. 

The  Guidelines  provide  examples,  based  on  established  economic  principles,  of 
where  vertical  and  conglomerate  mergers  may  significantly  impede  effective 
competition  in  the  markets  concerned.  For  instance,  they  outline  the  circumstances 
under which a vertical merger could be likely to result in competing companies being 
denied access to an important supplier or facing increased prices for their inputs, and 
thus ultimately lead to higher prices for consumers. 

The Guidelines also indicate levels of market share and concentration below which 
the  Commission  is  unlikely  to  identify  competition  concerns  (so-called  "safe 
harbours"). 

By way of example, the energy sector is one area where vertical and conglomerate 
issues can be of concern, as illustrated by the Commission's decision to prohibit the 

Judgment in Case T-417/05 Endesa v Commission, [2006] ECR II-2533. 
http://ec.europa.eu/comm/competition/mergers/legislation/legislation.html 

EN 

22 

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proposed  takeover  of  GDP  by  EDP  and  ENI56.  The  proposed  merger  of  the 
electricity  and  gas  incumbents  in  Portugal  could,  for  example,  have  created 
considerable obstacles to new entrants to the Portuguese electricity market using gas-
fired power stations. Another recent example is the acquisition of Pfizer's Consumer 
Healthcare  division  by  Johnson  &  Johnson.  Without  the  divestiture  remedies 
imposed by the Commission, the transaction would have given J&J control over key 
inputs  for  nicotine  patches  produced  by  its  main  competitor,  GSK.  The  result  for 
consumers  attempting  to  quit  smoking  could  have  been  higher  prices  and  less 
innovative products for their nicotine replacement therapy. 

Guidance  on  the  assessment  of  mergers:  draft  Revised  Commission  Notice  on 
Remedies 

To  clarify  its  policy  with  regard  to  remedies  in  merger  control,  the  Commission 
launched a public consultation on the draft Revised Remedies Notice. Remedies are 
modifications  to  a  merger  proposed  by  the  merging  parties  to  eliminate  potential 
competition concerns identified by the Commission. In order to give guidance on the 
interpretation of the EC Merger Regulation with regard to remedies, the Commission 
adopted  in  2001  a  first  Remedies  Notice57  under  the  EC  Merger  Regulation.  The 
Revised Remedies Notice will update and replace the current notice. 

The  revision  reflects  i)  the  conclusions  from  the  Commission's  2005  Merger 
Remedies  Study58  which  undertook  a  comprehensive  review  of  past  merger  cases 
involving remedies; ii) recent case law, such as the judgments in the EDP59, General 
Electric60,  and  Cementbouw61  cases,  which  gave  useful  guidance  on  the  legal 
framework  for  accepting  or  rejecting  remedies  as  well  as  on  more  specific  issues 
concerning  their  design;  iii)  the  experience  gained  in  the  Commission’s  practice  in 
the  GDF/Suez62  and 
the  past  years 
Inco/Falconbridge63  cases;  and  also  iv)  the  changes  brought  about  by  the  recast 
Merger Regulation of 2004 to the extent that they are relevant to remedies. 

the  field  of  remedies, 

including 

in 

The revision makes it clear that the commitments have to eliminate the competition 
concerns  entirely  and  have  to  be  comprehensive  and  effective  from  all  points  of 
view.  A  general  requirement  for  meeting  this  standard  is  that  there  has  to  be  a 
possibility  of  monitoring  the  binding  commitments.  In  order  to  allow  the 
Commission  to  properly  asses  remedies  the  draft  revised  notice  introduces  a  new 
information  form  to  be  submitted  by  the  parties  to  describe  their  proposals  for 
remedies64. 

1.3. 

71. 

72. 

73. 

56 
57 

58 
59 
60 
61 
62 
63 
64 

Case COMP/M.3440 ENI/EDP/GDP Commission decision, 9.12.2004. 
Commission  Notice  on  Remedies  acceptable  under  Council  Regulation  (EEC) No  4064/89  and  under 
Commission Regulation (EC) No 447/98, OJ C 68, 2.3.2001, p. 3. 
DG COMP, Merger Remedies Study, October 2005. 
Judgment of the CFI in Case T-87/05 EDP v Commission [2005]. 
Judgment of the CFI in Case T-210/01 General Electric v Commission [2005]. 
Judgment of the CFI in Case T-282/02 Cementbouw v Commission [2006]. 
Case COMP/M.4180 GdF/Suez Commission decision 14.11.2006. 
Case COMP/M.4000 Inco/Falconbridge Commission decision 4.7.2006. 
This  will  also require  an  amendment  of  Commission  Regulation  (EC) No 802/2004 on  implementing 
the EC Merger Regulation. 

EN 

23 

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74. 

75. 

The draft Revised Remedies Notice provides extended guidance on the suitability of 
the various types of remedies, clearly setting out that divestiture commitments are the 
preferred  remedies  because  they  are  the  most  effective  way  to  restore  competition. 
Non-divestiture  remedies  (for  instance,  remedies  giving  competitors  access  to 
infrastructure, networks, key technology or essential inputs) may only be acceptable 
in  certain  circumstances  when  their  effects  will  be  equivalent  to  those  of  a 
divestiture.  Apart  from  this,  the  revision  maintains  the  Commission's  existing 
scepticism  towards  behavioural  remedies,  i.e.  commitments  merely  to  refrain  from 
certain  commercial  behaviour.  Due  to  the  absence  of  effective  monitoring  of  the 
implementation  of  such  remedies,  the  Commission  may  accept  them  only 
exceptionally and in specific circumstances. 

As  the  proper  implementation  of  the  remedies  in  the  interim  period  is  of  decisive 
importance  for  their  overall  effectiveness,  the  draft  Revised  Remedies  Notice 
reinforces the requirements for the implementation of commitments. In particular, it 
strengthens  the  tasks  of  the  Monitoring  Trustee  overseeing  the  implementation  of 
divestiture remedies and clarifies the role of the Hold Separate Manager, responsible 
for the management of the divested business. 

2. 

APPLICATION OF THE MERGER CONTROL RULES 

2.1. 

Overview 

76. 

77. 

78. 

In 2007 the number of merger cases notified to the Commission reached an all-time 
record of 402. This figure represents an increase of more than 12% compared to the 
356  transactions  notified  in  2006.  In  the  last  quarter  of  the  year  the  number  of 
notifications  fell  in  relation  both  to  the  previous  quarters  and  to  the  last  quarter  of 
2006. This appears to be due to the effects of the global credit squeeze. 

In  total,  the  Commission  adopted  396  final  decisions  in  2007.  A  total  of  368  were 
cleared  in  first  phase  without  conditions.  Nearly  two-thirds  (the  equivalent  of  238 
decisions)  of  the  unconditional  first  phase  clearances  were  adopted  under  the 
simplified procedure. A further 18 transactions were cleared in first phase subject to 
conditions. 

Ten decisions were adopted after in-depth Phase II investigations. Five of these were 
cleared  without  conditions,  in  four  cases  the  clearances  were  subject  to  conditions 
and  one  transaction  was  prohibited.  During  the  year  the  Commission  opened  15 
Phase II proceedings, up from 13 in the previous year. In addition, two notifications 
were  withdrawn  in  the  second  phase.  The  table  below,  which  lists  the  number  and 
percentage  of  prohibitions  and  second  phase  withdrawals  over  the  last  ten  years 
shows that the figures for 2007 fall within the usual range. 

Chart 1 – Prohibitions and Phase II withdrawals, 1998-2007 

1998  1999  2000  2001  2002  2003  2004  2005  2006  2007  Total 

10 
years

Notifications  224 

276 

330 

335 

277 

211 

247 

310 

356 

402 

2977 

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24 

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Prohibitions  2 

Phase 
II 
withdrawals 

4 

1 

5 

2 

5 

5 

4 

0 

1 

0 

0 

1 

2 

0 

3 

0 

2 

1 

2 

12 

28 

Regulatory 
risk 

2.7%  2.2%  2.1% 2.6% 0.4% 0.0% 1.2% 1.0%  0.6%  0.7% 1.3%

2.2. 

Remedies in non-horizontal cases 

79. 

80. 

81. 

82. 

83. 

84. 

Cases  involving  vertically  related  markets  in  2007  included  Evraz/Highveld65  and 
Johnson and Johnson/Pfizer Consumer Healthcare66. A more detailed explanation of 
this case is given here to illustrate the Commission's approach. 

This case concerned the acquisition by Johnson & Johnson ("J&J") of Pfizer's entire 
consumer  healthcare  division,  Pfizer  Consumer  Healthcare  ("PCH").  The  merger 
gave  rise  to  a  problematic  vertical  relationship  in  the  area  of  nicotine  replacement 
therapy (NRT) products, more particularly with regard to nicotine patches. 

J&J,  through  its  subsidiary  ALZA  (acquired  in  2001),  is  active  in  the  development 
and  manufacturing  of  innovative  drug-delivery  systems  such  as  transdermal  drug-
delivery  patches.  ALZA  supplied  all  GSK's  needs  for  nicotine  patches  and 
cooperated  with  GSK  in  the  development  of  nicotine  patch  products.  GSK  sells 
nicotine patches supplied by ALZA under its brand NiQuitin. 

Among PCH's activities acquired by J&J was the Nicorette business, which produces 
a wide range of NRT products, including nicotine patches. Therefore, following the 
merger, GSK would find itself in a situation where it would be supplied with nicotine 
patches by its main competitor. 

Nicotine  patches  are  pharmaceutical  products;  any  change  in  their  manufacturing 
process requires the approval of the relevant health authorities. They are also branded 
consumer  products.  These  factors  explain  why  the  main  players  in  the  market  are 
vertically integrated or have long-term exclusive supply agreements. 

The market investigation concluded that the new entity would have the ability and an 
incentive  to  foreclose  GSK,  its  competitor  on  the  downstream  markets.  Given  the 
existing ALZA-GSK supply agreement, there was no risk that ALZA could refuse to 
supply  GSK,  but  rather  a  risk  that  the  new  entity  would  seek  to  reduce  the 
competitiveness  of  GSK's  NiQuitin  patches  by,  for  example,  limiting  or  reducing 
supply, lowering quality, increasing costs, or disrupting R&D. The provisions of the 
existing contract were not sufficient to prevent such a strategy. The new entity would 
increase  its  own  downstream  sales  as  the  market  investigation  showed  that  a 
significant proportion of customers would purchase Nicorette if they no  longer had 
access to NiQuitin. Such an input foreclosure strategy would reduce the competitive 

65 
66 

Case COMP/M.4494 Evraz/Highveld Commission decision, 20.2.2007. 
Case  COMP/M.4314  Johnson  and  Johnson/Pfizer  Consumer  Healthcare  Commission  decision, 
11.12.2006. 

EN 

25 

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constraints that NiQuitin exerts on Nicorette, leading to reduced choice and increased 
prices for consumers. 

85. 

The  Commission  took  the  view  that  behavioural  commitments  would  not  be 
sufficient to exclude the risk of input foreclosure. Therefore J&J committed to divest 
ALZA's nicotine patch manufacturing business. In March, the Commission approved 
the  sale  of  ALZA's  international  nicotine  patch  business  to  GSK,  enabling  GSK  to 
become an independent vertically-integrated producer of nicotine patches. 

3. 

SELECTED COURT CASES 

3.1. 

Jurisdiction in merger cases 

3.1.1.  Cementbouw v Commission 

86. 

87. 

88. 

89. 

On  18 December  the  Court  of  Justice  rejected  an  appeal  lodged  by  the  Dutch  firm 
Cementbouw  against 
in  case  T-282/02 
Cementbouw/Commission,  by  which  the  CFI  had  upheld  a  Commission  decision 
clearing  an  implemented  concentration  on  the  condition  that  the  operation  be 
unwound within a given deadline67 (case C-202/06P Cementbouw/Commission). 

judgment  of  2006 

the  CFI's 

Haniel  and  Cementbouw  acquired  joint  control  of  the  company  CVK  in  1999 
through a series of transactions. Prior to 1999, CVK was a joint selling cooperative 
comprising all (eleven) sand lime brick producers in the Netherlands. These eleven 
producers  (the  “CVK  members”)  were  individually  controlled  by  either  Haniel, 
Cementbouw  or  a  third  company,  the  German  company  RAG.  .  In  2002,  the 
Commission  cleared  the  operation  on  the  condition  that  the  parties  fulfilled  a 
commitment to dissolve CVK within a certain deadline. Previously the Commission 
had  rejected  a  first  commitment  offered  by  the  parties,  which  only  amounted  to 
Haniel  and  Cementbouw  giving  up  their  joint  control  over  CVK,  but  leaving  the 
Pooling  Agreement  linking  the  CVK  members  and,  hence,  CVK's  role  as  a  single 
dominant supplier of wall building materials in place. 

Following  the  Commission’s  decision  in  2002,  CVK  was  dissolved  into  two 
competing  groups,  owned  by  Haniel  and  Cementbouw  respectively.  Even  though 
Haniel  and  Cementbouw  implemented  the  Commission's  decision,  Cementbouw 
appealed against it to the CFI. In February 2006, the CFI rejected the appeal, stating 
the  Commission  was  right  both  in  assuming  jurisdiction  over  the  case,  in  its 
assessment  of  the  competition  impact  of  the  operation,  and  in  insisting  that 
competition be fully restored. 

Cementbouw  appealed  the  Commission's  clearance  decision  before  the  Court  of 
Justice  on  the  sole  ground  of  CFI's  analysis  as  regards  the  remedy.  The  CFI  had 
stated  in  this  respect  that  the  Commission's  jurisdiction  over  the  entire  transaction 
(including both the conclusion of the Pooling Agreement and the acquisition of joint 
control  over  CVK  by  Haniel  and  Cementbouw)  had  not  ended  when  the  parties 
offered their first set of commitments to give up joint control but leaving the Pooling 
Agreement in place.  The  Court of  Justice in its judgment confirmed that the CFI – 

67 

Case COMP/M.2650 Haniel/Cementbouw/JV (CVK) Commission decision, 26.6.2002. 

EN 

26 

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and hence the Commission's decision – was correct also in this respect. In the view 
of the Court, the CFI did not violate the principle of proportionality by considering 
that the Commission was not required to accept the first commitment offered by the 
parties,  since  that  commitment  was  viewed  as  insufficient  to  restore  effective 
competition in the relevant market. 

3.2. 

Substantive assessment of mergers 

3.2.1. 

Sun Chemicals and others v Commission 

90. 

91. 

92. 

93. 

94. 

95. 

96. 

On  29  May  2006  the  European  Commission  approved  the  acquisition  by  Hexion 
Specialty  Chemicals  ("Hexion",  USA),  owned  by  the  investment  fund  Apollo,  of 
Akzo  Nobel’s  Inks  and  Adhesive  Resins  business  (“IAR”,  the  Netherlands).  The 
transaction concerned in particular the market for resins used in the printing ink and 
adhesives industries. 

The  transaction  gave  rise  to  various  overlaps  in  different  types  of  resins.  The 
overlaps were limited to one single application: the production of inks. However, the 
Commission  considered  that  the  transaction  would  be  unlikely  to  give  rise  to 
unilateral  or  co-ordinated  anti-competitive  effects  and  therefore  cleared  the 
transaction. 

On  9  October  2006,  three  customers  -  Sun  Chemical  Group  BV,  Siegwerk 
Druckfarben AG and Flint Group Germany GmbH - lodged an appeal before the CFI 
against the decision, alleging that the Commission had failed to follow the Horizontal 
Merger  Guidelines  and  that  the  decision  was  flawed  by  errors  of  law,  fact  and 
appraisal. 

On  9  July,  the  CFI  dismissed  the  appeal,  rejecting  all  grounds  of  complaint.  In 
relation to the Horizontal Merger Guidelines, the CFI stated that the Commission is 
not required to analyse all the factors mentioned in the guidelines in every case and 
does  not  have  to  deal  explicitly  with  all  the  matters  of  law  and  fact  which  may  be 
connected  with  the  merger  and/or  raised  during  the  administrative  procedure, 
particularly when these matters appear to be manifestly irrelevant, insignificant or of 
secondary importance. 

As regards the assessment of market share levels and market concentration, the CFI 
stated that a Herfindahl-Hirschman Index (HHI) exceeding the guideline thresholds 
does not give rise to a presumption of competition concerns and that, although this is 
a useful first indication of market structure, the Commission is not required to assess 
the HHI in every decision. 

The  CFI  upheld  the  Commission's  findings  that  the  market  was  characterised  by 
excess capacity and that, in order to discourage any anticompetitive conduct, it is not 
necessary for the merged entity’s customers to be able to transfer all their orders to 
other suppliers, but only a substantial part of their orders. 

As regards the assessment of the buyer power enjoyed by some customers (including 
the applicants), the applicants argued that the Commission did not take into account 
the fact that their in-house production only covered one type of rosin resin that could 
be used exclusively for the production of a limited range of inks. The CFI, however, 

EN 

27 

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supported  the  Commission's  conclusion  that  the  customers  would  still  have  the 
ability  to  exert  pressure  on  their  suppliers,  either  by  threatening  to  stop  purchasing 
this specific type of resin or by freeing up the capacity of other suppliers who could 
then produce the rosin resins. 

97. 

The CFI dismissed all the remaining grounds of appeal. This case was dealt with by 
the CFI by way of expedited procedure in only nine months. 

3.3. 

Damages for alleged losses resulting from a Commission merger decision 

3.3.1. 

Schneider Electric v Commission 

98. 

99. 

On  11  July  the  Court  of  First  Instance  ("the  Court")  delivered  an  interlocutory 
judgment  in  the  Schneider/Commission  case.  Schneider  claimed  that  the  manifest 
errors  of  assessment  and  the  breach  of  its  right  to  be  heard  found  in  Schneider  I68 
constituted "sufficiently serious breaches" such as to render the Community liable to 
compensate the damage which it incurred by reason of its resale of Legrand at a price 
below that which it had to pay to acquire it. Moreover, Schneider maintained that the 
Commission had committed a number of breaches other than those contained in the 
decision declaring the merger between Schneider and Legrand incompatible with the 
common market, and claimed a series of additional heads of damage. 

In  its  judgment,  the  Court  analysed  the  allegations  of  fault  extraneous  to  the 
incompatibility  decision  and  found  that  none  constituted  a  "sufficiently  serious 
breach".  As  regards  the  faults  contained  in  the  decision,  it  declined  to  rule  on  the 
substantive errors of assessment, since they could not result alone in the annulment 
of  the  decision.  In  contrast,  the  Court  held  that  the  breach  of  the  right  to  be  heard 
found in Schneider I constituted a "sufficiently serious breach of a principle of law 
which confers rights on individuals", which could constitute a ground for liability on 
the  part  of  the  Community.  Next,  while  it  rejected  most  of  the  heads  of  damage 
claimed, the Court found that a causal link did exist between the violation of the right 
to be heard and the two following heads of damage: 

–  the  fees  incurred  by  Schneider  in  having  the  merger  examined  a  second  time 

following Schneider I, and 

–  the reduction in the resale price of Legrand which Schneider had to grant so as to 
defer the resale pending the delivery of the judgment in Schneider I and thus give 
Schneider the chance to benefit from the re-examination of the merger, should the 
Court annul the incompatibility decision. 

100. 

The Community was therefore found to have to compensate Schneider with respect 
to  both  heads  of  damage.  However,  given  that  Schneider  was  found  to  have 
contributed  to  its  own  damage  by  assuming  the  real  risk  of  an  incompatibility 
decision  subsequent  to  the  acquisition  of  the  control  of  Legrand  and,  as  a 
consequence,  of  a  forced  resale,  the  amount  of  damages  due  in  relation  to  the 
reduction in the resale price of Legrand was reduced by one third.  

68 

Affaire T-310/01 Schneider Electric v Commission Judgment of 22.10.2002. 

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28 

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101. 

The Commission has lodged an appeal against the CFI interlocutory judgment to the 
Court of Justice. Should the Court of Justice uphold the interlocutory judgment, the 
CFI will have to decide on the amount of damage to be compensated in a subsequent 
judgment. 

C – STATE AID CONTROL 

1. 

APPLICABLE RULES 

102. 

103. 

104. 

105. 

106. 

In 2007, the Commission pursued the implementation of the State Aid Action Plan 
launched in 2005. The Commission adopted a new method for setting reference and 
discount  rates69  more  closely  in  line  with  market  principles  as  it  contains  a  system 
taking  account  of  the  specific  situation  of  the  company  or  project  and  will  thus 
contribute to a better economic approach to State aid analysis, as announced in  the 
State Aid Action Plan. 

The  Commission  launched  a  consultation  on  a  draft  General  Block  Exemption 
(GBER)70. This GBER will simplify and consolidate into one text five existing block 
exemptions for aid to SMEs, research and development aid in favour of SMEs, aid 
for employment, training aid and regional aid. In addition, the scope of the existing 
block  exemptions  will  be  extended  to  cover  certain  categories  of  new  aid,  in 
particular environmental aid, aid in the form of risk capital as well as research and 
development aid in favour of large companies. Certain rules will also be simplified 
and harmonised across different categories of aid. For instance, SME bonuses will be 
identical for all categories of aid. The draft GBER forms part of the State Aid Action 
Plan  designed  to  simplify  the  rules  and  concentrate  on  the  cases  where  the  most 
distortion occurs. A first discussion with Member States already took place in 2007. 
A  new  meeting  will  take  place  in  2008  and  the  GBER  should  be  adopted  by  the 
Commission in June 2008. 

On  13  June  2007 
its  2001  Cinema 
Communication until 31 December 2009 at the latest. The Cinema Communication 
contains rules on State aid to cinematographic and other audiovisual works. 

the  Commission  decided 

to  extend 

In  2007  the  Commission  also  launched  the  procedure  for  the  revision  of  the 
Commission notice on the application of Articles 87 and 88 of the EC Treaty to State 
aid in the form of guarantees. A first consultation of Member States and stakeholders 
took place during the summer. 

Following the Commission's work on the new de minimis and regional aid rules, the 
focus of the draft is two-fold. First, it clarifies the conditions relating to the presence 
or absence of aid in the form of guarantees. Second, it quantifies the relevant amount 
of aid on the basis of market references and risk analysis. 

69 
70 

Not yet published in OJ. 
OJ C 210, 8.9.2007, pp. 14-40. 

EN 

29 

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107. 

During 2007 the Commission also prepared draft guidelines on State aid to railway 
undertakings71.  In  the  context  of  market  opening,  where  companies  are  gradually 
confronted  with  increased  competitive  pressure,  there  is  a  need  for  improved 
transparency and legal certainty. 

2. 

APPLICATION OF THE STATE AID RULES 

2.1. 

Overview 

108. 

109. 

Following the exceptionally large number of State aid notifications in 2006 (922), the 
number  of  new  cases  notified  by  Member  States  in  2007  was  77772,  significantly 
above  the  level  in  2004  and  2005.  The  decrease  from  2006  is  in  line  with  the 
Commission's commitment to facilitate the granting of aid through block exemptions 
and  to  focus  policy  on  the  most  distortive  types  of  aid.  In  2007,  Member  States 
introduced more than 1 100 measures without prior notification to the Commission, 
compared to 410 block exempted measures in 2006. In agriculture alone, the number 
of  block  exempted  measures  increased  from  119  in  2006  to  496  in  2007.  Member 
States also put into effect around 200 measures under the recently-introduced block 
exemption for regional aid. 

The Commission took 629 final State aid decisions73
 in 2007. In the vast majority of 
cases,  the  Commission  approved  the  measures  without  a  formal  investigation, 
concluding that the examined aid was compatible with the State aid rules (87% of all 
decisions  in  2007)  or  did  not  constitute  State  aid  (5%  of  all  decisions).  Where  the 
Commission  has  doubts  whether  certain  aid  measures  comply  with  the  rules,  it 
carries out a  formal investigation during  which third parties and all Member States 
are  invited  to  provide  observations.  At  the  end  of  this  investigation  procedure,  the 
Commission  either  takes  a  positive,  conditional  or  no  aid  decision  (3%  of  all 
decisions) or finds that the measure does not comply with State aid rules and hence is 
not compatible with the common market, and therefore takes a negative decision (5% 
of all decisions). 

110. 

The Commission published two editions of the State aid Scoreboards74 in 2007. The 
autumn 2007 update75
 looked at the extent to which Member States have responded 
to  the  Lisbon  targets  of  less  and  better-targeted  aid,  and  also  included  a  special 
outlook on aid approved in 2007 under the new framework for research, development 
and innovation (R&D&I). The spring 2007 update76
 included a focus on unlawful aid 
awarded  by  Member  States.  The  Commission  continues  to  publish  the  electronic 

71 
72 

73 

74 

75 
76 

http://ec.europa.eu/dgs/energy_transport/state_aid/consultation_ms_en.htm 
Of the 777 notifications, 53% mainly concerned the manufacturing and service sectors, 33% agriculture, 
8% transport and 6% fisheries. 
Included  in  this  figure  are:  decisions  on  the  absence  of  State  aid,  decisions  not  to  raise  objections, 
positive decisions, conditional decisions and negative decisions. 
http://ec.europa.eu/comm/competition/state_aid/studies_reports/studies_reports.html 
online 
Scoreboard contains electronic versions of all Scoreboards, as well as a set of key indicators and a wide 
array of statistical tables. 
COM(2007) 791 final, 13.12.2007, State Aid Scoreboard, autumn 2007 update. 
COM(2007) 347 final, 28.6.2007, State Aid Scoreboard, spring 2007 update. 

An 

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30 

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111. 

newsletter  "State  Aid  Weekly  e-News"77  which  is  distributed  to  more  than  3000 
subscribers. 

Progress  in  terms  of  a  key  objective  of  the  State  Aid  Action  Plan  -  i.e.  that  the 
Member  State  should  grant  both  less  and  better-targeted  aid  -  is  being  made.  The 
latest  State  aid  Scoreboard  shows  that  Member  States  have  over  the  past  six  years 
been moving towards the European Council objective of less and better-targeted aid. 
In particular, the EU-10 Member States have progressively reoriented their state aid 
towards  horizontal  objectives  of  common  interest  such  as  regional  development, 
R&D,  SMEs  and  protecting  the  environment.  With  the  exception  of  Malta  and 
Hungary, they have all directed more than 85% of their aid to horizontal objectives, 
which  places  them  at  or  above  the  EU  average.  R&D  aid  has  increased  only 
moderately  in  the  EU,  but  with  the  new  R&D  framework  a  further  increase  is 
expected in the future. 

2.2. 

Applying regional aid rules 

112. 

113. 

114. 

During  2007,  the  Commission  approved  the  regional  aid  maps78  of  Bulgaria  and 
Romania,  as  well  as  those  for  Belgium,  Cyprus,  Denmark,  France,  Italy,  the 
Netherlands, and Portugal. As a result, regional aid maps covering the period 2007-
2013 have now been approved for all Member States. 

In two successive decisions the Commission approved a methodology for calculating 
the  aid  intensity  of  State  guarantees  granted  on  investment  loans79  and  working 
capital  loans80  in  Germany.  Four  other  Member  States  have  notified  proposed 
methods for determining the aid intensity of  State guarantees to be  assessed  by the 
Commission  in  accordance  with  the  arrangements  provided  for  in  Article  2(2)  of 
Regulation (EC) No 1628/200681. 

The Commission authorised regional aid for a number of large investment projects, 
such  as  the  establishment  of  two  chemical  production  plants82  and  three  separate 
investment  projects  in  the  pulp  and  paper  sector83  in  Portugal,  the  extension  of  an 
electricity generation plant in Hungary84, a plant for the production  of solar energy 
modules in Germany85, the expansion of a car manufacturing plant in Slovakia86 and 
an  automotive  investment  project  in  the  Czech  Republic87.  The  Commission  also 
authorised  German  aid  to  AMD  for  the  conversion  and  extension  of  its  existing 
micro-processor  wafer  plants  in  Dresden88.  In  one  case,  concerning  Ibiden89  in 

77 
78 
79 
80 

81 
82 
83 
84 
85 
86 
87 
88 
89 

http://ec.europa.eu/comm/competition/state_aid/newsletter/index.html 
http://ec.europa.eu/comm/competition/state_aid/regional_aid/regional_aid.cfm 
Case N 197/2007 Method to calculate the aid element in guarantees. 
Case  N  541/2007  Amendment  to  the  German  guarantee  method  to  include  guarantees  for  working 
capital. 
OJ L 302, 1.11.2006, p. 29. 
Case N 898/2006 Repsol Polimeros, N 899/2006 Artensa. 
Case N 900/2006 CELBI, N 838/2006 Soporcel, N 564/2006 About the future. 
Case N 907/2006 Mátrai Erőmű. 
Case N 863/2006 Avancis. 
Case N 857/2006 Kia Motors Slovakia. 
Case N 661/2006 Hyundai Motor Manufacturing Czech. 
Case N 810/2006 AMD Dresden. 
Case C 21/2007 IBIDEN Hungary Ltd. 

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31 

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115. 

116. 

117. 

2.3. 

118. 

119. 

Hungary, the Commission opened a formal investigation because of doubts over the 
definition of the relevant product markets and the market share of the beneficiary. 

A  proposed  ad  hoc  regional  investment  aid  to  Glunz  &  Jensen90  in  Slovakia  was 
deemed incompatible as it would have created significant distortions of competition 
in the market for graphic arts pre-press processing equipment in which the company 
has  an  important  share.  Doubts  about  the  incentive  effect  of  further  ad  hoc  aid  for 
Alas in Slovakia prompted the Commission to open a formal investigation91. 

As  regards  the  outermost  regions,  the  Commission  approved  ten  aid  schemes 
providing  exemptions  from  tax  and  social  security  contributions  in  the  French 
overseas départements92, as well as a reduction in excise duty on traditional rum93. A 
scheme providing tax reductions to companies set up in the free zone of Madeira was 
also approved94. 

In  Greece,  the  Commission  found  that  tax  breaks  of  approximately  EUR 
200 million95  given  to  thousands  of  companies  in  a  wide  range  of  sectors  were 
incompatible with the single market and need to be recovered from the beneficiaries. 

Applying  the  State  aid  framework  for  Research,  Development  and  Innovation 
(R&D&I) 

Notifications  of  aid  for  R&D&I  pending  on  1  January,  as  well  as  all  new 
notifications  received  in  the  reporting  year,  were  assessed  on  the  basis  of  the  new 
framework96. In 2007, the Commission approved 48  notified schemes, 28 of which 
were  pure  R&D  schemes,  four  were  pure  innovation  aid  schemes  and  16  covered 
both  R&D  and  innovation.  In  addition,  the  Commission  approved  four  ad  hoc  aid 
measures below the threshold triggering a detailed assessment under Chapter 7 of the 
Framework. Two decisions on R&D schemes concluded that no aid was involved. 

The  Commission  took  eight  decisions  following  a  detailed  assessment  of  large 
amounts of aid to projects under Chapter 7 of the Framework. It authorised a number 
of  projects  financed  by  the  French  Industrial  Innovation  Agency  -  two  R&D  aid 
totalling  EUR  119 million97,  EUR 
projects  ("NanoSmart"  and  "HOMES") 
26.5 million  in  aid  for  the  NeoVal  R&D  programme98,  EUR  37.6 million  in  aid 
towards the “Télévision Mobile Sans Limite” R&D project99 and EUR 31 million aid 
for  the  OSIRIS  R&D  programme100.  The  Commission  also  authorised  EUR 

90 
91 
92 

93 

94 
95 
96 
97 
98 
99 
100 

Case C 12/2007 Glunz&Jensen 
Case N 843/2006 ALAS Slovakia. 
Cases  N  522/2006,  N  524/2006,  N  529/2006,  N  540/2006,  N  542/2006,  N  559/2006,  N  560/2006, 
N 627/2006, N 667/2006, N 668/2006. 
Case  N  530/2006  Taux  d’accise  réduit  sur  le  rhum  «traditionnel»  produit  dans  les  départements 
d’outre-mer. 
Case N 421/2006 Zona Franca Madeira. 
Case C 37/2005 Tax-exempt reserve fund for certain companies. 
OJ C 323, 30.12.2006, p. 1. 
Cases N185/2007, OJ C 284, 27.11.2007, p. 3 and N89/2007, OJ C 275, 16.11.2007, p. 3. 
Case N 674/2006, OJ C 120, 31.5.2007, p. 2. 
Case N 854/2006, OJ C 182, 4.8.2007, p. 5. 
Case N 349/2007, OJ C 304, 15.12.2007, p. 5. 

EN 

32 

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12.25 million  of  R&D  aid  for  the  SOITEC  group101.  In  March,  the  Commission 
opened an in-depth investigation into a proposed loan of EUR 27 million to Spanish 
company ITP for the development of the Trent 1000 aircraft engine102. 

2.4. 

Assessing risk capital financing for SMEs 

120. 

In  2007  the  Commission  approved  19  notified  schemes  under  the  risk  capital 
guidelines103.  Eleven  of  the  schemes  were  found  to  respect  the  safe  harbour 
provisions of Chapter 4 of the Guidelines and were approved after a light assessment. 
Five of the schemes were approved after a more detailed assessment under chapter 5 
of  the  Guidelines.  Finally,  three  schemes  were  found  not  to  constitute  aid.  The 
Commission  opened  proceedings  regarding  one  scheme 
in  Saxony-Anhalt, 
Germany104. 

2.5. 

Assessing training aid 

121. 

122. 

123. 

124. 

Although training aid is covered by a block exemption regulation105, the Commission 
is  required  to  assess  projects  exceeding  EUR  1 million.  In  the  reporting  period  the 
Commission  took  six  decisions  (final  decisions  or  decisions  to  open  formal 
investigations) concerning training aid. 

In a number of cases, the Commission focussed on the need to ensure that aid is only 
granted where it is a necessary incentive for the training activity (and is not diverted 
into operating aid by subsidising training that the beneficiary would have carried out 
in any event and thus simply provides windfall gains for the beneficiary). 

Thus, in the GM Antwerp106 case, the Commission found part of the notified state aid 
incompatible,  as  it  would  have  served  to  finance  training  activities  which  the 
beneficiary  would  have  carried  out  anyway,  even  without  aid.  Such  aid  would  not 
serve the common interest by increasing training activities and would simply distort 
competition. In Fiat107 and Club Med Guadeloupe108 the Commission found the aid 
necessary and compatible. 

in 

the  DHL  Leipzig/Halle  case109 

the 
Similarly, 
investigation  because  it  had  doubts  whether  DHL  would  not  have  to  provide  the 
training to its employees anyway. DHL needs to employ workers with sophisticated 
technical  skills  which  are  to  a  large  extent  required  by  law  and  necessary  for  its 
operations.  Doubts  as  to  the  incentive  effect  of  the  training  aid  have  also  led  the 

the  Commission 

initiated 

101 
102 
103 
104 
105 

106 
107 
108 
109 

Case N 887/2006, OJ C 200, 28.8.2007, p. 2. 
Case C 9/2007, OJ C 108, 12.5.2007, p. 18. 
OJ C 194, 18.8.2006, pp. 2-22. 
OJ C 246, 20.10.2007, p. 20. 
Commission Regulation (EC) No 68/2001 on the application of Articles 87 and 88 of the EC Treaty to 
training aid (OJ L 10, 13.1.2001, p. 20). 
Case C 14/2006, Training aid to General Motors Antwerp (OJ L 243, 18.9.2007, p. 71). 
Case N 541/2006 Fiat Auto S.p.A. (OJ C 220, 20.9.2007, p. 2). 
Case N 206/2007 Training aid for Club Med Guadeloupe (OJ C 284, 27.11.2007, p. 5). 
Case C 18/2007 Training aid for DHL Leipzig (OJ C 213, 12.9.2007, p. 28). 

EN 

33 

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Commission  to  open  formal  investigations  in  the  Vauxhall110  and  Volvo  Cars 
Ghent111 cases. 

2.6. 

Taxation cases 

125. 

126. 

127. 

On  10  October112,  the  Commission  opened  the  formal  investigation  procedure  with 
respect  to  a  tax  incentive  for  the  acquisition  by  Spanish  companies  of  significant 
participations  in  foreign  companies.  The  tax  measure  allows  Spanish  companies  to 
amortise  over  a  20-year  period  the  goodwill  deriving  from  the  acquisition  of 
significant shareholdings in foreign companies, whereas there is no similar measure 
relating  to  the  goodwill  arising  from  domestic  acquisitions.  A  shareholding  is 
deemed  significant  if  it  represents  at  least  5%  of  the  share  capital  of  the  target 
company. Considering the due diligence investigation required in such transactions, 
it  could  be  argued  that  in  practice  this  scheme  can  only  apply  for  relatively  large 
acquisitions, and that it therefore confers a selective advantage that may be qualified 
as State aid 

On  7  February  the  Commission  opened  the  formal  investigation  procedure  against 
the  so-called  "group  interest  box"  (Groepsrentebox)  notified  by  the  Dutch 
authorities113.  On  21  March  the  Commission  also  opened  proceedings  against  a 
similar scheme which was already in force in Hungary114. Both schemes reduce the 
tax burdens on companies in respect of the net balance of interest received from and 
paid to affiliated companies. 

The Commission considered that the reduced tax burden in respect of a certain type 
of  revenue  (interest)  would,  according  to  the  source  of  the  revenue  (intragroup), 
confer  an  economic  advantage  granted  through  State  resources  on  certain 
undertakings only. The Commission also considered that this advantage was likely to 
distort  competition  and  affect  trade  between  the  Member  States.  Indeed,  the 
advantage  would  appear  to  be  substantially  higher  in  the  context  of  international 
group financing activities. For these reasons, it could constitute State aid. 

2.7. 

Aid for rescuing and restructuring firms in difficulty 

128. 

In a number of rescue aid cases the Commission again emphasised that such aid is no 
more than a temporary measure facilitating the preparation of a restructuring plan or 
the  liquidation  of  the  company.  Accordingly,  in  the  Ottana115,  Ixfin116  and  New 
Interline117 cases, the Commission opened the formal procedure because rescue aid 
had  not  been  repaid  within  the  statutory  six  months  deadline  and  no  serious 
restructuring plan had been submitted. In the Ernault118 case, a restructuring plan had 
been submitted subsequent to the granting of rescue aid but was later withdrawn by 

110 
111 
112 
113 
114 
115 
116 
117 
118 

Case C 23/2007 Vauxhall Motors Ltd Training aid for Ellesmere Port (OJ C 243, 17.10.2007, p. 4). 
Case C 35/2007 Training aid to Volvo Cars Ghent (OJ C 265, 7.11.2007, p. 21). 
OJ C 311/2007, 21.12.2007, p. 21. 
IP/07/154, 7.2.2007. 
IP/07/375, 21.3.2007. 
Case C 11/2007 Aiuto alla ristrutturazione di Ottana Energia Srl (OJ C 122, 2.6.2007, p. 22) 
Case C 59/2007 Aiuto al salvataggio alla Ixfin SpA (decision of 11.12.2007, not yet published). 
Case C 13/2007 Aiuto al salvataggio della New Interline SpA (OJ C 120, 31.5.2007, p. 12). 
Case C 32/2005 Aide à la restructuration d'Ernault (OJ L 277, 20.10.2007, p. 25). 

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34 

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129. 

130. 

the  Member  State.  The  Commission  explained  that  the  aid  had  to  be  repaid  at  the 
latest at the time of withdrawal of the plan. 

In  the  reporting  period  the  Commission  approved  a  number  of  restructuring  aid 
measures  including  Javor  Pivka119  and  Novoles  Straza120  (both  approved  under  the 
1999 rescue & restructuring guidelines), Techmatrans121 and Bison-Bial122. In other 
cases  the  Commission  found  the  aid  incompatible  (e.g.  Nuova  Mineraria  Silius123 
and  Biria124)  or  opened  a  formal  investigation  because  of  doubts  regarding 
compatibility (e.g. Legler125, FagorBrandt126 or Fluorite di Silus127). 

2007  also  saw  a  number  of  restructuring  aid  cases  linked  to  the  privatisation  of 
publicly  held  companies.  In  two  cases  involving  Romania  (Automobile  Craoiva128 
and Tractorul129), the Commission opened the formal investigation because of doubts 
that  the  conditions  attached  to  the  privatisation  might  confer  an  advantage  on  the 
undertakings  that  are  being  privatised  and  consequently  entail  State  aid  to  their 
benefit. In particular, conditions aimed at securing a certain future production level, 
especially in the case of a structurally loss-making company, are capable of having 
an  effect  similar  to  restructuring  aid  and  are  paid  for  by  the  State  in  the  form  of 
reduced proceeds from the privatisation. 

131. 

The current 2004 Community guidelines on State aid for rescuing and restructuring 
firms  in  difficulty130  are  due  to  expire  on  9  October  2009.  In  accordance  with  the 
2006 State Aid Action Plan, DG Competition launched a review of the guidelines in 
2007  in  order  to  identify  the  potential  need  for  changes  to  the  rescue  and 
restructuring rules. 

2.8. 

Aid for environmental protection 

132. 

133. 

119 

120 

121 

122 

123 
124 
125 
126 
127 
128 
129 
130 
131 
132 

During 2007, approximately 65 State aid cases were approved by the Commission on 
the basis of the Community guidelines on State aid for Environmental Protection131. 

In November, the Commission approved a British case (WRAP Printing and Writing 
Paper  Scheme)132  concerning  investment  in  new  capacity  for  recycling  paper.  The 

Case  C  19/2006  Restructuring  aid  for  Javor  Pivka  Commission  decision  of  10.7.2007  (not  yet 
published). 
Case  C  20/2006  Restructuring  aid  to  Novoles  Straza  Commission  decision  of  10.7.2007  (not  yet 
published). 
Case  C  6/2007  Restructuring  aid  for  Techmatrans,  Commission  decision  of  28.11.2007  (not  yet 
published). 
Case  C  54/2006  Restructuring  aid  for  Bison-Bial,  Commission  decision  of  12.9.2007  (not  yet 
published). 
Case C 16/2006 Restructuring aid to Nuova Mineraria Silius (OJ L 185, 17.7.2007, p. 18). 
Case C 38/2005 Biria Gruppe (OJ L 183, 13.7.2007, p. 27). 
Case C 39/2007 Aiuto di stato per la ristrutturazione del gruppo Legler (OJ C 289, 1.12.2007, p. 22). 
Case C 44/2007 Restructuring aid to FagorBrandt (OJ C 275, 16.11.2007, p. 18). 
Case C 60/2007 Aid to Fluorite di Silius S.p.A Commission decision, 11.12.2007 (not yet published). 
Case C 46/2007 Privatisation of Automobile Craoiva, Romania (OJ C 248, 23.10.2007, p. 25). 
Case C 41/2007 Privatisation of Tractorul, Romania (OJ C 249, 24.10.2007, p. 21). 
OJ C 244, 1.10.2004, p. 2. 
OJ C 37, 3.2.2001, p. 3 
Case C 45/2005, Waste and Resources Action Programme (WRAP) Printing and Writing Paper Scheme 
(not yet published in the OJ). 

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35 

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scheme was approved because it respected the requirements that apply to this type of 
investment:  (a)  the  aid  does  not  indirectly  relieve  the  polluters  from  a  burden  that 
should be borne by them, (b) the investment goes beyond the "state of the art", (c) the 
treated  materials  would  otherwise  be  treated  in  a  less  environmentally  friendly 
manner, and (d) the investment increases collection of those materials. The approval 
was  possible  due  to  the  fact  that  the  scheme  is  confined  to  addressing  the  proven 
market failures in using recycled paper as raw material. 

134. 

During 2007 work on revised Community guidelines on State aid for Environmental 
Protection  continued  as  part  of  the  wider  energy  and  climate  change  package.  The 
guidelines were adopted on 23 January 2008133. 

2.9. 

Enforcing and monitoring State aid decisions 

135. 

136. 

137. 

In  2007  the  Commission  continued  its  efforts  to  achieve  more  effective  and 
immediate  execution  of  recovery  decisions.  Information  submitted  by  the  Member 
States concerned shows that significant progress towards recovery was made during 
that period. The number of recovery decisions awaiting implementation was reduced 
from 60 at the end of 2006 to 47 at the end of 2007. In all, 23 recovery cases were 
closed,  whilst  9  new  recovery  decisions  were  adopted.  The  progress  made  is  also 
reflected  in  the  amounts  of  aid  recovered.  Of  the  EUR  8.9 billion  of  illegal  and 
incompatible  aid  to  be  recovered  under  decisions  adopted  since  2000,  some  EUR 
8.2 billion (i.e. 91.2% of the total amount) had been effectively recovered by the end 
of  2007.  In  addition,  a  further  EUR  2.4 billion  in  recovery  interests  had  been 
recovered. 

As  announced  in  the  State  aid  Action  Plan134,  the  Commission  continued  to  take  a 
strict  line  towards  Member  States  that  failed  to  effectively  implement  recovery 
decisions  addressed  to  them.  In  2007  the  Commission  initiated  legal  action  under 
either Article 88(2) EC or Article 228(2) EC for failure by Member States to comply 
with recovery obligations. It took such action in a total of five cases involving Italy 
and Spain. 

The  future  General  Block  Exemption  Regulation  (GBER)  is  expected  to  lead  to  a 
significant widening of the scope of the current Block Exemption Regulations and to 
a  large  increase  in  the  amounts  of  block  exempted  State  aid.  Ex  post  monitoring 
therefore becomes particularly relevant as a way of ensuring the correct application 
of these measures by Member States. Against this background, the Commission had 
carried  out  a  pilot  project  involving  the  ex  post  monitoring  of  several  block 
exemption regulation (BER) measures in 2006. This pilot exercise proved useful and 
the Commission therefore launched a second exercise in 2007. A final report on the 
results of this exercise should be completed in June 2008. 

138. 

Given that effective and prompt recovery is essential to ensure that an end is put to 
distortions  of  competition  resulting  from  illegal  and  incompatible  aid,  the 
Commission saw a need to summarise the case law and its policy in this area in the 

133 

134 

Not  yet  published  in  the  OJ.  The  guidelines  are  available  in  English,  French  and  German  on  the 
website:  http://ec.europa.eu/comm/competition/state_aid/reform/reform.cfm.  Until  the  publication  of 
the new guidelines, the 2001 guidelines on State aid for Environmental Protection are applicable. 
http://ec.europa.eu/comm/competition/state_aid/reform/reform.cfm 

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36 

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form of a Notice135. The main aim of the Notice was to build on the progress made to 
date  and  to  outline  how  the  Commission  and  the  Member  States  could  cooperate 
more  effectively  to  ensure  effective  and  swift  implementation  of  the  Commission's 
recovery decisions. 

The Notice highlights the key principles of recovery policy as contained in Articles 
14  and  15  of  the  Procedural  Regulation.  It  recalls  the  basic  principle  contained  in 
Article 14 (3) of the Procedural Regulation that recovery is carried out under national 
law,  as  long  as  the  provisions  of  national  law  allow  immediate  and  effective 
recovery. The content of the Notice in this respect is largely shaped by the relatively 
strict  interpretation  of  the  Member  States'  recovery  obligations  by  the  Community 
Courts, in particular in two judgments handed down in 2005 and 2006 respectively 
136. 

The  Notice  also  contains  best  practice  guidelines  for  the  Commission  and  for  the 
Member  States  in  connection  with  recovery,  as  well  as  a  description  of  the 
Commission's new approach towards the setting of recovery deadlines137. 

In relation to the role of the Member States, the Notice deals with a number of issues 
such  as  the  internal  responsibilities  for  recovery,  issues  arising  in  the  event  of 
litigation  before  national  or  Community  Courts,  and  the  specific  issues  arising  in 
relation to recovery from beneficiaries in financial difficulties. 

Finally, the Notice recalls the possible consequences of a failure by a Member State 
to  implement  a  Commission  recovery  decision.  It  emphasises  that  the  Commission 
will require Member States to suspend the payment of any new – even compatible – 
aid to beneficiaries who have not yet repaid incompatible aid previously granted to 
them. 

139. 

140. 

141. 

142. 

2.10.  The application of State aid rules in particular sectors 

2.10.1.  Steel 

143. 

The  Commission  continues  to  adopt  a  restrictive  approach  to  State  aid  in  the  steel 
sector.  Given  that  restructuring  and  investment  aid  to  the  steel  sector  is  generally 
prohibited under EU rules, the Commission did not authorise any new aid in 2007. It 
continued to monitor aids under restructuring and business plans authorised prior to 
the 2004 accession. 

135 

136 

137 

Towards  an  effective  implementation  of  Commission  decisions  ordering  Member  States  to  recovery 
unlawful and incompatible State aid (OJ C 272, 15.11.2007). 
The most recent confirmation of this strict approach was adopted in the France Telecom case, C-441/06 
Commission  v  France,  which  was  decided  on  18.10.2007.  See  also  Case  C-415/03,  Commission  v 
Greece [2005], ECR I-03875 and Case C-232/05, Commission v France [2006]. 
To date, the Commission's negative decisions usually contained a single deadline by which the Member 
State had to inform the Commission of the measures taken to comply with a given decision. According 
to the interpretation of the Community Courts, this deadline (which was usually set at two months) also 
determined the date by which the Member State had to complete the recovery. It is intended that future 
decisions  will  contain  two  separate  deadlines,  two  months  for  informing  the  Commission  of  the 
intended recovery measures and a further two months for the completion of the recovery. 

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144. 

145. 

The Commission's monitoring of these plans was successfully completed in 2007 as 
regards the Czech Republic (three steel companies, all of which are now considered 
viable  under  the  plans)  and  Poland  (eight  undertakings,  of  which  five  were 
considered viable and three are in liquidation). The monitoring of Slovakia has given 
rise to litigation. Monitoring continues for Bulgaria and Romania. 

In  this  context,  the  Commission  took  a  decision  approving  a  modification  of  an 
individual  business  plan  of  the  Czech  steel  producer  VPFM138.  In  addition,  the 
Commission  closed  two  formal  investigation  procedures  in  the  Technologie 
Buczek139 and Arcelor Huta Warszawa140 cases with negative decisions, concluding 
that State aid had been misused. The Commission also opened formal investigations 
into  State  aid  linked  to  the  terms  of  privatisation  of  Mittal  Steel  Roman141,  a 
Romanian  steel  manufacturer,  and  concerning  aid  to  the  restructuring  of  the  Polish 
seamless steel tube sector142. 

2.10.2.  Shipbuilding 

146.  Work  was  started  in  2007  on  the  review  of  the  Framework  on  State  Aid  to 
Shipbuilding143. A decision on the future of this Framework is due by 31 December 
2008, when the current provisions expire. 

147. 

Following the opening of the investigation procedure The Commission adopted two 
negative  decisions  prohibiting  aid  to  the  Portuguese  shipyard  Estaleiros  Navais  de 
Viana do Castelo S.A144. In both cases Portugal had notified the aid to shipbuilding 
on the basis of the Regulation concerning a temporary defensive mechanism (TDM 
Regulation)145. The TDM Regulation entered into force on 3 July 2002 and expired 
on 31 March 2005. However, Portugal only approved the aid internally and notified 
it to the Commission after the TDM Regulation had expired. 

148. 

The Commission pursued its formal investigations into the restructuring of the Polish 
shipyards  in  Gdynia,  Szczecin  and  Gdansk146.  In  the  latter  case  it  issued  an 
information injunction to Poland. 

2.10.3.  Coal 

149. 

After  the  ECSC  Treaty  expired,  the  Council  adopted  an  exemption  regulation147 
based  on  Article  87(3)(e),  laying  down  favourable  rules  for  State  aid  for  hard  coal 
and meta-lignite. In 2007 the Commission took relatively few decisions in the coal 

138 
139 
140 
141 
142 
143 
144 

145 

146 
147 

Case N 350b / 2006 Changes of IBP of VPFM (OJ C 200, 28.8.2007, p. 1). 
Case C 23/2006 Technologie Buczek, decision of 23.10.2007 (not yet published). 
Case C 51/2006 Arcelor Huta Warszawa, decision of 11.12.2007 (not yet published). 
Case C 40/2007, Privatisation of Mittal Steel Roman (OJ C 287, 29.11.2007, p. 29). 
Case C 48/2007, Restructuring of the Polish tube sector (OJ C 282, 24.11.2007, p. 21). 
Framework on State aid to Shipbuilding (OJ C 317, 30.12.2003, p. 11). 
Case  C  26/2006,  Temporary  Defensive  Mechanism  for  Shipbuilding,  Portugal  (OJ  L  219,  24.8.2007, 
p. 25),  and  Case  C  32/2007,  TDM  aid  to  ENVC,  Commission  decision  of  11.12.2007  (not  yet 
published). 
Council Regulation (EC) N° 1177/2002 concerning a temporary defensive mechanism to shipbuilding 
(OJ L 172, 2.7.2002, p.1), as amended by Council Regulation (EC) N° 502/2004 of 11 March 2004 (OJ 
L 8, 19.3.2004, p. 6). 
Cases C 17/2005, C 18/2005 and C 19/2005. 
Council Regulation (EC) No 1407/2002 of 23 July 2002 on State aid to the coal industry. 

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38 

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sector,  and  no  decision  in  the  lignite  sector.  In  particular,  it  approved  the  plan  for 
access to coal reserves in Romania. Following this decision, only one plan for access 
to coal reserves remains, namely that of Spain, which notified it in 2006. 

2.10.4.  Agriculture 

150. 

In  2007  the  Commission  adopted  a  new  de  minimis  Regulation  for  primary 
production  in  agriculture,  processing  and  marketing  activities148  that  had  already 
been  brought  within  the  scope  of  the  general  de  minimis  Regulation149.  Compared 
with  the  previous  de  minimis  Regulation  for  agriculture150,  the  main  new  elements 
are: increase of the individual ceiling to EUR 7 500 per beneficiary over a period of 
three  fiscal  years;  increase  of  the  national  ceiling  to  0.75%  of  the  value  of  the 
agricultural  production;  extension  of  the  scope  of  the  Regulation  to  include 
guarantees as well as other types of measures considered as transparent under certain 
conditions, as in the general de minimis Regulation. 

151. 

The new Regulation, covering the period 2008-2013, has been designed primarily to 
allow  Member  States  to  react  quickly  in  cases  of  emergency,  such  as  natural 
disasters. 

2.10.5.  Fisheries 

152. 

In  July,  the  Commission  adopted  a  new  de  minimis  Regulation  specific  to  the 
fisheries sector151. This  new Regulation  has increased the ceiling of de minimis aid 
from the previous ceiling of EUR 3 000 (which was laid down in provisions common 
to fisheries and agriculture in the former de minimis Regulation) to EUR 30 000 per 
fishing  enterprise  per  three-year  period152.  Moreover,  the  Member  States  must 
comply  with  the  condition  that  the  total  amount  of  aid  granted  to  all  enterprises 
during that 3-year period does not exceed 2.5% of the annual fisheries output of the 
Member  State  concerned  (the  total  amount  having  been  0.3%  in  the  former 
Regulation). 

153. 

A  draft  of  a  new  exemption  Regulation153,  intended  to  replace  Regulation  No 
1595/2004 which expired on 31 December 2004, was presented to Member States in 
an  Advisory  Committee  on  State  aid  in  October.  The  second  meeting  of  this 
Committee will be held early in 2008 with a view to adopting the Regulation shortly 
after. 

154. 

During 2007, 49 new State aid cases were registered and 17 decisions adopted. 

148 
149 
150 
151 
152 
153 

Regulation (EC) No 1535/2007 (OJ L 335, 21.12.2007, p. 35). 
Regulation (EC) No 1998/2006 (OJ L 379, 28.12.2006, p. 5). 
Regulation (EC) No 1860/2004 (OJ L 325, 28.10.2004, p. 4). 
No 875/2007 of 24 July 2007. 
No 1860/2004. 
OJ C 248, 23.10.2007. 

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39 

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3. 

SELECTED COURT CASES 

3.1. 

Definition of aid 

155. 

156. 

157. 

In the Bouygues Télécom case154, the CFI confirmed a Commission decision stating 
that  by  retroactively  adapting  the  amount  to  be  paid  by  Orange  and  SFR  for  the 
UMTS  licence  in  connection  with  a  first  call  for  applications,  in  the  light  of  the 
amount paid in connection with a second call for application by Bouygues Telecom, 
the French State did not grant any State aid to SFR and Orange. The CFI ruled that 
the  fact  that  the  State  may  have  waived  resources  by  retroactively  adapting  the 
amount of the licences may indeed have created an advantage for the beneficiaries of 
the  reduction  in  the  fee.  However,  this  was  not  considered  sufficient  to  prove  the 
existence  of  a  State  aid  incompatible  with  the  common  market,  given  the  specific 
provisions  of  Community  law  on  telecommunications  read  in  the  light  of  the 
common law on State aid. The waiver of the claim at issue was considered inevitable 
by  the  CFI,  as  the  general  scheme  of  the  telecommunication  system  required  non-
discriminatory treatment of operators. 

In the Olympic Airways case155, the CFI partially annulled the relevant Commission 
decision  in  that  it  had  considered  the  non-payment  by  Olympic  Aviation  (a 
subsidiary of Olympic Airways) of value added tax (VAT) on aviation spare parts as 
State aid. The CFI found that the Commission could not, in principle, presume solely 
on  the  basis  of  the  non-payment  that  the  undertaking  concerned  had  enjoyed  an 
advantage. The Commission should have verified whether the non-payment of VAT 
conferred a real cash advantage on the undertaking concerned. 

The  CFI  also  issued  its  judgment  in  Salvat  père  &  fils  e.a.  v  Commission156 
concerning  the  Rivesaltes  Plan  and  the  CIVDN  parafiscal  levies,  through  which 
France sought to help wine production in the region in question (in particular through 
a  set-aside  premium  and  through  an  aid  for  promotion,  partially  financed  by  inter-
professional levies). The CFI rejected the case brought by the aid recipient seeking to 
annul Commission Decision 2007/253/EC, which declared this aid incompatible. The 
judgment  clarifies  the  financing  of  agricultural  inter-professions  in  relation  to  the 
Pearle judgment157, while limiting its scope. Claimants invoked the Pearle judgment 
to deny that a State-resource character could be imputed to inter-professional levies 
(financing  of  the  measure)  and  to  the  set-aside  premium  (financed  partly  by  levies 
but  also  by  the  State  budget).  The  CFI  established  the  existence  of  State  resources 
having regard to the role played by the French State in the inter-profession context. 

3.2. 

Procedural issues 

158. 

In  the  Lucchini  case158,  the  Grand  Chamber  of  the  ECJ  confirmed  in  an  important 
ruling  that  national  judges  must  ensure  the  effectiveness  of  Community  law, 
including  the  provisions  on  the  control  of  State  aid.  Community  law  therefore 
precludes the application of a provision of national law which seeks to lay down the 

154 
155 
156 
157 
158 

Case T-475/04 Bouygues Télécom v Commission. 
Case T-68/2003 Olympiaki Aeroporia Ypiresies AE v Commission. 
T-136/05, CFI judgment of 20.9.2007. 
Case C-345/02 Pearle BV. 
Case C-119/05 Ministero dell'Industria, del Commercio e dell'Artigianato/Lucchini SpA. 

EN 

40 

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159. 

160. 

161. 

162. 

principle  of  res  judicata  in  so  far  as  the  application  of  that  provision  prevents  the 
recovery of State aid granted in breach of Community law which has been found to 
be incompatible with the common market in a decision of the Commission which has 
become final. 

In the Koninklijke Friesland Foods case159, building on the judgment of the ECJ in 
the  Belgian  coordination  centres  case160,  the  CFI  partially  annulled  the  decision  of 
the Commission concerning a Dutch tax scheme in favour of international financing 
activities insofar as the decision did not contain a transitional period for companies 
whose applications to benefit from the litigious aid scheme were pending at the date 
of the opening of the procedure. The Commission has appealed against the judgment. 

In the Freistaat Sachsen case161, the CFI annulled a decision of the Commission to 
the  extent  that  it  declared  certain  aspects  of  the  notified  scheme  incompatible.  The 
Commission  had  based  its  incompatibility  assessment  on  the  fact  that  the  aid 
provided  under the  scheme  exceeded the aid intensities provided for in SME  block 
exemption  No  70/2001162  adopted  a  few  days  after  the  scheme  had  been  notified, 
although  this  block  exemption  regulation  did  not  contain  any  explicit  transitional 
provisions.  The  CFI  essentially  considered  that  the  rules  to  be  applied  on  a  given 
notification  case  were  the  rules  in  place  at  the  date  on  which  the  notification  took 
place. The Commission has appealed against the judgment. 

In a case concerning failure to act initiated by Asklepios Kliniken163, the CFI clarified 
that  the  Commission  was  entitled  to  defer  its  examination  of  the  questions  of  fact 
raised by the complaint, pending clarification of the legal framework in the context 
of the proceedings in the Altmark case164. 

In the parallel Bouychou and FG Marine cases165, the CFI had occasion to decide on 
two actions for damages following the annulment, by the ECJ, of the decision of the 
Commission in the Stardust case166. The CFI considered that the causal link between 
the  Commission  decision  annulled  by  the  ECJ  and  the  alleged  damage  of  the 
applicants had been broken as the cessation of payments decided by the beneficiary 
of the aid was not the direct consequence of the decision of the Commission. Indeed, 
at the date of declaration of cessation of payments, the Commission decision had not 
yet been notified to the French State. The debt to the French State was therefore not 
yet enforceable. 

163. 

In Technische Glaswerke Ilmenau v Commission167 the CFI ruled, for the first time in 
the field of State aid, that the Commission should base its refusal to grant access to 
documents  on  the  precise  information  contained  in  the  documents,  and  not  on  a 
general analysis by category of documents. An individual and concrete examination 

159 
160 
161 
162 

163 
164 
165 
166 
167 

Case T-348/03 Koninklijke Friesland Foods v Commission. 
Cases C-182/03 and C-217/03 Forum 187 et al. v Commission. 
Case T-357/02 Freistaat Sachsen v Commission. 
Commission Regulation No 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the 
EC Treaty to State aid to small and medium-sized enterprises, OJ L 10, 13.1.2001, p. 33. 
Case T-167/04, Asklepios Kliniken v Commission. 
Case C-280/00, Altmark Trans and Regierungspräsidium Magdeburg [2003] ECR I-7747. 
Case T-344/04, Bouychou v Commission and case T-360/04 FG Marina SA v Commission. 
Case C-482/99, France v Commission (Stardust) [2002] ECR I-4397. 
T-237/02, CFI judgment of 14.12.2006. 

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41 

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is not necessary, however, if the Commission gives as its reason that access should 
manifestly  have  been  refused  due  to  the  particular  circumstances  of  the  case.  The 
Court does not completely deny the possibility for the Commission to refuse access 
to documents on the basis of Article 4(2) of Regulation 1049/2001. However, in the 
case at hand, the CFI held that the Commission  should  have indicated  in  detail the 
reasons why the exception applied to the categories  of documents and  that it could 
not rely on purely hypothetical grounds. The Commission appealed this jugdment to 
the ECJ. 

In  Fachvereinigung  Mineralfaserindustrie  v  Commission168,  the  CFI  dismissed  an 
action  for  annulment  of  two  Commission  decisions  brought  by  a  professional 
association. The Court confirmed in one of the judgments that, since the applicants 
had not sought annulment on the ground that the procedural safeguards provided for 
by  Article  88(2)  EC  were  infringed,  the  mere  fact  that  the  applicants  may  be 
considered to be parties "concerned" could not be sufficient to regard them as having 
been individually affected by the contested decision. 

In Spain v Lenzing169, the ECJ dismissed an appeal against the CFI judgment which 
partially annulled a non-aid Commission decision challenged by Lenzing (competitor 
of  the  Spanish  beneficiary  "Sniace").  The  Court  confirmed  that  the  CFI  did  not 
merely note in general terms that Lenzing and Sniace were in competition with each 
other, but that the CFI had in fact based its findings regarding the adverse effect on 
Lenzing’s  position  on  the  market  on  a  number  of  factors  adduced  by  Lenzing  in 
respect of the competitive situation and effect of the aid on Sniace's prices. 

In  Sniace  v  Commission170,  the  ECJ  also  dismissed  the  appeal  against  the  CFI 
judgment declared inadmissible the action initiated by Sniace against a Commission 
decision.  The  latter  considered  that  the  mesures  adopted  by  Austria  in  favour  of 
Lenzing were in part not an aid and in part compatible aid. The ECJ confirmed that 
the appellant was not individually concerned by the contested decision owing to two 
factors:  the  limited  role  played  by  Sniace  in  the  formal  examination  procedure  and 
Sniace’s  failure  to  demonstrate  that  its  position  on  the  market  was  substantially 
affected. 

The  Court  stated  that  comparable  situations  were  not  treated  differently.  Sniace’s 
situation  could  clearly  be  distinguished,  in  an  essential  respect,  from  that  of  the 
applicant  in  Lenzing  v  Commission.  In  the  latter  case,  the  applicant  was  in  direct 
competition  with  the  recipient  of  aid  on  the  market  concerned  and  this  was 
considered by the CFI to be a determining factor in its assessment of the applicant’s 
capacity to bring proceedings against the Commission’s decision. 

In Stadtwerke Schwäbisch Hall and Others v Commission171, the ECJ annulled a CFI 
judgment  because  the  Court  considered  that  the  CFI  had  construed  the  applicant's 
request incorrectly, as they had only asked for the decision to be annulled. The CFI 
had  stated  that  the  objective  of  the  appeal  was  to  protect  the  applicants'  procedural 
rights. 

164. 

165. 

166. 

167. 

168. 

168 
169 
170 
171 

T-375/03, CFI judgment of 20.9.2007; T-254/05, CFI judgment of 20.9.2007. 
C-525/04 P, ECJ judgment of 22.11.2007. 
C-260/05 P, ECJ judgment of 22.11.2007. 
C-176/06 P, Stadtwerke Schwäbisch Hall and Others v Commission, ECJ judgment of 29.11.2007 

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169. 

In  Ireland  and  others  v  Commission172,  the  CFI  annulled  the  Commission's  final 
negative decision on the ground of an infringement of the duty to give reasons with 
regard to the non-application of Article 1(b)(v) of Regulation No 659/1999173 in the 
State aid field (Procedural Regulation) to the exemption from excise duty on mineral 
oils.  The  CFI  considered  that,  given  the  particular  circumstances  of  the  contested 
exemptions, the Commission should have ascertained whether the measures could be 
regarded  as  existing  aid  by  reason  of  the  fact  that,  at  the  time  they  were  put  into 
effect, they did not constitute aid, but that they subsequently became aid due to the 
evolution  of  the  common  market  and  without  having  been  altered  by  the  Member 
States  concerned  in  accordance  with  the  abovementioned  article  of  the  Procedural 
Regulation. The Commission has appealed against the judgment. 

3.3. 

Recovery of aid 

170. 

171. 

172. 

In the MTU case174, the CFI interpreted Article 13(1) of the Procedural Regulation, 
which empowers the Commission to adopt a decision on the basis of the information 
available if a Member State fails to comply with an information injunction from the 
Commission. The CFI concluded that Article 13(1) does not allow the Commission 
to  impose  on  a  particular  undertaking  an  obligation  to  repay  a  fixed  part  of  the 
amount of the aid declared to be incompatible, where the transfer of State resources 
from which that undertaking benefited was hypothetical. The CFI underlined that the 
Member State concerned was, in any event, under an obligation to require recovery 
from  the  actual  beneficiaries  under  the  Commission’s  supervision,  without  it  being 
necessary for the Commission to name those beneficiaries expressly in the recovery 
decision. The Commission has lodged an appeal against this judgment. 

In Scott v Commission175 the CFI annulled a final negative decision with recovery on 
the grounds of erroneous assessment of the amount of State aid. The judgment lays 
an  obligation  on  the  Commission  to  take  into  account  the  comments  of  the 
beneficiary  filed  after  the  time  limit  in  certain  circumstances.  In  this  respect  it 
referred to some errors by the Commission in the calculation of the aid amount. The 
CFI  also  annulled  the  decision,  for  insufficient  statement  of  reasons,  in  so  far  as  it 
relied  on  the  interest  rate  applied  by  the  Commission  in  Département  du  Loiret  v 
Commission176. The Commission has lodged an appeal against these judgments. 

In Commission v Spain177 the Court confirmed the failure of Spain to adopt, within 
the  period  prescribed,  the  measures  necessary  to  implement  the  Commission's 
recovery decisions. In Commission v Italy178, the ECJ condemned Italy for failure to 
execute a Commission recovery decision. The Court confirmed the settled case-law 
that  the  only  reason  justifying  non-execution  is  the  complete  impossibility  to 
implement the decision, which was not proven in this case. 

172 
173 

174 
175 
176 
177 
178 

T-50/06, T-56/06, T-60/06, T-62/06 and T-69/06, Alumina cases, CFI judgment of 12.12.2007 
Council  Regulation No 659/1999 of  22  March  1999  laying  down  detailed  rules for  the  application of 
Article 93 (now Art.88) of the EC Treaty, OJ L 83, 27.3.1999, p. 1. 
Case T-196/2002 MTU v Commission. 
T-366/00, CFI judgment of 29.3.2007. 
T-369/00, CFI judgment of 29.3.2007. 
C-177/06, ECJ judgment of 20.9.2007. 
C-280/05, ECJ judgment of 6.12.2007. 

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173. 

In Commission v France179, the ECJ condemned France for failing to comply with a 
Commission recovery decision concerning France Télécom as well as for breach of 
the loyal cooperation obligation under Article 10 EC. The Court confirmed the well 
established  case-law  according  to  which  the  Commission,  when  ordering  the 
recovery of the aid declared incompatible with the Common market, is not obliged to 
fix the exact amount of the aid to be recovered. It is sufficient for the Commission's 
decision  to  include  information  enabling  the  Member  State  itself  to  work  out  that 
amount, without too much difficulty. 

174. 

In  the  present  case  the  ECJ  considered  that  the  Commission  gave  sufficient 
indications to France as to how the aid component should be determined. Finally, it 
was  stressed  that,  in  the  event  of  serious  difficulties  encountered  while  fixing  the 
precise  amount  to  be  recovered,  the  Member  State  is  obliged  to  cooperate  actively 
with the Commission in order to find an acceptable solution. 

D - THE ROLE OF COMPETITION POLICY IN THE WIDER POLICY FRAMEWORK 

175. 

176. 

During 2007 the Commission reviewed the Lisbon strategy180 with a view to its final 
phase  (2008-2010)181.  The  review  proposes  to  further  embed  competition  in  the 
wider Lisbon strategy framework. A particular focus is placed on the need to step up 
market  monitoring  combined,  if  necessary,  with  enforcement  in  the  service  and 
network  industry  sectors182.  These  proposals  are  in  line  with  the  Single  Market 
Review  carried  out  by  the  Commission  during  2007.  The  importance  of  reforms  in 
the  area  of  competition  is  reflected  by  the  very  large  number  –in  both  relative  and 
absolute terms - of recommendations proposed for endorsement by the Council under 
Article 99 EC. 

For  example,  the  review  proposes  that  competition  policy  should  contribute  to  the 
Lisbon strategy objectives in the gas, electricity and financial services sector through 
the following-up of sector inquiries launched in 2005183. Competition policy is also 
considered as a complementary instrument in connection with efforts to enhance the 
efforts being made to ensure interoperability and standardisation in a timely manner. 
The  review  also  mentions  'competition rules' among  the policies where  the EU can 
contribute  specific  expertise  which  could  be  beneficial  to  its  key  partners.  This  is 
closely  linked  to  the  need  to  ensure  fair  competition  and  a  level  playing  field 
internationally184. 

179 
180 

181 

182 

183 

184 

C-441/06, Commission v France (France Télécom), ECJ judgment of 18.10.2007. 
The Commission's Communication on the 'Strategic Objectives 2005-2009' states that "[t]he top priority 
today  is  to  restores  sustainable  dynamic  growth  in  Europe  in  accordance  with  the  Lisbon  strategy". 
COM(2005) 12 final, see page 3. 
Communication from the Commission to the European Council: Strategic report on the renewed Lisbon 
strategy  for  growth  and  jobs:  launching  the  new  cycle  (2008-2010)  Keeping  up  the  pace  of  change 
Part I (COM(2007) 803 final). 
Proposal  for  a  Community  Lisbon  Programme  2008  –  2010  Brussels,  11.12.2007,  COM(2007)  804 
final.  See  in  particular  Objective  5:  The  Community  will  strengthen  the  single  market,  increase 
competition in services, and take further steps to integrate the financial services market. 
See the previously mentioned objective 5 as well as objective 8 concerning Energy and climate change. 
See also the annex listing the EC level measures concerning these objectives. 
See section 3.4 of the Strategic report (COM(2007) 803 final) mentioned above. 

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177. 

178. 

The  following  Section  II  on  Sector  Developments  contains  numerous  examples  of 
how competition policy during 2007 contributed to the Commission's wider policies. 

A  concrete  example  of  how  competition  policy  can  support  the  objectives  of  other 
Community policies and initiatives is the guidance given in relation to the significant 
exchange of data required by the Regulation concerning the Registration, Evaluation, 
Authorisation  and  Restriction  of  Chemicals  (REACH)185.  In  this  context  it  was 
deemed necessary to issue specific competition law guidance to the industry on data 
sharing186.  The  guidance  is  provided  in  the  form  of  practical  rules  helping 
undertakings to avoid a breach of competition law by e.g. reducing the frequency of 
information  exchanges  and  using  an  independent  third  party  to  anonymise  the 
individual data. 

II – Sector Developments 

A – ENERGY 

1. 

OVERVIEW OF THE SECTOR 

179. 

180. 

European energy policy is built around three pillars: sustainability, security of supply 
and  competitiveness.  Reducing  greenhouse  gases  is  vital  to  combating  climate 
change,  and  all  European  consumers  (households  as  well  as  commercial  and 
industrial  users)  depend  heavily  on  the  secure  and  reliable  provision  of  energy  at 
competitive prices. These objectives can only be effectively met through a properly 
functioning,  competitive  European  energy  market  which  sends  the  right  signals  to 
investors and policy makers. This requires continued efforts to open up Europe’s gas 
and electricity markets to competition and create a single European energy market. 

Competition policy in the energy field aims at ensuring a secure flow of energy, in 
particular  electricity  and  gas,  at  competitive  prices  to  the  EU’s  households  and 
businesses.  An  open  and  competitive  single  EU  market  would  also  guarantee  a 
secure  provision  of  energy  in  the  future  by  sending  the  necessary  signals  for 
investment and making the European market attractive to external suppliers. Such a 
market  would  also  be  open  to  new  energy  mixes,  and  would  play  a  major  role  in 
developing  and  deploying  new  environmentally  friendly  technologies.  Prices  that 
reflect costs will help encourage energy efficiency, thereby supporting sustainability 
and security of supply. 

181. 

The  Commission's  competition  sector  inquiry  into  the  European  gas  and  electricity 
markets187 concluded that energy markets are not functioning properly. As a result, 
Europe's consumers, businesses and the economy as a whole are still not benefiting 

185 
186 
187 

Regulation (EC) No 1907/2006 (OJ L 396, 30.12.2006, p. 1). 
http://reach.jrc.it/docs/guidance_document/data_sharing_en.pdf 
Communication  from  the  Commission:  Inquiry  pursuant  to  Article  17  of  Regulation  (EC)  No  1/2003 
into the European gas and electricity sectors (Final report), COM(2006) 851 final, and DG Competition 
report on energy sector inquiry, SEC(2006) 1724. 

EN 

45 

   EN 

 
                                                 
from the full advantages that should flow from the opening up of European energy 
markets in terms of lower prices and a better choice of services. 

182. 

Three major structural problems and a number of other barriers persist. 

183. 

184. 

185. 

186. 

First,  many  energy  markets  are  still  too  highly  concentrated.  The  sector  inquiry 
showed that incumbents have very high market shares in their respective national gas 
markets,  as  well  as  in  several  electricity  markets.  Many  incumbents  have  retained 
firm control of the liberalised markets, and the markets themselves remain national in 
scope,  with  little  new  entry.  All  this  enables  incumbents  to  impose  high  prices 
through their market power. Moreover, to protect their market positions and profits, 
incumbents  engage  in  various  practices  that  make  it  harder  for  new  entrants  to 
compete. 

Second,  many  energy  markets  are  characterised  by  a  high  degree  of  vertical 
integration,  in  particular  in  the  form  of  insufficient  unbundling  of  network  and 
supply activities. When incumbents control the network, they also control the supply 
market.  It  is  therefore  no  surprise  that  incumbents  view  their  networks  as  strategic 
assets  that  allow  them  to  exclude  competition  through  discrimination.  Moreover, 
where network and supply companies are integrated there are too few incentives to 
invest in networks – and this represents a major obstacle to new entry and a threat to 
security of supply. Many of Europe's interconnectors are chronically congested, there 
are  insufficient  tradable  supplies  on  energy  markets,  and  long-term  contracts 
contribute to the locking-in of markets, thereby preventing alternative suppliers from 
supplying customers on retail markets. 

A third problem – of a structural nature – is the absence of cross-border integration 
and  cross-border  competition.  Incumbents  largely  keep  to  their  traditional  markets, 
and  rarely  enter  other  national  markets  as  large-scale  competitors.  While  energy 
prices for commercial users vary significantly from Member State to Member State, 
the differences are not competed away through imports. Moreover, different market 
designs between Member States make transfers of energy from one point in Europe 
to another difficult. 

In addition, the lack of transparency, for example with respect to available transport 
capacity, harms all operators except the incumbents. As a result, there is little trust in 
the  pricing  mechanisms.  When  prices  do  not  react  to  changes  in  actual  supply  and 
demand,  security  of  supply  and  investment  in  alternative  energy  sources  is 
threatened. 

2. 

POLICY DEVELOPMENTS 

187. 

On  10  January  the  Commission  adopted  a  comprehensive  package  of  measures  to 
establish  a  new  Energy  Policy  for  Europe  to  combat  climate  change  and  boost  the 
EU's  energy  security  and  competitiveness188.  Together  with  this  package,  the 

188 

Communication  from  the  Commission  to  the  European  Council  and  the  European  Parliament  -  an 
energy policy for Europe COM(2007) 1 final. 

EN 

46 

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188. 

189. 

190. 

191. 

Commission  also  adopted  the  Final  Report  of  the  competition  energy  sector 
inquiry189. 

The  inquiry’s  findings  are  followed  up  through  a  number  of  carefully  selected 
competition cases to address the key structural problems mentioned above. It should 
be  underlined  that  enforcement  in  such  individual  cases  cannot  open  markets  by 
themselves and that it is therefore necessary to complement the enforcement action 
with an improved legal framework. It is a legislative priority to reinforce the current 
insufficient level of network unbundling, in order to create the proper incentives for 
investment  and  do  away  with  discrimination.  To  this  end,  DG  Competition  has 
worked very closely with DGs Transport and Energy in preparing the new legislative 
proposals. 

The European Council in March and the European Parliament report on the Energy 
Package  in  July  generally  endorsed  the  Commission's  January  package.  They  also 
strongly  supported  the  need  for  "effective  unbundling".  On  this  basis,  the 
Commission  put  forward,  on  19  September,  a  proposal  for  a  third  liberalisation 
package for the European electricity and gas markets190. It focuses in particular on (i) 
effective unbundling of transmission networks; (ii) strengthening of the powers and 
independence of regulators; (iii) cooperation between regulators and (iv) cooperation 
among transmission system operators. 

A  second  package  of  energy  proposals,  focusing  on  renewable  energy  and  climate 
change,  was  prepared by  the  Commission during 2007 and was adopted in January 
2008. In support of the Commission's overall climate change and renewable energy 
policies,  the  package  also  includes  new  guidelines  on  State  aid  to  environmental 
protection,  specifying  the  conditions  under  which  aid  to  environmental  protection 
may be declared compatible with the Treaty. 

Full  and  combined  use  of  the  Commission’s  powers  under  antitrust  rules  (Articles 
81,  82  and  86  EC)  as  well  as  merger  control  (Regulation  139/2004)  and  State  aid 
control  (Articles  87  and  88  EC)  is  also  needed  in  order  to  maximise  the  overall 
enforcement impact. 

2.1. 

Antitrust enforcement 

192. 

Real  competition  requires,  in  particular,  that  entrants  can  access  (1)  energy;  (2) 
networks and (3) customers. 

189 

190 

Communication  from  the  Commission:  Inquiry  pursuant  to  Article  17  of  Regulation  (EC)  No  1/2003 
into the European gas and electricity sectors (Final report), COM(2006) 851 final, and DG Competition 
report on energy sector inquiry, SEC(2006) 1724. 
This  package  includes  the  following  proposals:  Proposal  for  a  Directive  amending  Directive 
2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules 
for  the  internal  market  in  electricity,  COM(2007)  528;  Proposal  for  a  Directive  amending  Directive 
2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules 
for  the  internal  market  in  natural  gas,  COM(2007)  529;  Proposal  for  a  Regulation  establishing  an 
Agency  for  the  Cooperation  of  Energy  Regulators,  COM(2007)  530;  Proposal  for  a  Regulation 
amending Regulation (EC) No 1228/2003 (electricity), COM(2007) 531 and Proposal for a Regulation 
amending Regulation (EC) No 1775/2005 (gas), COM(2007) 532. 

EN 

47 

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193. 

194. 

195. 

196. 

197. 

The Commission has focused in particular on cases in the electricity and gas sectors 
that address the main areas of market malfunctioning identified in the sector inquiry. 
These  investigations  include  both  foreclosure  and  collusion  (market  sharing)  cases. 
In  this  work  the  Commission  cooperates  closely  with  National  Competition 
Authorities (NCA)191. 

As regards the foreclosure investigations, these initiatives cover practices along the 
value  chain,  including:  foreclosure  of  downstream  markets  by  long-term  contracts 
with  energy  consumers;  abusive  practices  by  integrated  network  and  supply 
companies in order to foreclose competitors from accessing networks (e.g. hoarding 
of network capacity and failure to invest); foreclosure of electricity retail markets by 
raising  rivals'  costs  through  the  balancing  system192;  foreclosure  of  downstream 
markets  through  the  control  of  gas  import  infrastructure  and  long-term  gas 
procurement agreements. Other issues investigated include, for example, allegations 
of  price  manipulations  on  electricity  markets  through  withdrawal  of  capacity  by 
generators. 

On 11 October the Commission adopted a decision under Article 9 of Regulation No 
1/2003 imposing binding commitments on the Belgian energy company Distrigas to 
open the Belgian gas market (see also summary in I.A.2.3.2. above)193. The effect of 
these commitments is to ensure that Distrigas does not tie an excessive proportion of 
customers for more than one year ahead, while allowing Distrigas as much flexibility 
as possible in managing its portfolio of contracts. 

As regards the electricity market, the Commission initiated proceedings on 18 July in 
two investigations concerning long-term contracts with final consumers (in particular 
large industrial consumers) in France194 (EDF) and Belgium195 (Suez). In view of the 
de facto and/or de jure exclusive nature of the supply relationship, the share of the 
market  that  is  tied  and  the  duration  of  these  contracts,  it  is  suspected  that  these 
contracts  prevent  customers  from  switching,  thereby  significantly  foreclosing  the 
market concerned. 

On  11  May,  the  Commission  initiated  proceedings  in  two  investigations  where 
abusive  practices  relating  to  gas  transport  networks  are  suspected  of  causing 
downstream  market  foreclosure.  One  case  concerns  alleged  capacity  hoarding  and 
strategic  underinvestment  by  the  Italian  energy  group  ENI  on  the  TAG  and  TENP 
gas pipelines, leading to the foreclosure of Italian supply markets196. The other case 
concerns  suspicions  that  the  German  energy  group  RWE  may  have  abused  its 
dominant position in the regional markets for the transport and wholesale supply of 

191 

192 

193 
194 
195 
196 

A  dedicated  sub-group  for  energy  has  been  set  up  as  part  of  the  cooperation  within  the  European 
Competition Network (ECN). During 2007 this subgroup addressed national experiences in relation to 
competition case remedies. 
The balancing system serves to ensure that injections and withdrawals on the network are identical, in 
order to keep the system in equilibrium. 
Case COMP/37.966 Distrigas. 
See DG Competition website at http://ec.europa.eu/comm/competition/antitrust/news.htm 
See DG Competition website at http://ec.europa.eu/comm/competition/antitrust/news.html 
MEMO/07/187, 11.5.2007. 

EN 

48 

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198. 

199. 

gas in North Rhine-Westphalia by raising rivals' costs and preventing (new) entrants 
from accessing capacity on gas transport infrastructure in Germany197

. 

The Commission also opened proceedings, on 18 July in a suspected collusion case 
under Article 81 EC, concerning the German E.ON group and the French GDF group 
(E.ON-GDF)198.  The  alleged  infringement  takes  the  form  of  an  agreement  and/or 
concerted  practice  restricting  competition  in  the  two  companies'  respective  home 
markets, in particular  concerning  sales of natural gas transported over the  MEGAL 
pipeline. 

As  regards  territorial  restrictions  and  price  sharing  mechanisms  in  gas  import 
contracts,  the  Commission  reached  an  understanding  with  Algeria  on  11  July, 
following a protracted dialogue199. As a result, the Algerian gas producer Sonatrach 
will amend its contracts to ensure that importers are not restricted in reselling their 
gas within the EU. In particular, the use of price sharing mechanisms (obliging the 
importer  to  share  part  of  its  profits  with  the  producer  if  the  gas  is  sold  outside  the 
agreed  territory  or  use)  in  liquefied  natural  gas  (LNG)  contracts  will  no  longer  be 
possible once the title to the gas has passed to the importer. 

2.2.  Mergers:  concurrent  application  of  internal  market  and  competition  rules 

(Article 21 of the Merger Regulation) 

200. 

201. 

202. 

203. 

The  Commission  adopted  a  number  of  decisions  in  the  energy  field  in  2007.  The 
most  interesting  case  from  the  point  of  view  of  competition  and  regulation  was 
Enel/Acciona/Endesa200. 

The acquisition of joint control of Endesa by Enel and Acciona was notified to the 
Commission  on  31  May  and  cleared  unconditionally  on  5  July.  Enel  and  Acciona 
requested,  under  the  relevant  national  law,  the  approval  of  the  Spanish  energy 
Regulator (Comision Nacional de Energia (CNE)) for their acquisition of Endesa. 

On  4  July  the  CNE  approved  the  transaction  subject  to  eleven  obligations,  which 
included an obligation to inform CNE of all the strategic decisions taken by Endesa's 
board  of  directors  in  regulated  markets  and  the  right  of  CNE  to  revoke  any  Board 
decision  if  ENEL's  vote  in  the  Board  has  been  necessary  for  the  approval  of  such 
decision  in  order  to  avoid  "the  additional  risks  which  may  derive  from  the  special 
powers that the Italian State still has in Enel" (Condition 9). 

The  Commission  considered  these  conditions  to  be  incompatible  with  Community 
law and in particular with Articles 43 and 56 EC. Moreover, it forwarded to Spain a 
preliminary assessment in which it expressed the view that Spain had violated Article 
21 of the Merger Regulation by adopting, without prior notification to and approval 
by  the  Commission,  measures  which  unduly  restricted  a  concentration  of  a 
Community  dimension  (i.e.  the  Enel/Acciona/Endesa  transaction)  and  which  were 
not  necessary  for  and  proportionate  to  the  protection  of  a  legitimate  interest  and 
therefore not compatible with Community law. 

197 
198 
199 
200 

MEMO/07/186, 11.5.2007. 
See DG Competition website at http://ec.europa.eu/comm/competition/antitrust/news.html 
IP/07/1074, 11.7.2007. 
Case COMP/M.4685 Enel/Acciona/Endesa Commission decision, 5.12.2007. 

EN 

49 

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204. 

205. 

2.3. 

206. 

207. 

Enel and Acciona appealed against some of the conditions of the CNE decision of 4 
July to the Spanish Minister for Industry and Tourism. The Minister revoked some of 
CNE's  conditions  and  amended  others,  leaving  unchanged  the  conditions  that  were 
not appealed against. 

The  Commission  considered  that  the  remaining  conditions  as  modified  by  the 
Minister  were  still  contrary  to  Community  law  and  ordered  Spain,  by  a  decision 
dated 5 December, to withdraw them by 8 January 2008 at the latest. 

State  aid:  investigations  opened  in  respect  of  regulated  electricity  tariffs  that 
may favour certain undertakings 

In 2007, the Commission found indications that regulated electricity tariffs in Italy, 
Spain  and  France  could  amount  to  State  aid  to  large  and  medium-sized  electricity 
consuming companies. 

In  Italy,  a  preferential  electricity  tariff  was  originally  established  in  1962  for  three 
companies,  ThyssenKrupp,  Cementir  and  Terni  Nuova  Industrie  Chimiche,  as 
compensation for the nationalization of a hydro power plant owned by Società Terni, 
of  which  the  three  beneficiaries  are  the  legal  successors.  Under  the  expropriation 
arrangement,  Società  Terni  was  to  receive  electricity  supplies  at  cost  price 
throughout  the  remaining  duration  of  the  company's  hydro  power  concession,  i.e. 
until 1992. After a first prolongation from 1992 to 2007, which was cleared by the 
Commission in 1992 under the State aid rules, Italy further prolonged the preferential 
tariff  from  2005  to  2010  without  notifying  the  second  prolongation  to  the 
Commission.  In  a  decision  taken  in  November201,  the  Commission  found  that  the 
second  prolongation  of  the  tariff  constituted  incompatible  State  aid.  While 
compensation granted by the State to a company in the context of an expropriation 
does  not  normally  constitute  State  aid,  in  this  case  the  preferential  tariff  could  no 
longer be considered as compensatory, since the compensation already provided for 
in  the  original  expropriation  package  was  adequate,  and  since  the  predictability 
normally  inherent  in  compensatory  measures  was  lacking.  The  only  effect  of 
continuing  to  supply  electricity  to  the  beneficiaries  below  market  price  was  to 
improve their competitive position vis-à-vis other EU producers who do not receive 
the  same  aid,  by  reducing  the  beneficiaries'  ordinary  operating  costs  and  enabling 
them to sell their products at a lower price. The Commission found that none of the 
exceptions  provided  for  in  the  EC  Treaty  for  authorising  such  aid  applied.  The  aid 
was  therefore  unlawful  and  must  be  recovered.  The  Commission  decision  is  under 
appeal. 

208. 

In  France  and  Spain,  electricity  users  can  purchase  their  electricity  either  from  the 
liberalised market or from the regulated market. On the regulated market, the prices, 
or "tariffs", are entirely regulated by the State. For some professional large electricity 
consumers in particular, the regulated tariffs are well below market prices. The tariffs 
are  fully  or  partially  financed  by  parafiscal  levies  imposed  on  all  electricity 
consumers.  The  Commission  is  concerned  that  the  preferential  tariffs  may  distort 
competition  between  large  and  medium-sized  companies  on  the  internal  market.  In 

201 

Decision of 20 November 2007 in State aid case C36/A/2006, not yet published in OJ, but available on 
the Internet site http://ec.europa.eu/comm/competition/state_aid/register/ 

EN 

50 

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209. 

addition  to  distorting  competition,  the  low  tariffs  may  prevent  the  access  of  new 
entrants  to  the  electricity  market,  which  runs  directly  counter  to  the  objective  of 
creating  a  well-functioning  Internal  Electricity  Market.  The  Commission  has 
therefore  opened  investigations  concerning  the  tariffs  in  both  France  and  Spain202, 
the final outcome of which is still to be decided. 

On  25  September  the  Commission  adopted  a  State  aid  decision  whereby  it  ordered 
the termination of long-term power purchase agreements (PPAs) entered into in the 
mid-nineties  between  power  generators  and  the  State-owned  network  operator  in 
Poland. The PPAs were concluded for a period of 15 to 25 years and covered around 
40%  of  the  Polish  power  generation  market.  Their  price  formulae  guaranteed  the 
viability of the generators concerned for the entire duration of the agreements. Such 
conditions  created  a  barrier  to  the  proper  liberalisation  of  the  power  generation 
sector. The Commission concluded in its decision that the PPAs conferred an undue 
advantage  on  their  beneficiaries  and  ordered  their  termination.  The  same  decision 
approves  compensation  for  stranded  costs  for  the  generators  that  benefited  from 
PPAs,  on  the  basis  of  the  Commission's  Communication  on  State  aids  linked  to 
stranded costs. Compensation for stranded costs is the tool that Member States can 
use  to  help  smooth  the  transition  to  a  liberalised  market  for  the  incumbents  of  the 
energy  sector.  A  similar  State  aid  procedure  is  on-going  against  PPAs  covering 
around 80% of the power generation market in Hungary. 

202 

Concerning France, see decision of 13 June 2007 in State aid case C17/2007, OJ C 164, 18.7.2007, p. 9; 
and concerning Spain, see decision of 24.1.2007 in State aid case C3/2007, OJ C 43, 27.2.2007, p. 9. 

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B – FINANCIAL SERVICES 

1. 

OVERVIEW OF THE SECTOR 

Financial  markets  are  crucial  to  the  functioning  of  modern  economies.  The  more 
integrated  and  the  more  competitive  they  are,  the  more  efficient  the  allocation  of 
capital  and  long-run  economic  performance.  Banking,  insurance  and  securities  are 
three major areas of the financial services sector. 

The  European  banking  sector  has  undergone  significant  growth  and  diversification 
over  the  last  two  decades.  Today  it  directly  provides  over  three  million  jobs  in  the 
EU. Retail banking remains the most important sub-sector  of  banking, representing 
over 50% of total EU activity in terms of gross income. The Commission estimates 
that in 2004 retail banking activity in the European Union generated gross income of 
EUR 250-275 billion, equivalent to approximately 2% of total EU GDP203. However, 
a  number  of  indicators,  such  as  market  fragmentation,  price  rigidity  and  customer 
immobility, suggest that competition in the EU retail banking market may not have 
been  working  effectively.  The  Commission  therefore  decided  in  2005  to  open  an 
inquiry  into  the  retail  banking  sector,  in  particular  in  relation  to  cross-border 
competition.  The  final  report  of  the  inquiry  was  published  in  January  2007  (see 
http://ec.europa.eu/comm/competition/sectors/financial_services/inquiries/retail.html
). 

To  underpin  the  development  of  a  single  market  for  financial  services  and  harness 
the full potential benefits of the euro, the European banking industry under the aegis 
of the European Payments Council (EPC)204 is creating a Single Euro Payments Area 
(SEPA).  SEPA,  if  properly  implemented,  will  allow  citizens,  companies  and  other 
economic  actors  to  make  and  receive  payments  in  euros,  within  Europe,  whether 
between  or  within  national  boundaries  under  the  same  conditions,  rights  and 
obligations,  regardless  of  their  location.  In  other  words  making  euro  payments 
throughout  Europe  would  become  as  easy,  cheap  and  secure  as  making  national 
payments today. 

SEPA aims at harmonising the millions of everyday electronic retail payments made 
with three payment instruments - payment cards, credit transfers and direct debits – 
using a single bank account. 

The  SEPA  project  is  strongly  supported  by  the  European  Commission  and  the 
European  Central  Bank  (ECB).  The  two  institutions  share  a  common  vision205  for 
SEPA:  an  integrated  market  for  payment  services  which  is  subject  to  effective 
competition . However, as the project is led by the EPC - which is an association of 
undertakings  -  its  implementation  merits  close  scrutiny  from  a  competition 
viewpoint. 

210. 

211. 

212. 

213. 

214. 

203 

204 
205 

from 

taken 

Interim  Report 

Figures 
http://ec.europa.eu/comm/competition/sectors/financial_services/inquiries/interim_report_2.pdf) 
EPC now consists of 69 members (banks and national banking associations). 
http://www.ecb.int/press/pr/date/2006/html/pr060504_1.en.html 

the  sector 

retail  banking. 

inquiry 

II  of 

into 

EN 

52 

(see 

   EN 

 
                                                 
215. 

216. 

217. 

Against  this  background,  DG  Competition,  together  with  the  national  competition 
authorities,  has  started  to  examine  a  number  of  SEPA-related  issues,  including:  the 
governance of the EPC and the schemes; access to card schemes and infrastructures, 
particularly for non-bank payment services providers; the split between card schemes 
and  infrastructures;  standardization,  certification  and  compliance;  multilateral 
interchange fees (MIFs); and migration, in particular for cards. 

Another  sector  of  financial  services  -  namely  insurance  -  is  of  vital  importance  for 
big and small businesses throughout the European Union. EU insurers collect EUR 
375 billion in non-life premiums every year206. The functioning of this industry in a 
pro-competitive way is crucial not only for the insurance industry as such, but for the 
economy as a whole. 

Business  insurance  is  the  most  important  sector  of  Non-life  Insurance,  generating 
gross  premiums  equivalent  to  around  3.3%  of  the  EU's  GDP.  A  competitive 
environment  in  business  insurance  is  therefore  key  to  European  economic  growth. 
Taking into account that competition in this sector within the common market may 
be  restricted  or  distorted,  the  Commission  initiated  a  sector  inquiry  into  business 
insurance in 2005. The final report of that inquiry was published in September 2007. 

2. 

POLICY DEVELOPMENTS 

2.1. 

Sector inquiry into retail banking 

218. 

219. 

On  10  January  the  European  Commission  published  the  Final  Report  of  its  sector 
inquiry  into  European  retail  banking  markets207.  It  also  adopted  a  Communication 
summarising the results of the inquiry and describing areas for further investigation 
and antitrust enforcement to open up markets and stimulate competition. The inquiry 
covers two aspects: markets for payment cards and payment systems, and markets for 
current accounts and related services (core retail banking products). 

The  findings  confirmed  that  markets  are  still  fragmented  along  national  lines. 
Fragmentation  means  that  the  potential  of  a  market  of  450 million  citizens  is  not 
being fully exploited, that consumers have limited choices and often pay more than 
they should for current accounts, loans or payments. Despite all efforts at European 
level to further integrate the EU financial services markets, access to several product 
markets  and  geographical  markets  still  appears  to  be  difficult.  The  high  degree  of 
variation  in  prices,  profit  margins  and  selling  patterns  between  Member  States  and 
the  contrasting  homogeneity  within  individual  Member  States  are  indicative  of 
regulatory or behavioural barriers. 

220. 

The European payment card industry channels flows of EUR 1 350 billion per year, 
generating  an  estimated  EUR  25 billion  in  fees  for  banks.  The  industry  is  highly 
concentrated,  entailing  high  fees  and  high  profitability.  Another  finding  is  that  the 
rules  governing  the  networks  can  also  create  significant  barriers  to  entry.  For 

206 

207 

Source: Swiss Re, Sigma 2/2005, p. 39 and 5/2006, p. 35; cf. Interim Report of the Business Insurance 
Sector Inquiry, p. 37. 
IP/07/114 and MEMO/07/40, 31.1.2007. 

EN 

53 

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221. 

222. 

223. 

224. 

2.2. 

225. 

example, several national  card schemes run by the main  domestic banks are giving 
rise to competition problems. 

There  are  large  variations  in  payment  card  fees  across  the  EU.  Retailers  in  some 
countries  pay  fees  up  to  four  times  higher  than  in  other countries  for  accepting  the 
same major credit card. 

The  publication  of  the  report  has  already  brought  about  changes  in  a  number  of 
Member States where market players and/or authorities have taken steps to address 
the competition concerns in the area of payment cards and payment systems208. 

The findings of the sector inquiry also underlined the importance of close monitoring 
of  the  Single  Euro  Payments  Area  (SEPA).  The  inquiry  raised  concerns  that  the 
banking industry could use the migration to SEPA as a pretext to increase prices by 
abolishing  efficient  national  schemes,  giving  rise  to  a  situation  of  monopoly  rents. 
The Commission – together with the national competition authorities – will therefore 
be following the SEPA developments with great attention. 

Finally,  the  sector  inquiry  concluded  that  proportionate  steps  to  enable  customer 
mobility will enhance competition in the retail banking sector. Certain problems the 
inquiry identified in relation to customer choice and mobility in core retail banking 
activities  (current  accounts  and  related  services)  are  being  followed-up  by  national 
competition  authorities  and  the  Commission.  In  Hungary,  for  instance,  the 
Competition  Authority  launched  a  sector  inquiry  on  customer  mobility.  At  the 
European  level,  the  Commission,  in  the  context  of  the  Green  Paper  on  Retail 
Financial Services209, has announced a series of initiatives including an invitation to 
the banking industry to develop a Code of Conduct on bank account switching210. 

The  Commission  prohibits  MasterCard's  Multilateral  Interchange  Fees  for 
certain cross-border card payments in the EEA 

On  19  December  the  Commission  adopted  a  decision  prohibiting  MasterCard's 
multilateral interchange fees (MIFs) for cross-border card payments with MasterCard 
and Maestro branded consumer credit and debit cards between Member States of the 
European  Economic  Area  (intra-EEA  MIFs)211.  The  adoption  of  this  decision 
virtually coincided with the expiry of the Commission's exemption of VISA's cross-
border MIFs on 31 December, widely considered as the Commission's leading case 
on MIFs over the last five years212. 

226.  MasterCard's  intra-EEA  MIF  is  a  charge  levied  on  each  payment  at  a  retail  outlet 
when  the  card  payment  is  processed.  This  charge,  which  is  paid  by  the  acquiring 

208 
209 
210 
211 
212 

Report on the retail banking sector inquiry, point B 2.2, p. 93 (electronic version). 
COM(2007) 226. 
SEC(2007) 1520 published alongside COM(2007) 724 final. 
IP/07/1959 and MEMO/07/590, 19.12.2007. 
In  2002,  the  Commission  exempted  a  similar  system  proposed  by  Visa  (see  IP/02/1138)  after  Visa 
offered  substantial  reforms  to  its  MIF.  The  exemption,  however,  expires  on  31  December  2007  and 
Visa will from that moment on be responsible to ensure that its system is in full compliance with EU 
competition  rules.  See  Commission  Decision  of 24.7.2002, VISA II, OJ  L 318, 22.11.2002, p. 17  and 
Competition Newsletter 2002 Number 3, p. 33. 

EN 

54 

   EN 

 
                                                 
227. 

bank213  to  the  issuing  bank214,  largely  determines  the  price  that  merchants  pay  for 
accepting payment cards. The decision concluded that MasterCard's intra-EEA MIF 
inflated the cost of card acceptance by merchants without countervailing efficiencies. 
MasterCard  was  ordered  to  discontinue  charging  the  fees.  While  no  fines  were 
imposed as MasterCard had given notification of its intra-EEA MIF and the specific 
circumstances  of  the  case,  the  decision  does  provide  for  daily  penalty  payments  in 
the event of failure to comply. If MasterCard does not withdraw its intra-EEA MIF 
by 20 June 2008 (i.e. six months after notification of the decision) the Commission 
may order MasterCard to pay 3.5% of its global daily turnover as a daily penalty. 

The  Commission's  decision  did  not  declare  MIFs  illegal  as  such.  However,  it  did 
make  clear  that,  where  card  schemes  such  as  MasterCard  operate  on  the  basis  of  a 
business  model  that  includes  a  MIF,  the  MIF  must  contribute  to  technical  and 
economic progress and benefit consumers in order for it to comply with Article 81 
EC. The onus for demonstrating these positive effects is on the payment association. 
The  outcome  of  the  Commission's  assessment  in  a  given  case  will  depend  on  the 
claimed purpose, plausibility and implementation of the specific model underlying a 
MIF  scheme,  as  well  as  the  MIFs'  object  and  effects  on  the  relevant  market(s). 
MasterCard's argument was that its MIF scheme maximised output while generating 
objective efficiencies to the benefit of consumers. Yet MasterCard has failed - after 
four  years  of  in-depth  investigation  -  to  furnish  empirical  evidence  to  demonstrate 
any positive effects on innovation and efficiency which would allow a fair share of 
the  alleged  MIF  benefits  to  be  passed  on  to  consumers.  The  Commission  therefore 
concluded that MasterCard's MIF scheme did not fulfil the first three conditions of 
Article 81(3) EC. 

228. 

The adoption of the decision follows the inquiry into retail banking (see 2.1. above), 
which found that interchange fee agreements might stand in the way both of a more 
cost-efficient payment cards industry and of the creation of SEPA. The inquiry also 
concluded  that  in  five  EEA  countries  (Denmark,  Finland,  Luxembourg,  the 
Netherlands and Norway) payment card systems function without MIFs. 

2.3.  Morgan Stanley/Visa International and Visa Europe 

229. 

On 3 October the Commission fined Visa International and Visa Europe (Visa) the 
sum  of  EUR  10.2 million  for  refusing  to  admit  Morgan  Stanley  as  a  member  from 
March  2000  to  September  2006215.  The  Commission  took  the  view  that  Visa's 
behaviour constituted a serious infringement of Article 81 EC and Article 53 of the 
EEA  Agreement216,  as  an  effect  of  which  Morgan  Stanley  was  excluded  from  the 
market. 

213 

214 

215 
216 

An acquiring bank is a financial institution that has a contractual relation with a merchant for accepting 
a certain payment card. 
An issuing bank is a credit institution that has a contractual relation with a cardholder which allows for 
the provision and use of a payment card. 
Case COMP/37.860. 
Visa is a membership association, members of which engage in an economic activity. Hence, rules and 
regulations setting out the functioning of Visa, adopted by its board of directors, are regarded either as 
decisions of association or as agreements between undertakings within the meaning of Article 81(1) EC. 

EN 

55 

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230. 

231. 

232. 

233. 

234. 

At the time of the infringement, the Morgan Stanley group owned the Discover card 
network in the US. However, Discover was not present on the UK market, or even on 
any  of  the  EU  markets.  Until  Visa  finally  admitted  Morgan  Stanley  Bank  as  a 
member, the card operations of Morgan Stanley in the EU were confined to issuing 
MasterCard cards in the UK. 

The case was initiated following a complaint submitted by Morgan Stanley in 2000. 
In 1999, Morgan Stanley incorporated Morgan Stanley Bank in the UK and in 2000 
Morgan  Stanley  Bank's  request  to  become  a  member  of  the  Visa  organisation  was 
rejected by Visa. 

The  Commission's  investigation  revealed  that  retailers  expect  banks  to  offer  card 
acceptance  contracts  as  a  package  that  includes  both  Visa  and  MasterCard.  Visa’s 
refusal to admit Morgan Stanley as a member therefore not only prevented Morgan 
Stanley  from  providing  services  to  merchants  as  regards  Visa  transactions  (which 
make  up  around  60%  of  the  market),  but  also  as  regards  transactions  with  other 
payment cards. 

In August 2004 the Commission sent Visa a statement of objections setting out the 
preliminary  findings  of  its  investigation.  Visa  subsequently  (in  September  2006) 
concluded a settlement agreement with Morgan Stanley allowing it to become a Visa 
member.  As  a  consequence,  Morgan  Stanley  withdrew  its  complaint  to  the 
Commission. 

The Commission found that the exclusion of Morgan Stanley from Visa membership 
restricted  competition  in  the  provision  of  credit  card  acceptance  services  to 
merchants  in  the  UK.  In  the  UK,  the  market  for  providing  merchants  with  card 
acceptance capabilities (the so-called "acquiring" market) is highly concentrated. 

235.  Within a very narrow circle of possible entrants, Morgan Stanley was one of a small 
number  of  operators  that  actually  considered  entry  and  had  the  qualifications  to 
operate efficiently. It was reasonable to assume  that Morgan  Stanley’s entry  would 
have positive effects on prices and on the quality of acquiring services in the UK. 

236. 

237. 

As  a  reason  for  excluding  Morgan  Stanley  from  membership,  Visa  invoked  an 
internal  rule  according  to  which  it  would  not  accept  as  a  member  any  applicant 
deemed by the board of directors to be a competitor of the Visa scheme. However, 
the Commission's investigation showed that Morgan Stanley was not a competitor of 
Visa  in  the  EU  and  had  no  plans  to  enter  at  the  material  time217.  Furthermore,  the 
internal  rule  was  applied  by  Visa  in  a  discriminatory  manner,  as  Visa  admitted 
Citigroup (the owner of the Diners Club network competing with Visa) and several 
shareholders of JCB Co. Ltd. (equally a competitor of Visa) as Visa members. 

the  complaint  was  withdrawn  and 

Although 
the 
Commission decided to impose a fine, as Morgan Stanley was excluded from the UK 
acquiring  market  for  six  and  a  half  years  and  more  than  two  years  after  the 
Commission's statement of objections to Visa. 

infringement  ceased, 

the 

217 

Because it had no payment card network and - given  the high entry barriers to the networks market - 
there was no  realistic  possibility  that  Discover,  Morgan Stanley’s  US  card network,  would  expand  to 
the EU. 

EN 

56 

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2.4. 

Groupement des Cartes Bancaires 

238. 

239. 

240. 

241. 

242. 

In its decision of 17 October, the Commission concluded that the price measures of 
the Groupement des Cartes Bancaires (CB) had an object and an effect of restricting 
competition  and  hence  infringed  Article  81  EC218.  The  Groupement  des  Cartes 
Bancaires  manages  the  "CB"  card  payment  system  in  France,  which  accounts  for 
over 70% of card payments in France. Visa and MasterCard cards issued in France 
operate  within  this  system  as  "CB"  cards.  The  Groupement,  which  has  around  150 
members, is managed by the largest French banks219. 

The Commission found that the Groupement had adopted price measures hindering 
the issuing of cards at competitive rates by certain member banks in France , thereby 
keeping the price of payment cards artificially high to the benefit of the major French 
banks. The measures at issue were fees adopted by the Groupement which had to be 
paid by certain members under certain conditions on the basis of the number of cards 
issued,  also  taking  into  account  the  acquiring  activity.  A  key  measure  was  the 
"MERFA"  (“Mécanisme  Régulateur  de  la  Fonction  Acquéreur”),  a  formula 
determining whether a fee of up to EUR 11 on each card issued should be paid by 
member  banks  that  are  not  "sufficiently"  active  in  terms  of  acquiring  merchants  or 
installing  automated  teller  machines  (ATMs).  The  other  measures  at  issue  in  the 
decision included a membership fee of EUR 12 per card, an additional membership 
fee and a “sleeping member” fee (“mécanisme de réveil des dormants”) of EUR 12 
per  card  issued  in  excess  of  a  maximum  number  of  cards  stipulated  by  the 
Groupement.  Although  the  fees  were  in  principle  applicable  to  all  members  of  the 
Groupement, they were designed to hinder the issuing of cards at a price lower than 
that of the large banks. 

Although the Groupement claimed that the measures were necessary to combat "free-
riding"  on  the  investments  and  to  encourage  new  competitors  to  acquire  merchants 
and  install  ATMs,  the  Commission's  investigation  revealed  that  the  measures  were 
introduced  to  restrict  competition  in  the  French  payment  card  market  and  that  this 
has in fact been their effect. 

The  implementation  of  the  measures  was  suspended  in  2004  pending  the 
Commission  decision  on  their  compatibility  with  Community  law.  The  measures 
nevertheless  continued  to  have  an  effect  on  the  market,  since  until  they  were 
abolished  competitors  of  the  major  banks  were  forced  to  issue  fewer  cards  at  less 
competitive  rates  than  they  would  have  done  if  the  restrictive  measures  had  not 
existed. 

The  Commission  ordered  the  Groupement  to  cancel  the  measures  concerned  with 
immediate  effect  and  to  avoid  taking  any  measures  in  the  future  with  a  similar 
purpose or effect. In the specific circumstances of the case, the Commission decided 
not  to  impose  a  fine  on  the  Groupement  since  the  measures  had  been  notified  in 
December 2002 and were kept in effect only for a very short time after the entry into 
force of Regulation 1/2003. 

218 
219 

http://ec.europa.eu/comm/competition/antitrust/cases/decisions/38606/dec_en.pdf 
Crédit  Agricole,  Crédit  Lyonnais,  Crédit  Mutuel,  Crédit  Industriel  et  Commercial,  Société  Générale, 
Crédit  du  Nord,  BNP-Paribas,  Natexis-Banques  Populaires,  the  savings  banks,  the  Post  Office  and 
Crédit Commercial de France. 

EN 

57 

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2.5. 

Business insurance sector inquiry 

243. 

244. 

245. 

246. 

247. 

248. 

249. 

The  Commission  decided  on  13  June  2005  to  initiate  a  sector  inquiry  into  the 
provision of insurance products and services to businesses in the Community, based 
on Article 17 of Council Regulation (EC) No 1/2003220. Business insurance includes, 
inter  alia,  coverage  for  property  risks  and interruption  of  business;  shipping;  motor 
vehicles;  general,  professional  and  environmental  liability;  personal  accidents  and 
credit risks. 

On  25  September,  the  Commission  adopted  the  Final  Report  on  the  Business 
Insurance  Sector  Inquiry221,  which  was  released  together  with  a  comprehensive 
working  document  of  the  Commission's  services  containing  the  full  findings  (the 
Working Document). 

The Final Report and the Working Document focused on a number of key issues and 
concerns  in  relation  to  the  financial  aspects  of  the  industry,  the  harmonization  of 
premiums in coinsurance and reinsurance, the distribution of business insurance, the 
horizontal  cooperation  amongst  insurers  and  the  duration  of  business  insurance 
contracts. 

It  appears  from  the  findings  of  the  sector  inquiry  that  profitability  in  business 
insurance at the EU-25 level has been sustained over recent years in the majority of 
Member States, albeit with significant variations. 

The  Commission  found  that  widespread  practice222  in  both  reinsurance  and 
coinsurance markets almost always results in a de facto alignment of premiums and 
other conditions of coverage, including premiums. 

The  Commission's  provisional  view  of  the  practices  described  is  that  individual 
instances of them, when they result from agreements between undertakings, may fall 
within  the  scope  of  Article  81(1)  EC.  The  Commission  questions  in  particular 
whether  the  element  of  premium  alignment  is  indispensable,  or  whether  the  same 
efficiencies  could  not  be  achieved  from  auctioning  the  remaining  part  of  the  risk. 
However, the Commission has not at this stage heard persuasive arguments to justify 
their indispensability as required by Article 81(3) EC. 

In  respect  of  insurance  intermediaries,  the  market  surveys  and  the  public 
consultation highlight the fact that current market practices - in particular the lack of 
spontaneous  disclosure  of  remuneration  received  from  insurers  and  other  possible 
conflicts  of  interest  -  create  an  environment  in  which  business  insurance  clients,  in 
many cases, are unable to make fully informed choices. Disclosure by intermediaries 
of  relevant  information  in  relation  to  remuneration  received  from  insurers  and 
services  provided  to  insurers  may  help  mitigate  conflicts  of  interest.  The 
Commission intends to look at these issues anew in the framework of the Insurance 
Mediation Directive. 

220 
221 
222 

http://ec.europa.eu/comm/competition/sectors/financial_services/inquiries/decision_insurance_en.pdf 
IP/07/1390, 25.9.2007. 
The Commission's concerns relate exclusively to the procedure in two stages; this involves the selection 
of a lead insurer in the first round and then the attribution of the remaining risk to insurers who do not 
reassess it but simply conclude agreements on identical terms to those of the lead insurer. 

EN 

58 

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250. 

251. 

252. 

253. 

254. 

255. 

Practices  aimed  at  giving  brokers  an  incentive  to  place  business  with  particular 
insurers ("contingent commissions") have the potential to undermine fair competition 
in the insurance market. Such practices might result, instead, in insurers competing 
against each other on the level of remuneration afforded to brokers in an attempt to 
"buy" distribution, or at the very least to influence the broker's choice. 

Some  forms  of  cooperation  between  insurers  are  at  present  subject  to  a  block 
exemption  under  Regulation  (EC)  No  358/2003.  The  current  Block  Exemption 
Regulation was adopted for a period of seven years and is thus due to expire on 31 
March 2010. 

In their responses, industry stakeholders were very much in favour of prolonging the 
current  Block  Exemption  Regulation  when  it  expires  in  2010  and  usually  observed 
that  the  forms  of  cooperation  and  agreements  exempted  by  the  Block  Exemption 
Regulation  are  pro-competitive.  However,  some  respondents  disputed  that  the 
insurance industry needs special treatment under antitrust rules. 

Under the terms of the enabling legislation the Commission is required to submit, by 
31  March  2009,  a  report  on  the  functioning  and  future  of  the  Block  Exemption 
Regulation.  A  consultation  process  involving  industry  participants,  consumers' 
organizations and other interested stakeholders is due to take place in 2008. 

The Commission also looked at the duration of contracts and at clauses concerning 
their renewal and extension, because of the competition concerns to which a general 
practice  of  excessively  long-term  contracts  might  potentially  give  rise  in  terms  of 
foreclosing the market to new entry. If customers are committed to the same insurer 
for a long period, this could affect competitors who are trying to gain access to the 
market or to increase their market share. 

Further to the findings of the Interim Report (which showed that the average duration 
of contracts in Austria was 8 years, in Slovenia 7 years, in Italy and the Netherlands 
6  years),  the  replies  received  were  insufficient  to  dispel  competition  concerns  in 
Austria.  The  Commission  believes  that  it  would  be  appropriate  to  give  further 
consideration to the situation in Austria, without prejudging the route that this might 
take. 

2.6. 

State aid in the financial services sector 

256. 

On  18  July  the  Commission  cleared  the  two remaining recapitalisation cases in the 
German Landesbanken sector (WestLB and Nord/LB) as complying with the private 
market economy investor test223. During the summer, the US subprime crisis began 
to impact seriously on several European banks, requiring considerable public support 
measures to keep the banks afloat. The Commission launched investigations into two 
cases  concerning  the  German  banks,  IKB  and  Sachsen  LB.  For  the  UK  bank, 
Northern  Rock,  a  decision  was  taken  on  5  December  declaring  rescue  aid  to  be 
compatible  with  State  aid  rules224.  Subsequent  additional  measures  in  support  of 
Northern Rock are also being assessed. 

223 
224 

OJ C 4, 9.1.2008, p. 1. 
IP/07/1859, 5.12.2007. 

EN 

59 

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257. 

258. 

259. 

260. 

The support measures in these cases are assessed according to the market economy 
investor  principle  ("MEIP").  Under  this  test  it  is  assessed  whether,  in  similar 
circumstances,  a  private  investor  operating  in  normal  conditions  of  a  market 
economy would have entered into the transaction in question (e.g. providing loans or 
funds  to  the  bank)  and  whether  it  would  have  done  so  on  similar  terms.  The 
comparison  between  the  conduct  of  public  and  private  investors  must  be  made  by 
reference to the attitude which a private investor would have had at the time of the 
transaction  in  question,  having  regard  to  the  available  information  and  foreseeable 
developments  at  that  time.  If  a  market  economy  investor  could  have  acted  in  the 
same way, no State aid is involved. 

On  13  November  the  Commission  initiated  the  formal  investigation  procedure  in 
respect  of  a  French  tax  scheme  for  insurance  companies  that  offer  complementary 
health  insurance  contracts  with  strong  solidarity  components225.  This  is  one  of  the 
rare cases where compatibility of the aid is claimed on the basis of Article 87 (2) (a), 
i.e. aid (i) with a social objective (ii) granted to the final consumers and (iii) without 
discrimination as to the origin of the product. As the aid is indirect, the Commission 
opened proceedings to ascertain that all three criteria are indeed present. 

On  30  May  the  Commission  opened  the  formal  investigation  procedure  against  an 
Italian tax scheme aimed at realigning the tax value of the assets of certain banks in 
Italy resulting from company reorganisation transactions under Law 218/1990 on the 
privatisation of the public banking sector in Italy226. Although it is not the first time 
that the Commission has investigated tax breaks relating to the reorganisation of the 
banking  sector  in  Italy227,  the  Commission  has  never  previously  examined  the 
compatibility of this subsequent tax scheme of 2003 aimed at clearing the suspended 
the  formal 
tax 
investigation,  the  Commission  took  the  view  that  the  scheme  seemed  to  provide  a 
sizeable advantage to a limited number of Italian banks and that this seemed liable to 
distort  competition,  especially  against  the  background  of  ongoing  consolidation  in 
the banking sector. 

liabilities  deriving  from  such  reorganisations.  In  opening 

The recent turmoil in the financial markets triggered by the US subprime crisis has 
raised  concerns  among  governments  and  regulators  about  financial  stability. In this 
context the ECOFIN Council on 9 October adopted Conclusions suggesting a series 
of  actions  to  enhance  the  arrangements  for  financial  stability.  In  these  conclusions 
the  ECOFIN  Council  invited  the  Commission  and  Member  States  to  work  together 
towards clarifying when a banking crisis could be considered by the Commission as 
“a  serious  disturbance  of  the  economy”  under  the  Treaty  and  State  aid  rules,  and 
invited  the  Commission  to  consider  streamlining  procedures  to  focus  on  how  State 
aid  enquiries  under  critical  circumstances  can  be  dealt  with  rapidly.  In  its 
Conclusions,  the  ECOFIN  Council  also  set  out  a  strategic  Roadmap  for  the  period 
until 2009. 

225 
226 
227 

IP/07/1692, 14.11.2007. 
OJ C 154, 7.7.2007, p. 15. 
See  Commission  Decision  2002/581/EC  of  11.12.2001  on  the  tax  measures  for  banks  and  banking 
foundations implemented by Italy (OJ L 184, 13.7.2002, p. 27); Commission Decision 2000/600/EC of 
10.11.1999  conditionally  approving  the  aid  granted  by  Italy  to  the  public  banks  Banco  di  Sicilia  and 
Sicilcassa (OJ L 256, 10.10.2000, p. 21); and Commission Decision 1999/288/EC of 29.7.1998 giving 
conditional approval to the aid granted by Italy to Banco di Napoli (OJ L 116, 4.5.1999, p. 36). 

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2.7.  Mergers in the financial services sector 

261. 

The Commission assessed and authorised a number of concentrations in the financial 
services sector. In the ABN AMRO cases228, the Commission analysed the proposed 
acquisition of the Dutch bank ABN AMRO by a consortium formed by RBS, Fortis 
and  Santander.  The  three  members  of  the  consortium  intended  to  distribute  ABN 
AMRO’s assets between themselves. The Commission therefore considered that the 
consortium's  operation  gave  rise  to  three  different  concentrations.  While  the 
acquisitions proposed by RBS and Santander were unconditionally authorised by the 
Commission in Phase I, the Phase I clearance of the Fortis acquisition was subject to 
conditions.  The  extensive  market  investigation  had  revealed  that  the  proposed 
acquisition  raised  competition  concerns  in  commercial  banking  (defined  for  the 
purposes of the case as financial services to corporate customers with a turnover of 
EUR  2.5 million  to  EUR  250 million)  and  factoring.  To  address  the  Commission's 
concerns,  Fortis  undertook  to  divest  a  corporate  banking  business  (consisting  of 
ABN AMRO's subsidiary Hollandsche Bank Unie N.V. (HBU)), two corporate client 
departments, 13 "Advieskantoren" and ABN AMRO's Dutch factoring activities to a 
large international bank. 

C – ELECTRONIC COMMUNICATIONS 

1. 

OVERVIEW OF THE SECTOR 

262. 

Growth  in  the  electronic  communications  sector  in  the  EU  was  slightly  slower  in 
2007  than  in  the  preceding  years.  While  traditional  fixed  voice  services  were 
continuing  to  decline,  in  the  mobile  voice  market  revenues  continued  to  rise  and 
penetration  increased  significantly  while  prices  continued  to  fall229.  The  most 
dynamic  segment,  fixed  broadband,  continued  to  develop  steadily,  benefiting  from 
infrastructure 
continued 
competition. Mobile broadband take-up remained limited although is showing signs 
of growth. 

investment  by  alternative  operators  and 

increased 

263. 

Confronted  with  slower  growth  in  their  traditional  revenues,  telecom  operators 
reoriented  their  business  models  towards  convergent  services  (telecoms,  media  and 
internet).  To  support  this  shift,  a  new  cycle  of  investment  in  convergent  and  high 
speed networks - the “Next Generation Networks” – has taken off, in particular in the 
form of large scale, fibre access roll-out projects. 

264. 

Increased  retail  competition  enabled  consumers  to  continue  to  benefit  from  both 
increasing  variety  and  quality  of  fixed  and  mobile 
lower  prices  and  an 
communication services. 

265. 

The  vast  majority  of  providers  of  electronic  communications  services  continued  to 
operate  within  the  confines  of  the  EU  regulatory  framework  for  electronic 

228 

229 

Case  COMP/M.4843  RBS/ABN  AMRO  assets  Commission  decision,  19.9.2007,  Case  COMP/M.4845 
Santander/ABN  AMRO  assets  Commission  decision,  19.9.2007  and  Case  COMP/M.4844  Fortis/ABN 
AMRO assets Commission decision, 3.10.2007. 
Progress Report on the Single European Electronic Communications Market 2007 (13th Report), p. 3. 

EN 

61 

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communications (Regulatory Framework)230, which is designed to facilitate access to 
legacy  infrastructure,  foster  investment  in  alternative  network  infrastructure  and 
bring choice and lower prices for consumers. 

2. 

POLICY DEVELOPMENTS 

266. 

267. 

268. 

269. 

2.1. 

270. 

230 

231 
232 

233 

234 

For most of 2007 the original Recommendation on the relevant markets remained in 
force231.  This  Recommendation  identified  18  product  and  services  markets,  at  both 
wholesale  and  retail  level,  as  being  susceptible  to  ex  ante  regulation.  Within  the 
Community consultation mechanism under Article 7 of the Framework Directive232 
(FD)  the  Commission  assessed  170  notifications  from  NRAs  and  adopted  66 
comments letters and 49 no-comments letters in 2007. In five cases, the Commission 
raised  serious  doubts  as  to  the  compatibility  of  the  notified  measures  with  EU  law 
and  opened  second  phase  investigations  under  Article  7(4)  FD.  In  one  case  the 
Commission adopted a veto decision233. 

The  work  on  the  review  of  the  Regulatory  Framework  continued  during  2007  and 
resulted in the adoption in November of a comprehensive Commission proposal for a 
revised regulatory package (see 2.1. below).  

As  far  as  the  application  of  EU  competition  law  in  the  electronic  communications 
sector  was  concerned,  the  most  significant  decision  adopted  by  the  Commission  in 
2007  was  the  decision  of  4  July  against  Telefónica  (see  I.A.2.3.  above).  In  this 
decision the Commission imposed a fine of over EUR 151 million on Telefónica for 
having abused its dominant position on the Spanish broadband market in the form of 
a margin squeeze between its wholesale and retail prices, despite the fact that sector-
specific regulation was in place234. 

The  issue  of  unrestricted  application  of  EU  competition  law  in  addition  to  sector-
specific  regulation  was  also  addressed  by  the  Commission  in  the  infringement 
procedure against the Czech Republic (see I.A.2.4. above). 

Review of the Regulatory Framework: reduction of markets subject to ex ante 
regulation  

The review of the Regulatory Framework in the course of 2007 led the Commission 
to  propose  a  regulatory  package  (covering  the  Directives  and  the  Recommendation 
on  relevant  markets  plus  a  proposal  for  a  Regulation  establishing  a  European 

Directive  2002/21/EC  (Framework  Directive)  (OJ  L  108,  24.4.2002,  p.  33),  Directive  2002/19/EC 
(Access  Directive)  (OJ  L  108,  24.4.2002,  p.  7),  Directive  2002/20/EC  (Authorisation  Directive)  (OJ 
L 108, 24.4.2002 p. 21), Directive 2002/22/EC (Universal Service Directive) (OJ L 108, 24.4.2002, p. 
51), Directive 2002/58/EC (Directive on privacy and electronic communications) (OJ L 201, 31.7.2002, 
p. 37). 
Commission Recommendation C (2003) 497, 11.2.2003, OJ L 114, 8.5.2003, p. 45. 
Directive 2002/21/EC of 7/3/2002 of the European Parliament and of the Council, OJ L 108, 24.4.2002, 
p. 33. 
For  details  on  the  second  phase  investigations  and  the  veto  decision  see  chapter  "Application  of  the 
Regulatory Framework" below. 
For details see chapter "Margin squeeze in a regulated sector" (section "Application of Articles 81, 82 
and 86 EC") above. 

EN 

62 

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271. 

272. 

Electronic Communications Market Authority (EECMA)) in November235. With the 
exception of the new Recommendation on relevant markets, which entered into force 
in December, the legislative parts of the proposed regulatory package will enter into 
force  after  their  adoption  by  the  Council  and  the  European  Parliament,  which  is 
expected in 2010-2011. 

The  Recommendation  on  relevant  markets  is  an  important  part  of  the  Regulatory 
Framework.  It  lists  those  markets  where,  in  the  view  of  the  Commission,  ex  ante 
regulation is the appropriate tool to promote competition, investment and consumer 
choice. From a competition policy perspective the main objective of the review has 
been to assess where ex ante regulation is still needed and where it can be lifted.  

The Regulatory Framework is helping to make communications markets increasingly 
competitive.  Competing  operators  are  providing  more  fixed  telephony  services  to 
consumers  and  building  more  core  network  infrastructure.  Mobile  network  access 
and  broadcasting  transmission  services  are  becoming  increasingly  competitive. 
Against  this  background  the  Commission  has  more  than  halved  the  number  of 
markets susceptible to ex ante regulation, from 18 to 7. Following the adoption of the 
new Recommendation, ex ante regulation is now likely to be lifted in many areas and 
a  greater  part  of  the  industry  will  be  subject  only  to  EU  competition  rules236.  The 
markets  for  retail  access,  fixed  call  origination,  fixed  call  termination,  physical 
network infrastructure access, wholesale broadband access, terminating leased lines, 
and mobile call termination remain in the new Recommendation. 

273.  Where bottlenecks persist, ex ante regulation will therefore continue to be necessary 
in the future and will have to be even more effective. This is why the Commission's 
proposal  contains  an  extension  of  the  Commission's  veto  powers  (currently  only 
covering  market  definition  and  findings  of  significant  market  power)  to  include 
remedies. However, in order to already begin to address issues related to remedies, 
the  Commission  has  started  to  work  on  Recommendations  for  remedies.  The 
envisaged Recommendations would provide for regulatory oversight through advice 
to the NRAs on how to achieve a more harmonised remedial system further upstream 
(i.e. before the question of a veto decision even arises). 

274. 

As  part  of  the  review  of  the  Regulatory  Framework,  the  Commission  proposes  to 
create an independent European Electronic Communications Market Authority with 
advisory  powers  to  provide  expert  advice  to  the  Commission  on  issues  inter  alia 
related  to  the  national  market  assessments.  The  Authority  would  also  assist  the 
Commission in identifying the remaining bottlenecks where further harmonisation is 
needed. 

235 

236 

EN 

Commission proposal for a directive of the European Parliament and of the Council, SEC(2007)1472 
and  SEC(2007)1473,  and  Proposal  for  a  regulation  of  the  European  Parliament  and  of  the  Council 
establishing  the  European  Electronic  Communications  Market  Authority  COM(2007)  699  for  an 
overview 
Society: 
http://www.ec.europa.eu/information_society/policy/ecomm/library/proposals/index_en.htm 
Commission  recommendation  of  17.12.2007  on  relevant  product  and  service  markets  within  the 
electronic communications sector, OJ L 344, 28.12.2007, p. 65. 

Information 

website 

DG 

see 

the 

of 

63 

   EN 

 
                                                 
275. 

276. 

It  is  also  proposed  to  introduce  functional  separation237  as  a  measure  in  the  NRA's 
tool-box.  However,  this  remedy  would  be  a  last  resort  to  be  used  by  the  national 
regulator only if other remedies have failed on a persistent basis. Moreover, the NRA 
would have to inter alia analyse the effects on the incumbent's incentives to invest in 
upgrading its network and on consumers. 

the  Commission  proposal  for 

Overall, 
the  future  regulation  of  electronic 
communications  markets  marks  yet  another  important  step  in  the  transition  of  this 
sector  from  monopoly  to  competition.  While  parts  of  the  sector  will  now  be 
completely free of ex ante regulation, it will continue to be governed by competition 
law. 

2.2. 

Application of the Regulatory Framework and other policy developments 

277. 

278. 

On 11 January the Commission adopted its fifth veto decision238 under Article 7(4) 
Framework Directive. The case concerned the retail markets for access to the public 
telephone network at a fixed location in Poland. The Commission had serious doubts 
about  the  market  definition  proposed  by  the  Polish  regulator,  which  included 
broadband  connections  (such  as  DSL  connections)  in  the  same  product  market  as 
narrowband  connections.  Under  the  proposed  measures  broadband  connections 
would be made subject to the same retail regulation as PSTN and ISDN connections. 
In  its  revised  analysis239  following  the  Commission's  veto  the  Polish  NRA  still 
partially included retail broadband access in the market, which resulted in a further 
letter  expressing  serious  doubts.  In  April,  the  Polish  NRA  decided  to  change  its 
market  definition  by  removing  all  retail  broadband  services  from  the  scope  of  the 
product market definition, and the measures were finally able to be adopted. 

In other cases, taking account of the Commission's position, several NRAs opted for 
withdrawal  of  draft  measures.  This  was  the  case  in  a  second-phase  investigation 
concerning the wholesale broadband access market in Malta240. Similarly, the NRA 
withdrew  the  draft  measure  in  a  case  concerning  the  wholesale  market  for  mobile 
origination  services  to  non-geographic  numbers  in  Italy241.  The  Belgian  NRA 
withdrew  the  notification  in  a  case  that  concerned  the  wholesale  markets  for 
broadcasting transmission services (mostly TV transmission by cable) in the French-
speaking  part  of  Belgium242.  Similarly,  the  Polish  NRA  withdrew  a  notification 
concerning the market for trunk segments of leased lines243. 

279.  Mobile telephony markets continued to receive attention from telecom regulators and 
competition authorities in 2007. This was partly due to their growing market share in 
comparison  with  fixed  telephony,  but  also  to  the  availability  of  new  products  and 

237 

238 
239 
240 
241 
242 
243 

Functional  unbundling  involves  incumbents  running  telephone  networks  as  a  separate  business  from 
that of providing call and internet services. 
PL/2006/0518. The second phase investigation was opened already in 2006. 
PL/2007/0593. 
MT/2007/0563. 
IT/2007/0575. 
BE/2007/0578. 
PL/2007/0668.  Leased  lines  are  connections,  typically  via  underground  fibre  optic  cables,  that  are 
owned by one operator and (partially) used by another operator. From an economic perspective leased 
lines  are  subdivided  into  terminating  segments  (between  a  network  node  and  a  final  destination)  and 
trunk segments (between two different network nodes) 

EN 

64 

   EN 

 
                                                 
280. 

281. 

282. 

283. 

services. 2007 was the year when 3G took off. Some 86 operators were offering 3G 
on a commercial basis at the end of 2007, up from 70 in 2006. 3G services have now 
become available in all Member States. It is expected that the greater availability of 
spectrum  and  flexibility  of  usage  conditions,  as  proposed  in  the  review  of  the 
Regulatory Framework, will stimulate further development of mobile data services. 

In general, mobile telephony markets tend to be effectively competitive at the retail 
level.  However,  wholesale  markets  for  mobile  call  termination  and,  under  the 
previous  Recommendation  on  relevant  markets,  for  mobile  access  and  call 
origination were recommended for ex ante regulation. 

In  2007,  five  NRAs  (Belgium,  Estonia,  Germany,  Gibraltar  and  Hungary)  notified 
draft  measures  applying  to  the  wholesale  market  for  mobile  access  and  call 
origination. Only in Gibraltar was the market found not to be effectively competitive. 
This indicates that removing the market from the revised Recommendation was the 
correct course of action. 

As regards wholesale markets for mobile call termination, all regulatory authorities 
found that each operator has a monopolistic position with regard to terminating calls 
on its mobile network. Consequently, ex ante remedies were imposed in most, if not 
all, Member States. 

The consistently high international roaming charges led the Commission to propose a 
Roaming  Regulation244  on  the  basis  of  Article  95  EC.  This  regulation  entered  into 
force  on 30  June  and will be applicable for  three years. As  a result, in all Member 
States  mobile  operators  were  obliged  to  offer  to  all  their  customers  by  30  July  a 
Eurotariff,  which  in  principle  applied  automatically  from  30  September  unless  a 
customer  chose  to  opt  out.  The  Eurotariff  sets  a  retail  price  cap  for  calls  made  or 
received abroad245. The Regulation also stipulates a price cap for wholesale roaming 
charges, and obliges operators to keep customers informed about roaming prices. 

284. 

On  18  July  the  Commission  closed  proceedings  conducted  under  Article  82  EC 
against  Vodafone  UK,  O2 UK,  Vodafone  Germany  and  T-Mobile  Germany,  which 
concerned international roaming tariffs applied by these operators246. 

2.3. 

Developments in the area of State aid 

2.3.1. 

Support for broadband services 

285.  Wide availability of broadband services at affordable prices is of crucial importance 
for the economic and social development of the European Union. In its assessment of 
public  funding  schemes  under  the  State  aid  rules,  the  Commission  acknowledges 
that,  in  the  absence  of  public  funding,  private  operators  often  have  no  economic 
incentive  to  offer  broadband  in  scarcely  populated  areas.  However,  public  support 

244 

245 

246 

Regulation  (EC)717/2007  of  the  European Parliament  and  of  the  Council  of  27.6.2007on roaming on 
public mobile telephone networks, OJ L171, 29.6.2007, p. 32. 
At EUR 0.49 excl. VAT for calls made and EUR 0.24 excl. VAT for calls received; these price caps 
will be further reduced in 2008 and 2009. 
Case  COMP/38.097  Follow  up  International  Roaming  UK  and  case  COMP/38.098  Follow  up 
International Roaming Germany; no decision has been issued. 

EN 

65 

   EN 

 
                                                 
286. 

287. 

288. 

289. 

schemes  for  broadband  have  to  be  properly  justified  and  proportionate  either  by 
pursuing  an  objective  of  social  or  economic  cohesion  or  remedying  a  well-defined 
market failure. 

During  2007  the  Commission  adopted  several  decisions  concerning  public  funding 
schemes  for  broadband  in  rural  or  remote  areas  with  no  or  only  limited  broadband 
coverage247.  The  Commission  also  accepted  State  intervention,  in  specifically 
defined circumstances, in favour of advanced broadband services in areas where the 
incumbent operators were only partly offering basic broadband services248. In a case 
relating to the procurement of broadband services by the public sector in Wales, the 
Commission  also  clarified  certain  aspects  relating  to  the  interface  between  public 
procurement  and  State  aid  rules249.  As  the  project  was  only  intended  to  meet  the 
needs of public sector organisations, no State aid was present. 

Following  a  complaint,  the  Commission  conducted  a  preliminary  investigation  into 
the “Wireless Prague” project - the first municipal wireless network case assessed by 
the  Commission  under  the  State  aid  rules250.  The  case  was  considered  by  market 
observers as an important precedent and was watched closely by municipalities with 
similar plans. 

During the Commission's preliminary investigation and following the opinion of the 
Czech competition authority, the Prague authorities considerably reduced the scope 
of  the  project.  In  particular,  the  modified  project  will  now  serve  only  the  public 
sector and the free broadband access provided to citizens will be limited to public-
sector  websites  and  e-Government  services.  As  no  economic  advantage  within  the 
meaning of Article 87(1) EC Treaty was granted to the selected service provider, to 
public-sector  content  providers  or  to  citizens  and  businesses  using  the  network,  it 
was considered that no State aid was present. 

After  an  in-depth  investigation  launched  in  December  2006,  the  Commission 
approved  the  investment  by  the  municipality  of  Amsterdam  in  a  glass  fibre 
telecommunications  network251.  The  municipality  is  investing  on  equal  terms  with 
two private investors active in the sector, both of which took significant stakes in the 
investment. In particular, all investing parties will bear any losses in the event of the 
business underperforming. The structure of the new company ensures that the private 
investors  have  significant  stakes  in  the  project  in  a  set-up  where  no  single 
shareholder can exercise sole control over the company. Together with the detailed 
analysis  of  the  business  plan,  this  information  provided  sufficient  evidence  for  the 
Commission  to  conclude  that  the  investment  was  in  line  with  the  market  economy 
investor principle and therefore did not involve State aid. 

247 

248 

249 
250 
251 

Cases N 475/2007 National Broadband Scheme Ireland Commission decision, 25.9.2007; N 473/2007 
Broadband  connections  for  Alto  Adige  Commission  decision,  11.10.2007;  N  570/2007  Broadband  in 
rural  areas  of  Baden-Württemberg  Commission  decision,  23.10.2007;  N  442/2007  Aid  in  favour  of 
broadband in remote areas of Veneto Commission decision, 23.10.2007. 
Cases N 746/2006 North Yorkshire NYNET Project United Kingdom Commission decision, 21.2.2007; 
N 890/2006 Aide du Sicoval pour un réseau de très haut debit Commission decision, 10.7.2007. 
Case N 46/2007 Welsh Public Sector Network Scheme Commission decision, 30.5.2007. 
Case NN 24/2007 Prague Municipal Wireless Network Commission decision, 30.5.2007. 
Case C 53/2006 (ex. N 262/2005) Citynet Amsterdam Commission decision, 11.12.2007. 

EN 

66 

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290. 

The Commission emphasised that it is not sufficient for public authorities to become 
involved  in  projects  merely  by  claiming  that  they  are  acting  like  a  normal  market 
investor.  It  needs  be  a  comprehensively  demonstrated,  for  instance  by  means  of  a 
sound business plan and a significant participation by private investors, that a public 
investment  conforms  to  the  conditions  of  the  market.  In  addition,  as  stated  in  the 
decision  concerning  the  above-mentioned  case,  the  private  parties  would  have  to 
assume  the  commercial  risk  linked  to  the  investment  under  the  same  terms  and 
conditions as the public investor. 

2.3.2.  Aid to Greek incumbent operator 

291. 

292. 

293. 

In  June  2007  the  Commission  approved  under  Article  87(3)(c)  EC  the  Greek 
government's plan to participate in OTE's early voluntary retirement scheme252. The 
case raised a number of issues, principally the definition of "aid" within the meaning 
of Article 87(1) of the Treaty as well as in relation to the scope of the compatibility 
assessment carried out under Article 87(3) with regard to undertakings that enjoyed a 
monopoly in the past and are now operating in liberalised but still regulated markets. 

Owing to the quasi-permanent status of its employees, which was protected by law 
and  dated  back  to  the  monopoly  era,  OTE  could  not  dismiss  its  personnel  like  any 
other  private  company.  Instead,  OTE  had  to  agree  to  an  early  voluntary  retirement 
scheme  (VRS).  The  material  difference  between  OTE's  VRS  and  an  ordinary  VRS 
was that, apart from the incentives to employees to take up the early retirement offer, 
OTE also had to make up the loss of future revenues or social advantages associated 
with the enjoyment of a permanent employment status and high salaries fixed by law. 
These "extra costs" were the main reason that led the Greek State to assume part of 
the overall costs of the VRS. In exchange, OTE had obtained the union's consent to 
put  an  end  to  the  permanent  employment  status  for  future  employees.  In  its 
notification  the  Greek  State  argued  that  its  contribution  did  not  procure  any 
advantage  to  OTE  since  it  simply  represented  compensation  for  a  structural 
disadvantage within the meaning of the Combus judgment253. 

Having  opened  a  formal  investigation,  the  Commission  finally  concluded  that  the 
notified  measure,  examined  in  conjunction  with  relevant  case-law,  including  the 
Combus judgment, might be regarded as State aid. In any event, the matter did not 
need to be pursued since the scheme was in any event compatible with the common 
market under Article 87(3)(c) of the Treaty. The Commission found that the State's 
contribution  did  not  exceed  the  amount  of  the  verifiable  "extra  costs"  incurred  by 
OTE, that it was an appropriate instrument for reorganising the company and could 
pave the way for the company's envisaged privatisation. 

2.4.  Merger Control 

294. 

In  the  area  of  merger  control,  the  Commission  assessed  whether  a  merger  between 
two  foreign  mobile  network  operators  operating  in  two  different  countries  would 
significantly  interfere  with  effective  competition.  In  such  a  case,  even  without 
horizontal  overlaps,  the  issue  stems  from  the  vertical  relationships  between  the 

252 
253 

Case C 2/2006 (ex. N 405/2005) OTE – Early retirement scheme Commission decision, 10.5.2007. 
Case T-157/01, Danske Busvognmænd v Commission, 16.3.2004, ECR II-0917. 

EN 

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markets for wholesale international roaming and the markets for fixed and/or mobile 
telecommunications in the countries where the parties to the transaction operate. This 
issue  is  particularly  relevant  to  international  roaming  telecoms  markets.  In  France 
Télécom/Mid  Europa  Partners/One,  the  Commission  found  that  the  transaction 
would not harm competition in any such markets and the merger was cleared without 
commitments254. 

295. 

The  Commission  adopted  a  dynamic  approach  in  respect  of  these  fast-moving 
markets.  An  example  is  the  Syniverse/BSG255  merger  where  the  Commission 
assessed the market for GSM roaming data clearing services. The characteristics of 
the  market  warranted  a  straight  clearance  decision  (after  an  in-depth  investigation) 
even  though  the  merger  entailed  a  reduction  in  the  number  of  market  players 
currently  active  in  Europe.  The  necessary  technology  in  order  to  enter  this  market 
was  in  fact  available  to  new  potential  entrants,  while  technological  advances 
underway were likely, in the short term, to re-shape the current market structure. 

D – INFORMATION TECHNOLOGY 

1. 

OVERVIEW OF THE SECTOR 

296. 

297. 

The information economy is a significant sector of economic activity. Including the 
provision of infrastructure and services for the creation, exchange and processing of 
information  and  communication  services  and  the  sale  of  information  itself,  this 
market is now in most developed countries in the range of 10% of GDP and accounts 
for  more  than  half  of  their  economic  growth.  Software  is  one  of  the  key  elements 
driving  ICTs’  role  in  the  economy256.  The  information  technology  sector  is 
characterised by digital convergence, the growing importance of interoperability and 
the key role of standard-setting organisations. 

Digital convergence continues to restructure the three traditional market segments – 
IT,  telecommunications,  and  media.  Separate,  vertically  integrated  networks  are 
transformed  into  horizontally  interconnected  functional  layers.  In  this  new  and 
evolving setting, network operators, IT players and the big media conglomerates all 
compete  for  market  share.  Convergence  continues  to  redefine  devices,  endowing 
them with new functionalities. PCs are already being used to store and manipulate all 
types of media and are becoming the hubs of the digital world. Consumer equipment 
products  such  as  hi-fis  and  cameras,  communicate  with  each  other  and  with 
computing devices. 

298. 

The  opportunities  opened  up  by  convergence  and  the  demands  on  the  high-tech 
ecosystem  to  deliver  the  benefits  of  convergence  lead  to  a  growing  need  and 
increasing scope for interoperability in terms of scope, scale and complexity. Indeed, 
given the prevalence of network effects in the ICT sector, interoperability is a crucial 
feature of these markets. Apart from the benefits of interoperability, other important 

254 
255 
256 

Case COMP/M.4809 France Télécom/Mid Europa Partners/One Commission decision, 21.9.2007. 
Case COMP/M.4662 Syniverse/BSG Commission decision, 4.12.2007. 
OECD Information Technology Outlook 2006 Highlights. 

EN 

68 

   EN 

 
                                                 
299. 

300. 

objectives such as incentives for innovation and security also need to be taken into 
account in defining and enforcing competition policy in this dynamic sector. 

In  this  context,  standard-setting  organisations  can  play  a  key  role  by  facilitating 
interoperability.  It  is  important  that  standard-setting  organisations  establish  rules 
which ensure fair, transparent procedures and early disclosure of relevant intellectual 
property. The Commission will continue to follow the operation of standard-setting 
organisations in this regard. 

Open source software has become an established feature of the mainstream software 
market. In fact, in many software markets it is now the only competitive constraint 
on incumbents. The “proprietary” business model, on the one hand, where the source 
code  of  the  software  is  usually  not  made  available  and  the  “open  source”  business 
model, on the other hand, are not incompatible in the sense that the same company 
may  develop  and  distribute  certain  products  following  the  open  source  business 
model and other products in binary source code only (i.e. following the proprietary 
model). 

2. 

POLICY DEVELOPMENTS 

301. 

In  2007  the  Commission  continued  its  proceedings  against  Microsoft  to  ensure 
compliance with the 2004 Decision257 with regard to pricing and licensing terms for 
the  interoperability  information  in  question  (Interoperability  Information).  These 
terms should be reasonable and non-discriminatory, in accordance with Article 5 of 
the 2004 Decision. In 2006 the Commission had already imposed a definitive penalty 
payment of EUR 280.5 million on Microsoft for not providing complete and accurate 
Interoperability Information258. Consequently, on 1 March, the Commission issued a 
statement  of  objections  addressed  to  Microsoft  which  set  out  the  Commission's 
preliminary assessment that Microsoft had not complied with its obligation to offer 
complete  and  accurate  Interoperability  Information  on  reasonable  and  non-
discriminatory terms259. 

302. 

Following  the  judgment  by  the  Court  of  First  Instance  (see  I.A.3.1.  above) 
dismissing  the  substantive elements of  Microsoft's application for  annulment of the 
2004 Decision260, on 22 October Microsoft announced a significant reduction of its 
licence fees. It also offered an updated version of its relevant licence agreements. As 
of  that  date  the  Commission  has  no  further  objections  concerning  Microsoft's 
compliance with the 2004 Decision261. 

303. 

A statement of objections was sent to Intel on 26 July indicating the Commission's 
preliminary  conclusion  that  Intel  has  engaged  in  three  types  of  abusive  practices 
aimed  at  excluding  AMD,  Intel's  main  rival,  from  the  x86  Computer  Processing 

257 

258 
259 
260 
261 

Commission decision of 24.5.2004 relating to a proceeding pursuant to Article 82 of the EC Treaty and 
Article  54  of  the  EEA  Agreement  against  Microsoft  Corporation,  Case  COMP/37.792  Microsoft,  OJ 
L 32, 6.2.2007, p. 23. 
http://ec.europa.eu/comm/competition/antitrust/cases/decisions/37792/art24_2_decision.pdf 
http://ec.europa.eu/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=MEMO/07/90|0|RAPID&lg=EN 
IP/07/1567, 22.10.2007. 
http://ec.europa.eu/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=IP/07/1567|0|RAPID&lg=EN 

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Units  (CPU)  market.  First,  Intel  provided  substantial  rebates  to  various  Original 
Equipment Manufacturers (OEMs) conditional on them obtaining all or most of their 
CPU requirements from Intel. Second, in a number of instances, Intel made payments 
in order to persuade an OEM to either delay or cancel the launch of a product line 
incorporating an AMD-based CPU. Third, in the context of bids against AMD-based 
products for strategic customers in the server segment of the market, Intel on average 
offered  CPUs  below  cost.  Each  abuse  is  provisionally  considered  to  constitute  an 
abuse  of  a  dominant  position  (Article  82  EC)  in  its  own  right.  In  addition,  the 
Commission's  preliminary  conclusion  is  that  the  three  types  of  conduct  reinforce 
each other and that they form part of a single overall anti-competitive strategy262. 

The Commission sent a statement of objections to Rambus on 30 July. The statement 
of objections outlines the Commission’s preliminary view that Rambus has abused a 
dominant  position  by  claiming  unreasonable  royalties  for  the  use  of  certain  patents 
for “Dynamic Random Access Memory” chips (DRAMS) subsequent to a so-called 
"patent  ambush."  DRAMS  are  the  computer’s  "working"  memory.  In  2006 
worldwide  sales  of  DRAM  chips  exceeded  USD  34 billion.  Virtually  all  PCs  have 
DRAMs that are compliant with a standard developed by the standard setting body, 
JEDEC. Rambus owns and is asserting patents which, it claims, cover the technology 
included in these JEDEC standards. 

The Commission’s preliminary view is that Rambus engaged in intentional deceptive 
conduct in the context of the standard-setting process, for example by not disclosing 
the  existence  of  the  patent  applications  which  it  later  claimed  were  relevant  to  the 
adopted  standard.  This  type  of  behaviour  is  known  as  a  "patent  ambush".  The 
Commission's  preliminary  view  is  that  without  its  "patent  ambush"  Rambus  would 
not have been able to charge the royalty rates that it is currently charging263. 

On 30 August, the Commission opened proceedings264 against Qualcomm Inc., a US 
chipset manufacturer and holder of IP rights in the CDMA and WCDMA standards 
for mobile telephony. The investigation results from separate complaints lodged by 
six  European,  US  and  Japanese  mobile  phone  and/or  chipset  manufacturers.  The 
complaints allege that Qualcomm's licensing practices are not Fair, Reasonable and 
Non-Discriminatory  ("FRAND")  and  therefore  may  breach  EC  competition  rules 
(Article 82 EC). The opening of proceedings does not imply that the Commission has 
conclusive  proof  of  an  infringement,  but  only  that  the  Commission  has  decided  to 
assign priority and more resources to analysing this case. 

In the ICT sector the Commission also enforced the Merger Regulation with the aim 
of  preventing  effective  competition  from  being  hampered  by  merging  companies, 
while  maintaining  opportunities  and  incentives  for  innovation.  Against  this 
background  the  Commission  cleared  a  joint  venture  between  ST  Microelectronics 
and  Intel265  in  the  area  of  flash  memory,  a  type  of  semiconductor  memory  used  to 
retain content when a device is switched off. There are a number of applications that 
integrate flash memory, such as data storage cards, mobile phones, networking and 
telecom equipment. The investigation into this highly dynamic industry showed that 

304. 

305. 

306. 

307. 

262 
263 
264 
265 

See http://ec.europa.eu/comm/competition/antitrust/cases/index/by_nr_75.html#i37_990 
See http://ec.europa.eu/comm/competition/antitrust/cases/index/by_nr_77.html#i38_636 
See http://ec.europa.eu/comm/competition/antitrust/cases/decisions/39247/proceedings.pdf 
Case COMP/M.4751 STM/Intel Commission decision, 10.8.2007 

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308. 

309. 

310. 

the market would remain competitive even after the proposed transaction, given that 
strong  players  are  active  in  the  marketplace.  The  Commission  also  concluded  that 
innovation concerning the evolutionary floating gate technologies266 underway in this 
area was not adversely affected by the merger. 

In  the  area  of  mergers  the  Commission  also  opened  an  in-depth  investigation  into 
Google's  proposed  acquisition  of  DoubleClick,  a  transaction  involving  the  markets 
for  online  advertising  and  intermediation  services  and  technologies  over  the 
Internet267. This decision is without prejudice to the merged entity's obligations under 
Community legislation in relation to the protection of individuals and the protection 
of  privacy  with  regard  to  the  processing  of  personal  data  and  the  Member  States' 
implementing legislation. 

In  the  field  of  State  aid  the  Commission  adopted  a  final  decision  approving  the 
French tax credit in respect of the creation of video games268. This measure had been 
notified under Article 87(3)(d) EC. It enables video game producers that are subject 
to  taxation  in  France  to  deduct  20%  of  the  eligible  costs  of  production  of  certain 
video games. Only video games that meet certain criteria will be eligible. 

The Commission opened the formal investigation because of doubts as to whether all 
video games eligible under the initial criteria had a verifiable cultural content as was 
claimed  by  the  French  authorities.  Following  this  investigation,  the  French 
authorities were asked to clarify the selection criteria. The new selection test made it 
possible in this case to conclude that the measure in question had a genuine cultural 
objective. In addition, in view of the small market shares of the beneficiaries and the 
fact  that  the  French  authorities  agreed  to  include  sub-contracting  expenses  in  the 
eligible costs, the measure was deemed to have a limited impact on competition and 
trade  between  Member  States.  This  is  the  first  time  that  the  cultural  exception  laid 
down in Article 87(3) (d) has been applied to video games. 

E – MEDIA AND SPORT 

1. 

OVERVIEW OF THE SECTOR 

311. 

As  new  technologies  increase  the  number  of  ways  in  which  people  can  access 
entertainment and information, competition to attract audiences in the media sector is 
becoming tougher. Traditional distribution channels, such as newspapers, television 
and  compact  discs,  are  facing  competition  from  new  distribution  platforms  such  as 
the  internet  or  mobile  devices.  The  increase  in  the  overall  number  of  distribution 
channels  is  fuelling  the  demand  for  content.  As  a  result,  there  is  a  trend  towards 
consolidation  between  the  more  established  media  players  and  new  media 

266 

267 

268 

Floating-gate technologies are devices that retain the stored information even when not powered (non-
volatile memory). 
Proceedings  initiated  on  13.11.2007  (see  IP/07/1688).  The  merger  was  cleared  without  conditions  on 
11.3.2008 (see IP/08/426). 
Case C 47/2006 Crédit d'impôt mis en place par la France pour la création de jeux vidéo Commission 
decision, 11.12.2007. 

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71 

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312. 

313. 

businesses,  as  well  as  between  the  owners  of  infrastructure  networks  and  content 
producers. 

The switch from analogue to digital broadcasting,  which Member States  are due to 
complete by the beginning of 2012269, is already providing consumers with a greater 
number of TV channels and radio stations, and better sound and picture quality. The 
digital  switchover  concerns  all  commonly  available  broadcasting  transmission 
platforms  such  as  satellite,  cable  and  terrestrial,  obliging  broadcasters  and  network 
operators  to  update  their  transmission  equipment,  and  viewers  to  install  digital 
decoders.  The  Commission  is  committed  to  supporting  the  digital  switchover  and 
recognises that the process may be delayed if left entirely to market forces. A number 
of  Member  States  are  providing  public  funding  to  encourage  broadcasters  and 
consumers to facilitate the switchover. The Commission has no general objection to 
the granting of State aid in this area. However, Member States have to demonstrate 
that  the  aid  is  a  necessary  and  appropriate  instrument,  is  limited  to  the  minimum 
necessary and does not unduly distort competition. 

Commercial  operators  continue  to  be  concerned  about  State  aid  for  public  service 
broadcasters, with whom they compete for audience share, especially for what they 
consider  to  be  purely  commercial  programmes  such  as  live  sports  or  blockbusters. 
They  also  allege  that  the  State  funding  for  public  service  broadcasters  may  exceed 
what is necessary for their public service mission, allowing such broadcasters to use 
these funds for their commercial activities. Commercial operators are also concerned 
that  public  broadcasters  are  engaging  in  anti-competitive  practices,  for  example  by 
inflating the price of television content such as sports rights. Private operators claim 
that  the  public  funding  of  public  service  broadcasters'  new  media  activities  distorts 
competition and discourages private initiatives from developing new and innovative 
services. 

314. 

Technological  developments  are  also  affecting  the  way  copyright  is  administered, 
especially  for  works  distributed  over  the  internet.  The  tradition  of  managing  rights 
based  on  territorial  borders  is  not  suited  to  online,  EEA-wide  distribution,  which 
could bring many benefits to artists and consumers. 

315.  With  firms  joining  forces  in  a  context  of  continuous  evolution  of  the  media  sector 
(such as the gradual digitalisation of content available for distribution across various 
platforms) there is an increased need to preserve the efficient competitive structure of 
network  and  multi-media  markets.  Therefore,  the  Commission’s  main  concerns  in 
the area of merger control are that mergers do not restrict consumer choice, that they 
maintain  incentives  and  scope  for  technological  innovation  possible  and  that  they 
ensure  continued  price  competition.  In  this  context,  the  Commission's  aim  is  to 
preserve access to the key elements of competition in this sector (content, technology 
or interconnection). 

269 

Commission  Communication  on  accelerating  the  transition  from  analogue  to  digital  broadcasting, 
COM(2005) 204 final (OJ C 49, 28.2.2006, p. 24). 

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2. 

POLICY DEVELOPMENTS 

316. 

The  Commission's  main  objective  from  a  competition  perspective  is  to  ensure  that 
there  is  a  level  playing  field  in  the  media  sector,  whether  between  different 
commercial  operators  or  between  commercial  operators  and  publicly-funded 
operators. 

2.1. 

Digital Broadcasting 

317. 

318. 

319. 

In  2007,  the  Commission  continued  to  monitor  the  switchover  from  analogue  to 
digital broadcasting in the EU Member States. In July, the Commission sent Italy a 
reasoned  opinion,  which  is  the  second  stage  of  the  infringement  procedure  under 
Article  226  of  the  EC  Treaty  that  had  begun  in  2006  following  a  complaint  by  the 
Italian  consumer  association,  Altroconsumo270.  The  Commission  considers  that  the 
Italian  legislation  is  contrary  to  the  EU  Regulatory  Framework  for  Electronic 
Communications271  as  it  places  unjustified  restrictions  on  the  provision  of 
broadcasting  transmission  services  and  attributes  unjustified  advantages  to  existing 
analogue  operators.  The  Commission  considers  that  there  is  a  risk  that  existing 
situation in analogue TV, namely that only a few operators are able  to compete on 
the  market  for  broadcasting  transmission  services,  will  be  reproduced  in  digital 
terrestrial  TV,  thereby  further  reducing  choice  for  Italian  consumers.  The  Italian 
authorities have drafted a law aimed, inter alia, at amending the existing broadcasting 
legislation. The draft law is pending before the Italian Parliament. 

In  the  field  of  State  aid  the  Commission  continued  throughout  2007  to  apply  the 
approach adopted in earlier decisions concerning State funding to support the digital 
switchover. The Commission approved three support schemes (two Italian272 and one 
Spanish273) for the acquisition of digital decoders with open API274 and for covering 
the costs of adapting existing collective analogue terrestrial antennas. 

The  Commission  adopted  two  negative  decisions  regarding  subsidy  schemes  in 
Italy275 and in the German Land of North Rhine-Westphalia276. In the first case, Italy 
had  provided  subsidies  to  consumers  for  the  acquisition  of  digital  terrestrial 
decoders.  The  investigation  led  the  Commission  to  conclude  that  the  exclusion  of 
satellite decoders from the measure introduced a distortion which was not necessary 
in  order  for  the  switchover  to  be  carried  out.  An  appeal  against  the  decision  was 
lodged before the Court of First Justice by the three main beneficiaries277. 

270 
271 

272 

273 

274 

275 
276 

277 

IP/07/1114, 18.7.2007. 
Notably, Commission Directive 2002/77/EC of 16 September 2002 on competition in the markets for 
electronic communications networks and services (OJ L 249, 17.9.2002, p. 21). 
Cases  N  270/2006  Subsidy  to  digital  decoders  with  open  API  (OJ  C  80,  13.4.2007),  N  107/2007 
Subsidies to idTV – Italy (OJ C 246, 20.10.2007). 
Case N 103/2007 Support for the acquisition of digital decoders and for the adaptation of antennas in 
Soria, Commission decision, 25.9.2007 (OJ C 262, 1.11.2007). 
Open API is a word used to describe advanced program interfaces (API) that facilitate interoperability, 
i.e. portability of interactive content between delivery mechanisms with full functionality of the content 
intact. 
Case C 52/2005 (ex NN 88/2005) Subsidy to digital decoders in Italy (OJ L 147, 8.6.2007). 
Case C 34/2006 (ex N 29/2005) Introduction of digital terrestrial television (DVB-T) in North Rhine-
Westphalia, Commission decision of 23.10.2007, not yet published. 
Cases T-96/07, T -177/07 and T-188/07. 

EN 

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320. 

The second case concerning North Rhine-Westphalia was very similar to the funding 
previously  envisaged  by  the  Land  of  Berlin-Brandenburg,  which  was  declared 
incompatible with the EU State aid rules in November 2005278. The Media authority 
of  the  Land  of  North  Rhine-Westphalia  wanted  to  grant  subsidies  to  commercial 
broadcasters  present  on  the  digital  terrestrial  platform  to  finance  part  of  the 
transmission fees that these broadcasters pay to the operator of the DVB-T network. 
The investigation led the Commission to conclude that the planned funding was not 
an  appropriate  way  to  address  specific  problems  in  relation  to  digitisation  and  was 
not  necessary  to  effect  the  switchover.  The  planned  State  aid  disregarded  the 
principle  of  technology  neutrality  and  only  envisaged  supporting  transmission  over 
the digital terrestrial platform. The envisaged funding would thereby have distorted 
competition between terrestrial, cable and satellite transmission. The Media authority 
of the Land of North Rhine-Westphalia has appealed against the decision 279. 

321. 

The Commission closed the investigation into a similar scheme in the German Land 
of Bavaria280 following the German authorities' decision to limit the subsidies to the 
de minimis threshold set in Regulation 1998/2006281. 

2.2. 

Public service broadcasting 

322. 

323. 

In line with the Interpretative Protocol on the system of public service broadcasting 
(Amsterdam  Protocol),  the  Commission  recognises  that  it  is  the  prerogative  of 
Member  States  to  organise  and  fund  public  service  broadcasting.  The  aim  of  the 
Commission's  policy  towards  State  aid  for  public  service  broadcasters  is  to  ensure 
that public funding does not exceed what is necessary for them to fulfil their public 
service mission and does not lead to unnecessary distortions of competition. 

The  Commission  considers  that  the  financing  of  public  service  broadcasters  by 
means of budgetary contributions or licence fee financing constitutes State aid, also 
in  view  of  the  conditions  set  out  in  the  Altmark  judgment282.  State  aid  to  public 
service  broadcasters  may,  however,  be  declared  compatible  if  it  fulfils  the 
requirements  of  Article  86(2) 
the  Broadcasting 
(as  specified 
Communication283). In its assessment of numerous complaints against the financing 
of public service broadcasters on the basis of the Broadcasting Communication, the 
Commission has further clarified and developed the requirements in its decisions. 

further 

in 

324. 

The Commission accepts a broadly defined public service mission to offer balanced 
and  varied  programmes,  including  information  as  well  as  entertainment  and  sport. 
The  Commission  also  recognises  that  the  public  service  remit  may  include  new 

278 
279 
280 

281 

282 

283 

Case N 25/2004 Einführung von DVB-T in Berlin-Brandenburg (OJ L 200, 22.7.2006, p. 14). 
Case T-2/08. 
Case C 33/2006 (ex N 576/2004) Introduction of digital terrestrial television (DVB-T) in Bavaria, not 
yet published. 
Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Articles 87 and 
88 of the Treaty to de minimis aid (OJ L 379, 28.12.2006). 
Case C-280/00, (Reference for a preliminary ruling from the Bundesverwaltungsgericht) Altmark Trans 
GmbH,  Regierungspräsidium  Magdeburg  v  Nahverkehrsgesellschaft  Altmark  GmbH,[2003]  ECR  I-
7747. 
Communication  from  the  Commission  on  the  application  of  State  aid  rules  to  public  service 
broadcasting (OJ C 320, 15.11.2001, p. 5). 

EN 

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325. 

media  activities,  provided  that  they  serve  the  same  democratic,  social  and  cultural 
needs of society as traditional broadcasting. 

The  Commission  continued 
to  approve  State  financing  for  public  service 
broadcasters where both the public service remit and the financing are determined in 
a  fully  transparent  manner  and  where  the  State  funding  does  not  exceed  what  is 
necessary  to  fulfil  the  public  service  mission.  In  2007,  in  line  with  its  established 
decision-making  practice,  the  Commission  adopted  two  decisions  concerning  the 
financing  of  public  service  broadcasters  pursuant  to  Article  86  (2)  EC  Treaty  in 
conjunction with the Broadcasting Communication. The first concerned the financing 
by  the  Spanish  Government  of  workforce  reduction  measures  taken  by  the  Spanish 
public service broadcaster, RTVE. The Commission approved the  financing, taking 
the  view  that  the  measures  allowed  RTVE  to  provide  a  more  cost-efficient  public 
service which enabled it to reduce the overall need for public support284. The second 
decision  concerned  the  general  financing  regime  for  public  service  broadcasters  in 
Germany  (ARD  and  ZDF).  Having  received  undertakings  from  the  German 
Government  to  amend  the current financing regime by May  2009, the  Commission 
closed  the  investigation.  These  undertakings  concerned  measures  to  ensure  a  more 
precise definition and a proper entrustment of the public service mission as regards 
new  media  activities,  adequate  safeguards  against  overcompensation  and  cross-
subsidisation,  observance  of  market  principles  in  the  public  service  broadcasters' 
commercial activities and greater transparency as regards the sublicensing of sports 
rights. In particular in terms of the possible offer of new media activities, the current 
legal framework will be amended to allow an evaluation of new offers based on a set 
of criteria and following a procedure which also allows third parties to submit their 
views285. 

326. 

Under  the  Commission's  rules  concerning  services  of  general  economic  interest, 
compensation  paid  to  small  local  or  regional  public  service  broadcasters  may  be 
compatible  with  Article  86(2)  and  not  subject  to  prior  notification  under  certain 
conditions286. 

2.3. 

Rights management and online distribution 

327. 

In April, the Commission sent a statement of objections to major record companies 
and  Apple  in  relation  to  agreements  between  each  record  company  and  Apple 
deemed  to  restrict  online  music  sales,  in  contravention  to  Article  81  EC.  Apple 
operates an iTunes on-line store selling music downloads with different views in the 
European Economic Area (EEA). EEA consumers can only buy music from the view 
which  is  directed  at  their  respective  country  of  residence  and  which  contains  the 
music that is copyright-cleared for sale in that country. iTunes checks the consumers' 
country of residence through their credit card details. For example, in order to buy a 
music download in the UK, a consumer must use a credit card issued by a bank with 

284 

285 

286 

The full text of the decision is published in English:   
http://ec.europa.eu/comm/competition/state_aid/register/ii/doc/NN-8-2007-WLWL-07.03.2007.pdf 
The full text of the decision is published in English:   
http://ec.europa.eu/comm/competition/state_aid/register/ii/doc/E-3-2005-WLWL-en-24.04.2007.pdf 
Commission decision, 28.11.2005, on the application of Article 86(2) of the EC Treaty to State aid in 
the form of public service compensation granted to certain undertakings entrusted with the operation of 
services of general economic interest (OJ L 312, 29.11.2005, p. 67). 

EN 

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328. 

329. 

an address in the UK. The prices of downloads for UK consumers were appreciably 
higher than in the eurozone countries. The different treatment of UK consumers was 
a major concern for Which? - a UK consumer protection organisation - who filed a 
formal complaint with the Commission. 

As  part  of  these  proceedings  Apple  announced  that  it  would  equalise  its  prices  for 
downloads of songs from its iTunes online store in Europe by mid-2008, thus putting 
an  end  to  the  different  treatment  of  UK  consumers.  The  Commission's  antitrust 
proceedings  further  clarified  that  the  agreements  between  the  major  record 
companies and Apple do not force Apple to set up national online stores and to sell 
downloads only from the iTunes online store of the consumer's residence, provided 
that  the  record  companies  have  licensed  the  song  for  the  relevant  country. 
Consequently, the Commission closed the case. 

In the context of rights management, the Commission continued its assessment of the 
CISAC case after having issued a statement of objections287 in 2006 against CISAC 
and  the  individual  collecting  societies  in  the  EEA  contracting  countries  that  are 
members of CISAC. The Commission expressed concerns about certain provisions in 
the CISAC model contract and the systematic and uniform implementation of these 
provisions by CISAC members. According to the Commission's preliminary findings 
these  restrictions  of  competition  mean  that  right  holders  cannot  select  the  EEA 
collecting  society  of  their  choice  and  commercial  users  cannot  obtain  multi-
repertoire,  multi-territorial  licences  for  their satellite,  cable  and  online  activities.  In 
2007, CISAC and 18 EEA collecting societies offered commitments under Article 9 
of  Regulation  No  1/2003288.  These  commitments  were  market  tested  by  the 
publication of an Article 27(4) notice on 9 June289. 

2.4. 

Premium sport content 

330. 

331. 

The Commission continues to give high priority to ensuring that premium content is 
made available under open and transparent conditions that allow a maximum number 
of  operators  to  bid  for  the  rights.  In  2007,  the  Commission  closed  its  investigation 
under Article 81 EC concerning the joint buying of TV rights of sports events by the 
European Broadcasting Union (EBU) and its members. 

EBU is an association of radio and TV broadcasting organisations. Its members are 
mainly  public  broadcasters.  Through  the  joint  buying  agreement,  EBU  acquires 
audiovisual  rights  for  international  sports  events  on  behalf  of  its  members.  There 
were  concerns  that  competitors  of  EBU  members,  in  particular  commercial 
broadcasters, were not in a position to acquire the rights to broadcast these events in 
their  respective  national  TV  markets  due  to  the  existence  of  EBU's  pan-European 
joint  buying  agreement.  Until  the  end  of  the  1990s,  the  rights  of  the  major 
international  sports  events  such  as  the  FIFA  World  Cup,  the  UEFA  European 
Football  Championship  and  the  Olympic  Games  had  systematically  been  sold  to 
EBU,  which  shared  the  events  among  its  members.  However,  the  investigation 
revealed  that  the  markets  for  the  acquisition  of  top  international  sports  rights  have 

287 
288 
289 

MEMO/06/63, 7.2.2006. 
IP/07/829, 14.6.2007. 
OJ C 128, 9.6.2007. 

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changed considerably in recent years. Contrary to the previous situation, EBU is no 
longer the sole buyer of premium international sports rights, as rights owners tend to 
diversify  the  sale  pattern  of  their  media  rights.  The  Commission  will  continue  to 
monitor  the  rapidly  changing  media  sector.  Access  to  premium  content  by 
broadcasters  and,  in  particular,  new  media  operators  remains  a  concern  for  the 
Commission. 

2.5.  White Paper on Sport 

332. 

On 11 July the Commission adopted a White Paper on Sport290 providing a strategic 
orientation on the role of sport in Europe, with the focus on its economic and social 
dimension.  The  EU  antitrust  rules  are  addressed  in  more  detail  in  Annex  I  to  the 
accompanying  Staff  Working  Document  "The  EU  and  Sport:  Background  and 
Context"291.  DG  Competition  was  involved  in  the  preparation  of  the  White  Paper, 
including  its  Annex  I  on  "Sport  and  EU  Competition  rules",  which  provides  an 
overview  of  the  main  case  law  of  the  Community  Courts  and  the  decision-making 
practice of the Commission with respect to the application of Articles 81 and 82 of 
the EC Treaty in the sport sector. 

333. 

The White Paper also proposes a number of actions to be implemented or supported 
by  the  Commission.  These  actions  are  brought  together  in  the  Pierre  de  Coubertin 
Action  Plan292.  DG  Competition  is  participating,  together  with  other  Commission 
services,  in  the  implementation  of  the  Action  Plan  especially  as  regards  players' 
agents, licensing systems and selling of media rights. 

2.6. 

Film and other audiovisual works 

334. 

335. 

The Commission continued to assess film support schemes on the basis of its 2001 
Cinema  Communication,  which  sets  out  the  criteria  under  which  such  aid  can  be 
approved under the cultural exemption from the general ban on State aid. In June, the 
Cinema Communication was extended until 31 December 2009 at the latest. 

The most significant decisions in 2007 concerned the Dutch film support schemes293 
and  the  UK  film  production  and  development  funds.  As  with  all  other  film  support 
decisions  in  2007,  the  Commission  approved  these  measures  on  the  basis  that  they 
would be amended by the national authorities to take account of any changes in the 
State aid rules during their period of operation. 

336. 

Against  the  background  of  growing  competition  between  film  support  schemes 
around  the  world  to  try  to  attract  large  film  productions,  particularly  through  tax 
incentives, the Commission continued to pay closer attention to such schemes. 

290 
291 
292 
293 

COM(2007) 391 final, available at http://ec.europa.eu/sport/whitepaper/wp_on_sport_en.pdf 
SEC(2007) 935, available at http://ec.europa.eu/sport/whitepaper/dts935_en.pdf 
SEC(2007) 934, available at http://ec.europa.eu/sport/whitepaper/sec934_en.pdf 
Case N291/07 The Netherlands film fund, Commission decision, 10.7.2007. 

EN 

77 

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2.7. 

Application of merger control 

337. 

338. 

339. 

A  prominent  example  of  application  of  the  merger  control  in  the  media  sector  was 
the  SFR/Tele2  merger294,  where  the  concentration  was  approved  subject  to 
conditions  ensuring  effective  competition  in  the  French  pay-TV  market.  SFR  was 
controlled by Vodafone and Vivendi. Vivendi controlled the dominant player in the 
French pay-TV market, Groupe Canal+, which inter alia enjoyed a large measure of 
control  over  attractive  television  content  for  pay-TV  (programmes  and  channels). 
Tele2 France was active in DSL TV. The DSL operators were collectively the main 
players  capable  of  exerting  competitive  pressure  on  Canal+.  The  Commission 
ensured that, post-merger, other DSL operators would enjoy equal treatment with the 
new entity as regards access to television content owned by Groupe Canal+. 

As  regards  the  music  industry,  in  the  case  of  Sony/BMG-II295  the  European 
Commission granted regulatory approval to the joint venture combining the recorded 
music  businesses  of  Sony  and  Bertelsmann,  after  the  Court  of  First  Instance  had 
annulled the previous Commission decision of 2004. After a very extensive and in-
depth investigation, the Commission concluded that the merger did not entail adverse 
horizontal  coordination  effects  between  the  recording  music  companies  as  regards 
their  pricing  behaviour,  nor  as  regards  other  non-price  elements  including  cultural 
diversity aspects. 

In the area of music publishing rights, the Commission cleared the merger between 
Universal and the BMG music publishing activities296 on the condition that the new 
company  divested  several  successful  catalogues.  The  Commission  concluded  that, 
absent  those  remedies,  the  merger  would  have  had  adverse  effects  on  the  online 
music  distribution  via  digital  channels  since  the  merged  entity  would  have  been  in 
control  of  a  large  percentage  of  "must-have"  titles  through  the  combination  of  its 
publishing and recording rights. 

F – AUTOMOTIVE INDUSTRY 

1. 

OVERVIEW OF THE SECTOR 

340. 

The  automotive  industry  is  one  of  the  most  significant  industries  in  the  EU, 
accounting  for  around  3%  of  the  EU's  GDP297  and  employing  around  2.3 million 
people  directly298,  with  a  further  850 000  engaged  in  the  production  of  parts  and 
components299.  The  EU  remains  the  world  leader  in  automobile  production.  Of  the 
69 million  motor  vehicles  produced  worldwide  in  2006,  18.6 million  (16.1 million 

294 
295 
296 
297 

298 
299 

Case COMP/M.4504 SFR/Tele2 Commission decision, 18.7.2007 
Case COMP/M.3333 Sony/BMG-II Commission decision, 3.10.2007 
Case COMP/M.4404 Universal Music Group/BMG Music Publishing Commission decision, 22.5.2007. 
Cars  21  –  A  competitive  Automotive  Regulation  System  for  the  21th  century.  Final  Report  to  the 
European Commission 2006, p. 9. 
ACEA, European Automobile Industry Report 2007/2008, p. 2. 
Design Directive Impact Assessment, COM(2004) 582, p. 11. 

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78 

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passenger  cars)  –  the  equivalent  of  27%  of  worldwide  production  –  were 
manufactured in the EU300. 

341.  While  the  industry  has  been  plagued  by  worldwide  overcapacity  in  recent  years, 
forcing  certain  manufacturers  in  Europe  to  close  plants,  other  manufacturers  have 
opened new manufacturing sites in the EU, taking advantage of the favourable cost 
situation in the new Member States and Eastern Germany, as well as the geographic 
proximity to Western European markets. 

342. 

343. 

344. 

Automotive production in the new Member States increased (albeit from low initial 
levels)  by  26%  in  2006  compared  to  the  previous  year,  making  up  13%  of  EU 
production301. 

The  growing  share  of  vehicles  produced  in  the  new  Member  States  has  led  to  the 
formation  and  development  of  clusters,  in  particular  in  southern  Poland,  eastern 
Czech Republic, western Slovakia and northern Hungary. Component suppliers tend 
to  follow  vehicle  manufacturers.  Investment  in  these  locations  reduces  the  overall 
costs in the European production chain and enhances the global competitiveness of 
the  EU  industry,  as  the  bulk  of  direct  investment  originates  from  manufacturers  of 
European origin. 

The  importance  of  the  automotive  sector  extends  beyond  the  primary  market  of 
manufacturing. Employment in the sales business and the aftermarket for the repair 
and  maintenance  of  motor  vehicles  amounts  to  close  to  three  million  people302.  In 
2004,  the  turnover  of  the  European  market  for  the  service  and  repair  of  motor  was 
around EUR 100 billion. 

2. 

POLICY DEVELOPMENTS 

345. 

346. 

300 
301 
302 
303 

304 

In  2007,  DG  Competition  continued  its  enforcement  and  monitoring  efforts  in  the 
automotive  sector,  including the manufacture  of  motor  vehicles  and  components  as 
well as the sale, maintenance and repair of motor vehicles. DG Competition monitors 
developments in the sector on an ongoing basis through its car price reports303. 

The motor vehicle block exemption (Commission Regulation 1400/2002) lays down 
a regime specific to the automotive sector through Commission Regulation (EC) No 
1400/2002  of  31  July  2002  on  the  application  of  Article  81(3)  of  the  Treaty  to 
categories of vertical agreements and concerted practices in the motor vehicle sector 
(OJ  L  203/30,  1.8.2002)304.  The  Regulation  aims  at  strengthening  intra-brand 
competition  in  response  to  a  perceived  lessening  of  inter-brand  competition  due  to 
the process of consolidation that the industry went through in the late 1990s and to 

ACEA, European Automobile Industry Report, p. 2. 
ACEA Economic Report. 
CECRA 2007 available at http://www.cecra.eu/en/about/about.php 
Latest 
report 
http://ec.europa.eu/comm/competition/sectors/motor_vehicles/prices/2007_05_full.pdf 
Commission Regulation (EC) No 1400/2002 of 31 July 2002 on the application of Article 81(3) of the 
Treaty  to  categories  of  vertical  agreements  and  concerted  practices  in  the  motor  vehicle  sector  (OJ L 
203/30, 1.8.2002). 

published 

2007, 

price 

July 

car 

27 

EN 

79 

   EN 

 
                                                 
347. 

348. 

fears  of  market  power  being  further  concentrated  in  the  hands  of  ever  fewer 
incumbents.  

However, there are ample indications – in the shape of falling real prices, a number 
of  successful  entries,  relatively  few  exits,  significant  fluctuations  in  market  shares, 
moderate  and  decreasing  degrees  of  concentration,  increased  choice  in  the  sub-
segments of the market, a shortening of model life-cycles and higher rates of range 
renewal  -  that  inter-brand  competition  in  the  car  sales  market  is  strong  and 
increasing. 

In 2007, work began on preparing the evaluation report for 2008 which is required by 
Article  11(2)  of  Regulation  1400/2002.  This  report,  which  will  contain  a  wealth  of 
statistical and other information on the state of the sector, will serve as the basis for 
determining the future regime governing the sector. 

349.  While there is healthy competition in the market for the sale of new cars, there seem 
to  be  rather  more  problems  in  the  market  for  after  sales  services and,  in particular, 
the market for components and parts for first assembly. Therefore, in addition to the 
aftermarket, where consumers are often captive, specific attention will be paid to the 
upstream market for parts and components. 

350. 

The  pressure  exerted  by  vehicle  manufacturers  on  their  component  and  spare  parts 
suppliers  seems  to  have  led  some  of  these  suppliers  into  conduct  that  may  be 
anticompetitive.  An  example  of  such  action  is  the  suspected  cartel  in  automotive 
glazing, where a statement of objections was sent in April to four companies active 
in the production and supply of car glass305. 

351. 

In  addition,  merger  activity  upstream  has  resulted  in  high  concentration  in  many 
parts markets, leaving only three to four suppliers. 

2.1. 

Antitrust enforcement 

352. 

353. 

On  13  September,  in  order  to  increase  competition  in  the  aftermarket,  the 
Commission  adopted  four  decisions  involving  four  car  manufacturers  related  to 
access to technical information, which is a crucial input for independent repair shops. 
Independent repair outlets are important for European consumers because they exert 
competitive pressure on the franchised networks. 

These four decisions legally bind DaimlerChrysler, Toyota, General Motors and Fiat 
to commitments to provide technical information about car repairs to all independent 
garages  in  the  EU306.  The  decisions  were  adopted  under  Article  9(1)  of  Regulation 
No  1/2003.  The  commitments  were  given  following  a  Commission  investigation 
which found that inadequate access to the full range of technical information could 
force  independent  repairers  out  of  the  market  and  that  the  agreements  between  the 
carmakers and their authorised repairers were therefore likely to infringe EC Treaty 
rules  on  restrictive  business  practices  (Article  81  EC).  The  resulting  reduction  in 

305 

306 

European  Commission  sends  Statement  of  Objections  to  alleged  participants  in  cartel  for  car  glass. 
IP/07/147, 23.4.2007. 
See e.g. Commission decision of 13.9.2007 relating to a proceeding pursuant to Article 81 of the EC 
Treaty (Case COMP/39.140 DaimlerChrysler) (OJ L 317, 5.12.2007, p. 76). 

EN 

80 

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competition  between  car  repairers  could  lead  to  less  choice  and  higher  prices  for 
consumers.  Independent  repairers  are  often  cheaper  than  authorised  outlets, 
sometimes  by  over  50%.  These  differences  are  all  the  more  significant  when  one 
considers that, over a car's lifetime, repair and maintenance costs can amount to the 
price originally paid for the car by its first owner. 

information  from 

As cars become more complex, even basic repairs require qualified technicians with 
access  to  brand-specific  technical  information.  The  Commission's  preliminary 
finding  in  all  four  cases  was  that  the  carmakers  seem  to  have  withheld  certain 
technical 
independent  repairers  and  have  provided  other 
information  in  a  way  that  does  not  meet  the  needs  of  independent  repairers.  The 
commitments which are made binding by the decisions are broadly similar and have 
three  core  elements.  First,  they  clarify  what  is  meant  by  technical  information  and 
require that all such information provided to authorised repairers must also be made 
available  to  independent  repairers  on  a  non-discriminatory  basis.  Second,  although 
car manufacturers may withhold information relating to certain functions (anti-theft 
or performance-limiting functions of on-board electronics), they must ensure that the 
withholding  of  this  information  does  not  prevent  independent  repairers  from 
performing repairs that are not directly related to these functions. 

Third, the commitments ensure that independent repairers can obtain information that 
is  both  unbundled  and  priced  in  a  way  that  takes  into  account  the  extent  to  which 
independent repairers use the information. 

The  websites  chosen  by  the  parties  as  their  main  means  of  providing  technical 
information  will  be  kept  operational  during  the  period  of  validity  of  the 
commitments. Access will be based on time slots, with the hourly price set at a level 
that ensures equality between independent and authorised repairers. 

The  commitments  will  be  binding  until  the  expiry  of  the  motor  vehicle  block 
exemption  (Commission  Regulation  (EC)  1400/2002)  in  May  2010.  By  then  the 
Vehicle  Emissions  Regulation  (Council  Regulation  (EC)  715/2007)307  will  have 
entered into force. This places an obligation upon vehicle manufacturers to provide 
independent repairers with standardised access to all technical repair information. 

354. 

355. 

356. 

357. 

2.2.  Merger Control 

358. 

After  2005  and  2006,  2007  was  another  year  in  which  merger  activity  within  the 
automotive industry largely involved the automotive supplier segment. A major deal 
in  2007  was  the  acquisition  of  Siemens  VDO  by  Continental,  resulting  in  an 
important tier-one supplier that was active on a world-wide scale. 

359. 

On  29  November,  the  Commission  cleared  the  proposed  merger  between  the  two 
German companies, Continental AG and Siemens VDO Automotive AG, under the 

307 

Regulation (EC) No 715/2007 of the European Parliament and of the Council of 20 June 2007 on type 
approval  of  motor  vehicles  with  respect  to  emissions  from  light  passenger  and  commercial  vehicles 
(Euro 5 and Euro 6) and on access to vehicle repair and maintenance information (OJ L 171, 29.6.2007, 
p. 1). 

EN 

81 

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EU  Merger  Regulation308.  The  Commission  concluded  that  the  transaction  did  not 
raise serious doubts as to its compatibility with the common market. 

2.3. 

State aid control 

360.  While  there  are  no  State  aid  rules  specific  to  the  automotive  sector,  a  number  of 
cases concerning this sector were addressed in 2007 under certain general State aid 
frameworks, such as the rules on regional aid309 and restructuring aid. 

361. 

362. 

363. 

364. 

On 11 May the European Commission authorised an ad hoc aid of EUR 111 million, 
by the Czech Government to Hyundai Motor Manufacturing Czech, a wholly owned 
subsidiary  of  the  Korean  Hyundai  Motor  Company,  for  the  setting-up  of  a  new 
passenger car production plant in the Moravia-Silesia region310. 

Two  months  later,  on  19  July,  the  European  Commission  authorised  ad  hoc  aid  of 
EUR  32 million  that  the  Slovak  Government  planned  to  grant  to  Kia  Motors 
Slovakia, a wholly owned subsidiary of the Kia Motors Corporation of Korea, for the 
expansion of its car manufacturing plant situated in Žilina, Slovakia311. 

These two cases were declared to be compatible with State aid rules on large regional 
investment projects, also taking into account the Commission's cohesion policy. 

The  Commission  also  examined  the  terms  of  privatisation  of  State-owned  car 
manufacturers.  In  the  case  of  Automobile  Craoiva,  a  Romanian  car  plant  (formerly 
Daewoo Craoiva), the Commission opened the formal investigation procedure under 
Article  88(2)  EC  as  the  conditions  attached  to  the  privatisation  appeared  liable  to 
confer  an  advantage  on  the  undertaking  undergoing  privatisation312.  In  particular, 
conditions  intended  to  secure  a  certain  future  production  level  for  structurally  loss-
making  companies  are  liable  to  have  an  effect  similar  to  restructuring  aid  and  are 
paid for by the State in the form of reduced proceeds from the privatisation. 

308 
309 

310 
311 
312 

Case COMP/M.4878 Continental/Siemens VDO Commission decision, 29.11.2007. 
The relevant provisions are found in Commission Regulation (EC) No 1628/2006 of 24 October 2006 
on the application of Articles 87 and 88 of the Treaty to national regional investment  aid (OJ L 302, 
1.11.2006, p. 29) or earlier provisions in the same field. 
N 661/2006 Investment incentives for Hyundai Motor Manufacturing Czech (OJ C 262, 11.1.2007, p. 2) 
N 857/2006 Kia Motors Slovakia (OJ C 214, 13.9.2007, p. 4). 
Case C 46/2007 Privatisation of Automobile Craoiva, Romania (OJ C 248, 23.10.2007, p. 25). 

EN 

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G – TRANSPORT 

1. 

OVERVIEW OF THE SECTOR 

365. 

366. 

367. 

368. 

369. 

370. 

The  transport  industry  accounts  for  about  7%  of  European  GDP  and  around  5%  of 
employment in the EU. 

Competition policy in the transport sector aims to ensure the efficient functioning of 
markets  which  have  been  recently  liberalised  or  which  are  in  the  process  of 
liberalisation. Making liberalisation a success requires action on two fronts. First, it 
means  ensuring  that  the  existing  regulatory  framework  continues  to  be  modernised 
where this has not been done to a sufficient extent. For decades, sector-specific rules 
governed  the  application  of  competition  rules  (both  substantive  and  procedural)  in 
the field of transport. Bringing transport within the generally applicable competition 
law framework remains a general objective of competition policy. Second, since it is 
essential  that  regulatory  efforts  are  not  hindered  by  anticompetitive  conduct,  other 
objectives  of  competition  policy  in  this  sector  are  vigilant  monitoring  of  market 
developments and targeted enforcement actions. This is particularly true of markets 
where incumbents retain significant market power or where market players are now 
subject to the full force of competition law. 

Road  transport  of  passengers  and  goods  in  the  EU  is  characterised  by  the 
predominance  of  small  companies  and  the  impact  on  competition  of  considerable 
differences in fuel tax levels between Member States. 

In  the  area  of  road  transport  international  markets  are  largely  liberalised  for  both 
passenger  and  freight.  National  road  haulage  is  also  liberalised  through  a  Council 
Regulation  on  cabotage313  while  national  passenger  markets  are  still  largely 
protected. Demand is driven by the increasing importance of door-to-door and just-
in-time  service,  contributing  to  strong  sustained  growth  in  road  transport,  which 
forms the largest component (44%) of intra-EU goods transport. 

As a result, road congestion has increased and is costing the EU about 1% of GDP. 
Harmful emissions from road transport have declined significantly; the introduction 
of catalytic converters, particulate filters and other vehicle-mounted technologies, for 
example,  has  helped  to  reduce  emissions  of  NOx  and  particulates  by  between  30% 
and 40% over the last 15 years, despite rising traffic volumes. 

EU  legislation  has  opened  up  the  market  for  international  transport  of  passengers. 
International  bus  lines  are  competing  through  low  fares  with  international  railway 
services  and  low-cost  airlines.  As  to  regular  services,  the  Commission  presented  a 
proposal  to  Parliament  and  Council  in  May  to  simplify  the  procedures  for  issuing 
authorisations. 

313 

Council  Regulation  (EEC)  No  3118/93  of  25  October  1993  laying  down  the  conditions  under  which 
non-resident  carriers  may  operate  national  road  haulage  services  within  a  Member  State,  OJ  L  279, 
12.11.1993, pp. 1–16. 

EN 

83 

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371. 

372. 

The  market  for  the  national  public  transport  of  passengers  has  so  far  not  been 
liberalised through Community legislation. A certain degree of  market opening has 
resulted  from  the  application  of  the  Public  Procurement  Directives,  which  apply  to 
contracts  –  other  than  concessions  –  that  are  concluded  for  the  provision  of  public 
transport  services.  The  Public  Procurement  Directives  do  not  apply  to  concessions 
for  public  transport  services,  which  are  a  common  way  of  organising  public 
transport,  particularly  in  central  Europe.  The  granting  of  such  concessions 
nevertheless remains subject to the general rules of the EC Treaty. 

The  opening  of  the  market  for  rail  freight  transport  was  completed  in  2007.  The 
third railway legislative package will also open up international passenger transport, 
including  cabotage.  Enforcement  of  the  acquis  by  national  regulatory  bodies  is 
needed  to  facilitate  the  spread  of  the  improvement  of  performance  of  the  railway 
sector, already observed in those Member States which have opened their markets, to 
the  whole  EU  internal  market.  However,  there  remain  structural  obstacles  to  the 
competitiveness  of  the  rail  industry.  These  include  technical  barriers,  such  as  low 
levels  of  interoperability,  lack  of  mutual  recognition  of  rolling  stock,  weak 
coordination of infrastructure and interconnection of IT systems, and the problem of 
the single wagon load314. 

373.  Major  problems  as  regards  competition  in  rail  freight  have  been  related  to 
unbundling/independence of essential functions for non-discriminatory access to the 
network  and  a  lack  of  administrative  capacity  and  independence  of  rail  regulatory 
bodies  (as  appears  from  the  2006  Commission  report  on  the  implementation  of  the 
First  Railway  Package315  and  recommendations  made  in  the  context  of  the  Lisbon 
strategy316). The Commission has sent questionnaires to Member States to investigate 
in detail how they have implemented a number of key provisions of the first railway 
package. The aim of this investigation is to decide whether or not it is necessary to 
open infringement procedures against Member States to ensure that they comply with 
their Treaty obligation to fully and correctly transpose EU law. 

374. 

Rail  has  shown  its  strength  in  passenger  transport,  in  particular  on  high-speed 
connections between city centres. Enlargement has opened up further long-distance 
(over  500  km)  rail  links  which,  combined  with  efficient  logistics  operations,  can 
compete  with  road  transport  in  providing  environmentally  friendly  door-to-door 
service. 

375.  With an annual volume of around 130 billion tonne-kilometres of freight, the modal 
share of river transport accounts for an overall 6% of the total inland transport in 
the European Union, but can be as high as 43% in North-Western Europe (e.g. in the 
catchment areas of major seaports). 

314 

315 

316 

About 50% of rail freight transport in Europe is carried out as single wagonload traffic. However, due 
to  high  fixed  costs  (e.g.  operation  of  marshalling  and  shunting  yards  as  well  as  private  sidings)  this 
production mode is often not competitive compared to other modes such as road haulage. 
See the Commission report on the implementation of the 1st railway package COM(2006) 189 final of 3 
May 2006. 
See the Commission recommendation of 11 December for a Council recommendation Brussels on the 
2008  update  of  the  broad  guidelines  for  the  economic  policies  of  the  Member  States  and  the 
Community  (COM(2007)  803  final).  See  in  particular  the  recommendation  in  respect  of  France  and 
Germany. 

EN 

84 

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376. 

Traditionally,  inland  shipping  has  enjoyed  a  strong  position  in  the  long-distance 
haulage  of  bulk  transport.  In  the  last  two  decades,  inland  shipping  has  also 
successfully  entered  new  markets,  such  as  the  hinterland  transport  of  maritime 
containers, posting an annual growth rate in double digits. 

377.  Maritime transport of goods is crucial to the European economy. Transport by sea 
accounts for about 50% of the external trade in goods in terms of weight and about 
20% of the trade between Member States. 

378. 

379. 

The expected growth of sea transport will need to be absorbed through the EU's port 
infrastructure.  Increased  investment  in  ports  and  into  the  hinterland  is  necessary  in 
order to improve and extend services so that ports become poles for growth instead 
of potential transhipment bottlenecks. A competitive ports sector depends on sound 
competition  both  within  and  between  ports,  clear  rules  for  public  contributions  to 
investment  and  transparent  access  to  port  services,  the  availability  of  competitive 
services and an increase in quality employment. 

The internal air transport market has become more of a reality, as well as an engine 
of growth. The restructuring of the sector and its integration are well advanced. The 
sector  has  developed  substantially  as  a  result  of  the  growth  of  air  connections  in 
Europe,  the  growth  and  importance  of  low-cost  carriers  and  the  development  of 
regional airports. The European Union is an important world player, both in terms of 
the production of aircraft and as regards the market for air transport services. 

380. 

Financing of airports, start-up aid to airlines departing from regional airports and the 
conditions  of  providing  airport  services  all  play  a  role  in  shaping  competition 
between airports. 

2. 

POLICY DEVELOPMENTS 

2.1. 

Road Transport 

381. 

In  the  area  of  State  aid,  the  Commission  maintained  its  policy  of  approving  aid  to 
favour the uptake of cleaner technology, in particular on old vehicles. As in the past, 
the Commission approved State aid for the acquisition of lorries satisfying the Euro 
V  pollution  standard  in  anticipation  of  the  compulsory  application  of  the  standard 
from October 2009 onwards. The Commission adopted a favourable decision in two 
cases during the reference period. The first was a German case related to guidelines 
for the promotion of environmental friendly heavy vehicles317 and the second was an 
Italian case concerning environmental investment aid to Fercam318. 

382.  With  regard  to  the  application  of  public  procurement  and  State  aid  rules  to  public 
service  contracts  and  public  service  concessions,  a  revised  regulation  for  public 
services  in  the  field  of  land  transport  was  adopted  and  will  enter  into  force  in 

317 
318 

Commission decision N 649/06, OJ C 139, 23.6.2007, p. 13. 
Commission decision N 607/06, OJ C 307, 18.12.2007, p. 10. 

EN 

85 

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383. 

384. 

December 2009319. The main objectives of this Regulation are, first, to introduce the 
obligation to conclude a public service contract when a competent authority decides 
to grant an exclusive right to an operator and/or compensation, of whatever nature, in 
return for the discharge of public service obligations and, secondly, to introduce rules 
concerning certain tendering obligations when choosing the transport operator. 

In  the  meantime  the  Commission  is  applying  the  existing  State  aid  rules  to  public 
service  contracts  and  public  service  obligations.  In  its  Altmark  ruling320,  the  Court 
clarified the circumstances under which public service subsidies will not be regarded 
as  constituting  State  aid.  Since  this  clarification  of  the  applicable  rules,  the 
Commission  has  received  a  large  number  of  complaints  as  well  as  certain 
notifications  of  subsidised  local  and  regional  bus  services.  Such  complaints  mainly 
focus  on  contracts  that  have  been  awarded  without  prior  public  tender.  Indeed, 
without such a prior tender procedure, it is difficult to prove that the Altmark criteria 
are  satisfied  and  thus  that  the  compensation  does  not  involve  State  aid.  Following 
complaints  by  competitors  in  the  bus  transport  sector,  the  Commission  initiated 
formal  investigation  procedures  in  Germany321,  Austria322  and  Ireland323.  Further 
investigations in these and other Member State are ongoing. 

Concerning State aid for road infrastructure in the context of the liberalisation of the 
road  services  sector  in  Finland,  including  road  maintenance  and  road  construction, 
the  Commission,  after  opening 
investigation  procedure,  cleared 
the  formal 
transitional  aid  to  the  incumbent  while  at  the  same  time  putting  an  end  to  the 
unlimited  State  guarantee324.  The  Commission  took  the  view  that  the  measures  to 
assist the construction of a motorway325 and a tunnel326 in Greece did not constitute 
State  aid  because  the  respective  concession  agreements  were  concluded  following 
tendering  procedures  conducted  on  an  open  and  non-discriminatory  basis,  which 
ensured  selection  of  the  bids  which  were  the  least  costly  for  the  State  and  which 
incorporated the strictest profit-capping arrangements. 

2.2. 

Rail Transport and Combined Transport 

2.2.1.  Railways liberalisation: further integration of European rail transport markets 

385. 

386. 

319 

320 

321 
322 
323 
324 
325 
326 

As  from  1  January,  rail  transport  services  for  freight  were  fully  opened  to 
competition in the European Union. 

As regards passenger transport, on 23 October the Council and the Parliament finally 
adopted the third railway package, ending a long legislative process begun in 2004 

Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on 
public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 
1191/69 and 1107/70, OJ L 315, 3.12.2007, p. 1. 
Judgment of the Court of 24 July 2003, Case C-280/00 Altmark Trans GmbH and Regierungspräsidium 
Magdeburg v Nahverkehrsgesellschaft Altmark GmbH ("Altmark") [2003] ECR I-7747. 
Commission decisions NN22/05 and NN55/07. Not yet reported. 
Commission decision C 16/07 (ex NN 55/06), OJ C 162, 14.7.2007, p. 19. 
Commission decision C 31/07 (ex NN 17/07), OJ C 217, 15.9.2007, p. 44. 
Commission decision C 7/2006, not yet reported. 
Commission decision N 508/07, OJ C 298, 11.12.2007, p. 4. 
Commission decision N 134/07, OJ C 234, 6.10.2007, p. 2. 

EN 

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with  the  proposals  put  forward  by  the  Commission327.  This  package  contains  a  full 
set  of  measures  allowing  the  further  liberalisation  and  integration  of  the  railway 
sector. International passenger rail services will be opened up to competition from 1 
January 2010. 

387. 

Furthermore,  as  mentioned  earlier,  the  Regulation  on  public  passenger  transport 
services by rail and by road (the so-called PSO Regulation) was also adopted on 23 
October. This Regulation creates a new legal framework for public transport and will 
introduce some elements of liberalisation into local transport328. 

2.2.2.  Applying Merger Rules to rail transport – DeutscheBahn /EWS 

388. 

389. 

390. 

In November, the Commission cleared the proposed acquisition of English, Welsh & 
Scottish Railway Holdings (EWS), the successor of the freight business of the former 
UK national rail monopoly, by Deutsche Bahn (DB) - the state-owned German-based 
railway company329. 

EWS is active in rail freight transport and related services in the UK and the Channel 
Tunnel; it also recently entered the French market. The DB Group is one of Europe's 
leading  rail  operators  engaged  in,  inter  alia,  rail  passenger  and  freight  transport 
services  in  Germany,  Italy,  the  Netherlands  and  Denmark.  It  also  has  a  significant 
freight forwarding business (by all modes of transport), and a logistics and ancillary 
services business. 

The proposed merger did not give rise to any significant overlaps in the activities of 
the  parties.  However,  although  there  was  no  overlap  in  the  parties'  rail  freight 
transport activities in any national geographic market, the Commission had concerns 
that  the  proposed  transaction,  as  initially  notified,  would  result  in  a  lessening  of 
competition  in  the  French  rail  freight  market.  The  French  rail  freight  market  is 
currently  dominated  by  the  incumbent  rail  operator,  SNCF.  The  Commission's 
investigation indicated that EWS, although a new entrant in this market, was likely to 
exert  significant  competitive  pressure  on  the  French  incumbent  in  the  future.  The 
Commission  was  concerned that  DB  would  not have  the same  incentives to  pursue 
rail  freight  transport  expansion  in  France  with  the  same  intensity  as  EWS  would  if 
there  were  no  merger,  and  that  the  merger  would  therefore  lead  to  a  lessening  of 
competition  on  the  French  rail  freight  market.  To  address  these  concerns,  DB 
undertook  to  carry  out  EWS's  expansion  plans  in  France  and  to  provide  non-
discriminatory access to certain EWS training activities and maintenance facilities in 
France for a period of five years. 

327 

328 

329 

Directive  2007/58/EC  of  the  European  Parliament  and  of  the  Council  of  23  October  2007  amending 
Council  Directive  91/440/EEC  on  the  development  of  the  Community's  railways,  and  Directive 
2001/14/EC on the allocation of railway infrastructure capacity and the levying of charges for the use of 
railway  infrastructure,  OJ  L  315,  3.12.2007,  p. 44.  Directive  2007/59/EC  of  the  European  Parliament 
and of the Council of 23 October 2007 on the certification of train drivers operating locomotives and 
trains  on  the  railway  system  in  the  Community,  OJ  L  315,  3.12.2007,  p.  51;  Regulation  (EC)  No 
1371/2007 of the European Parliament and of the Council of 23 October 2007 on rail passengers’ rights 
and obligations, OJ L 315, 3.12.2007, p. 14. 
Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on 
public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 
1191/69 and 1107/70 (OJ L 315, 3.12.2007, p. 1). 
Case COMP/M.4746 DeutscheBahn/EWS, decision of 6.11.2007. 

EN 

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2.2.3.  Applying State aid rules to rail transport 

391. 

The  Commission  adopted  several  decisions  to  promote  rail  transport  and  combined 
transport. It authorised the renewal of a Czech aid measure which guarantees a loan 
to Czech Railways (Česke ráhy)330 to facilitate the purchase of new passenger rolling 
stock.  The  Commission  also  adopted  a  final  decision,  following  the  opening  of  the 
procedure in 2006, concerning aid for the acquisition of certain mobiles assets for the 
use  of  combined  transport  operations  in  Czech  Republic331.  The  Commission  also 
authorised the prolongation of an aid scheme for the development of certain private 
railway infrastructure (private sidings332) in Austria333. The Commission also decided 
to  approve  restructuring  aid  to  the  freight  transhipment  and  logistics  firm, 
InterFerryBoats334. 

392. 

Concerning  State  aid  to  rail  infrastructure,  the  Commission  decided  that  rescue  aid 
granted  by  the  UK  authorities  to  the  Metronet  Companies,  (the  entities  responsible 
for  the  maintenance  and  upgrading  of  the  London  Underground)  was  compatible 
with the common market335. 

2.3. 

Inland Navigation 

393. 

394. 

The year 2007 was the first full year of the implementation of the NAIADES Action 
programme for the promotion of inland waterway transport at all levels (EU, MS and 
the industry itself), and on 5 December the Commission adopted a Communication 
containing a first progress report on NAIADES336. The report describes progress in a 
number  of  areas,  including  measures  adopted  by  Member  States  to  promote  this 
environmentally friendly mode of transport. 

As regards inland navigation, the Commission adopted several decisions to promote 
inland navigation. For example, it authorised an Italian measure to increase safety in 
inland and maritime transport of local nature337. The purpose of this measure aims is 
to scrap old vessels that do not comply with the latest safety measures. 

2.4.  Maritime Transport 

2.4.1.  Policy developments 

395. 

After a one-year consultation of all port stakeholders the Commission adopted, on 18 
October,  a  Communication  on  Port  Policy338,  which  forms  part  of  a  package  on 

330 

331 
332 

333 

334 
335 

336 
337 
338 

Case  N  770/06  State  guarantee  for  the purpose  of  financing  the purchase  of  railway rolling  stock  by 
Ceske Dráhy (Czech Railways) decision of 10.5.2007 (OJ C 227, 27.9.2007, p. 4). 
C 12/2006 (ex N 13/05). 
Private sidings are railway track owned by undertakings used to dispatch and/or receive freight as part 
of their commercial activities. 
Case N 707/06, Austria, Prolongation of aid scheme for the development of private railway sidings (OJ 
C 137, 21.6.2007, p. 4). 
C 46/2005, not yet reported. 
Case  NN  47/07  United-Kingdom,  Metronet  Rail  CV  Limited  and  etronet  Rail  SSL  Limited  in 
administration (Rescue aid). 
COM(2007) 770 final. 
N 848/06, not yet reported. 
COM(2007) 616. 

EN 

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freight logistics339. The Communication sets out the main objectives of the European 
Ports  Policy  and  outlines  an  action  plan  for  achieving  them.  It  also  includes  three 
sections on the application of the Treaty principles of freedom of establishment and 
freedom to provide services to port concessions, port services and work in ports. 

2.4.2.  Applying State Aid Rules to Maritime Transport 

396. 

397. 

398. 

399. 

In 2007 the Commission promoted the close convergence of aid schemes in maritime 
transport, including towage and dredging activities, which was aimed at achieving a 
level  playing  field  within  Europe  as  far  as  possible.  In  particular,  the  Commission 
approved the introduction of a Tonnage Tax in Poland340, but opened an investigation 
on  features  of  the  scheme  that  appeared  not  to  be  in  line  with  former  approved 
tonnage tax schemes. It also opened investigations with respect to Denmark's desire 
to  introduce  changes  to  the  scope  of  its  existing  schemes  for  maritime  transport 
(extension  to  cable  laying  activities)341  and  to  bring  in  ring-fencing  measures 
(alleviation of information obligations concerning intra-group transactions between a 
company  benefiting  from  a  tonnage  tax  scheme  (tonnage  company)  and  a  foreign 
affiliate342, and alleviation of the conditions applying to the eligibility of chartered-in 
vessels on a time basis343). 

As  regards  State  aid  for  the  provision  of  public  service  obligations  in  the  maritime 
sector,  the  Commission  adopted  two  positive  decisions  concerning  Italy344.  In 
addition,  the  Court  of  First  Instance345  dismissed  the  action  for  annulment  of  the 
Commission decision of 6 August 1999 concerning State aid to the Gruppo Tirrenia 
di Navigazione companies346. 

The Commission took the view that the financing of certain port infrastructures, such 
as  the  Rotterdam  main  port  development  project  347,  the  Eastern  extension  of  the 
Muuga Port Harbour in Estonia348 and a real estate exemption for Polish Ports349, did 
not constitute State aid. 

In this context, public financing of transport infrastructure may raise State aid issues 
at two levels, i.e. at the level of the users and at the level of the manager/operator of 
the  infrastructure  in  question.  The  Commission  is  of  the  view  that,  in  general,  no 
form of State aid within the meaning of Article 87(1) is present at the user's level if 
transport infrastructure is open to all potential users on equal and non-discriminatory 
terms. On the other hand, where public infrastructure is used to provide infrastructure 
for a particular user, giving it an unfair advantage over its competitors, the financing 
may fall within the prohibition laid down in Article 87(1). 

339 
340 
341 
342 
343 
344 
345 
346 

347 
348 
349 

COM(2007) 606. 
N 93/06 (OJ C 300, 12.12.2007, p. 22). 
C 22/07, not yet reported. 
Case C 5/07, not yet reported. 
Case C 58/07, not yet reported. 
N 265/06 and N 62/05 (OJ C 196, 24.8.2007, p. 3). 
Case T-246/99, not yet reported. 
Case  C  64/99  (ex  NN  68/99)  Italy,  State  aid  to  the  Gruppo  Tirrenia  di  Navigazione  companies  (OJ 
L 53, 26.2.2005, p. 29). 
N 60/06 (OJ C 196, 24.8.2007, p. 1). 
N 507/06 (OJ C 133, 15.6.2007, p. 4). 
N 510/05 (OJ C 238, 10.10.2007, p. 2). 

EN 

89 

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400. 

401. 

402. 

At the level  of  the  infrastructure manager/operator, there are generally no State aid 
elements  involved  in  the  financing  of  an  infrastructure  in  cases  when  the  port 
manager finances the infrastructure from its own resources, without intervention by 
the  public  authorities,  in  cases  where  the  infrastructure  cannot  be  exploited 
economically and its financing falls under the public policy  remit, and/or  when  the 
behaviour  of  port  managers/operators  is  guided  by  the  prospects  of  profitability  in 
the longer term. 

The  Commission  continued  to  enhance  maritime  safety  by  approving  an  Italian 
scheme aimed at expediting the withdrawal of single-hull vessels350. 

The Commission adopted favourable decisions as regards social aid for seafarers in 
Estonia351, Belgium352 and Sweden353. The Commission adopted a positive decision 
concerning innovation aid for ship-owners in the Netherlands354. The Court of First 
Instance  dismissed  as  inadmissible  for  want  of  a  legal  interest  in  bringing 
proceedings355  the  action  against  Commission  Decision  C  (2002) 4370  final  of  13 
November  2002  not  to  raise  objections  to  the  Danish  fiscal  measures  applicable  to 
seafarers on board vessels registered in the Danish international register356. 

403. 

The  Commission  also  continued  to  investigate  the  injections  of  finance  granted  by 
the French State to Société Nationale Maritime Corse-Méditerranée in the context of 
its  partial  privatisation  and  the  new  restructuring  plan,  with  a  view,  inter  alia,  to 
ensuring a level playing field in maritime cabotage. 

2.5. 

Aviation 

2.5.1.  Enforcement of Article 81 – SkyTeam airline alliance 

404. 

On  19  October  the  Commission  invited  interested  parties  to  comment  on  the 
commitments  proposed  by  eight  members  of  the  SkyTeam  airline  alliance,  namely 
Aeromexico,  Alitalia,  CSA  Czech  Airlines,  Delta  Air  Lines,  KLM,  Korean  Air, 
Northwest  Airlines  and  Air  France357.  These  commitments  are  designed  to  meet 
concerns  under  Article  81  EC  raised  by  the  Commission  in  its  statement  of 
objections of 15 June 2006358. The Commission is concerned that the cooperation in 
passenger air transport services between these SkyTeam members may have adverse 
effects  for  passengers  on  a  limited  number  of  routes  where  they  enjoy  a  strong 
market  position  and  where  barriers  to  entry  are  significant.  To  address  these 
concerns, the parties have offered commitments designed to facilitate new entry on 
the routes in question, mainly by offering to make slots available at appropriate EU 
airports for competitors and by sharing their frequent flyer programmes. 

350 
351 
352 
353 
354 
355 
356 
357 
358 

N 54/06 (OJ C 187, 10.8.2007, p. 1). 
N 65/07 (OJ C 307, 18.12.2007, p. 12). 
NN132/2000 and NN-73/03 (OJ C 238, 10.10.2007, p. 1). 
N 749/06 (OJ C 282, 24.11.2007, p. 2). 
N 225/06 (OJ C 196, 24.8.2007, p. 2). 
T-30/03, not yet reported. 
Appeal brought on 11 July 2007 in the ECJ, C-319/07 (OJ C 211, 8.9.2007, p. 27). 
IP 07/1558, 19.10.2007. 
MEMO/06/243, 19.6.2006. 

EN 

90 

   EN 

 
                                                 
405. 

Comments  on  the  proposed  commitments  were  received  by  19  November.  If  the 
Commission's  assessment  of  the  comments  supports  the  view  that  the  proposed 
commitments  were  to  resolve  the  competition  concerns,  the  Commission  would 
adopt a so-called "commitments decision" under Article 9 of Regulation 1/2003. 

2.5.2.  Applying merger rules to aviation 

406. 

407. 

On 27 June the Commission took a decision to prohibit the proposed takeover of Aer 
Lingus  by  Ryanair.  The  acquisition  would  have  combined  the  two  leading  airlines 
operating from  Ireland which compete vigorously against each other. Both Ryanair 
and Aer Lingus were by far the largest airlines offering short-haul flights to and from 
Ireland. Their position was particularly strong on routes to and from Dublin, where 
the merged entity would have accounted for around 80% of all intra-European traffic. 

Consistent  with  its  approach  in  previous  airline  merger  cases,  the  Commission 
analysed  the  effects  of  the  merger  on  the  individual  routes  on  which  the  two 
companies' activities overlapped. The Commission's extensive in-depth investigation 
of the case showed that Aer Lingus and Ryanair competed directly with each other 
on  35  routes  to  and  from  Ireland.  On  22  of  these  routes,  the  merger  would  have 
presented  customers  with  a  monopoly.  On  the  remaining  routes,  Aer  Lingus  and 
Ryanair  were  each  other's  closest  competitors,  and  the  merger  would  have 
significantly  reduced  consumer  choice,  with  the  merged  entity  holding  a  market 
share of between 60% and over 90%. Further, the market investigation revealed that 
competing  airlines  were  unlikely  to  enter  into  direct  competition  against  a  merged 
Ryanair/Aer Lingus in Ireland. This was not only because the merged entity would 
be able to operate from the very large bases of Ryanair and Aer Lingus in Ireland, 
having  access  to  customers  through  their  two  well-established  brands,  but  also 
because Ryanair has a reputation of aggressive retaliation against any entry attempt 
by competitors. The likelihood of entry was further reduced by peak-time congestion 
at  Dublin  airport  and  other  airports  on  overlapping  routes.  The  Commission  thus 
concluded  that  the  proposed  acquisition  would  have  impeded  effective  competition 
on  a  large  number  of  routes  to  and  from  Ireland,  directly  affecting  more  than 
14 million passengers every year. 

408.  While Ryanair offered various remedies to resolve the competition issues identified, 
the  Commission  concluded  that  the  scope  of  these  remedies  was  insufficient  to 
ensure  that  customers  would  not  be  harmed  by  the  transaction.  In  particular,  the 
limited  number  of  airport  "slots"  offered  was  unlikely  to  stimulate  market  entry  on 
the  scale  necessary  to  replace  the  competitive  pressure  currently  exercised  by  Aer 
Lingus. Moreover, the remedies contained a number of other formal and substantive 
shortcomings  and  were  thus  not  sufficient  to  remove  the  identified  impediment  to 
effective competition. 

409. 

The facts of this case differed from those of previous airline mergers. This was the 
first time the Commission assessed a proposed merger of the two main airlines in a 
single country, with both operating from the same "home" airport, namely Dublin. It 
was also the first time the Commission assessed a merger of two "low-cost" airlines, 
operating  on  a  "point-to-point"  basis.  Finally,  the  number  of  overlapping  routes 
compared with previous airline cases is unprecedented. 

EN 

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2.5.3. 

International Aviation Policy – Application of Regulation (EC) No 847/2004 

410. 

411. 

412. 

On 15 February and 31 May respectively, the Commission adopted two decisions359
under  Regulation  847/2004  on  the  negotiation  and  implementation  of  air  service 
agreements  between  Member  States  and  third  countries.  In  those  decisions,  the 
Commission  sets  out  the  criteria  according  to  which  it  assesses  the  agreements 
negotiated  by  Member  States  with  a  view  to  authorising  or  not  the  provisional 
application or conclusion of such agreements by Member States in line with EU law. 

It is settled case law that Article 10 EC, read in conjunction with Articles 81 and 82 
EC, requires Member States not to introduce or maintain in force measures, even of a 
legislative  or  regulatory  nature,  which  may  render  ineffective  the  competition  rules 
applicable  to  undertakings.  This  would  be  the  case  -  the  Court  of  Justice  has 
declared360 - if a Member State were to require or favour the adoption of agreements, 
decisions or concerted practices contrary to Article 81 or to reinforce their effects. A 
fair proportion of bilateral air service agreements concluded between Member States 
and  third  countries  require  or  encourage  air  carriers  designated  under  these 
agreements to agree on or coordinate tariffs and/or the capacity they operate. 

In  its  decisions  under  Regulation  847/2004,  the  Commission  found  that  such  air 
service  agreements  infringe  Articles  10  and  81  when  taken  in  conjunction. 
Accordingly,  the  Commission  allows  Member  States  to  provisionally  apply  or  to 
conclude  such  agreements,  inter  alia  on  condition  that  the  provisions  breaching 
Articles 10 and 81 are brought into line with EU law within 12 months of the date of 
notification of the decisions. 

2.5.4. 

International aviation policy – application of the Horizontal Mandate 

413. 

414. 

On  5  June  2003,  the  Council  adopted  a  decision  (the  Horizontal  Mandate) 
authorising  the  Commission  to  negotiate  Community-level  agreements  with  third 
countries to replace certain specific provisions agreed bilaterally by Member States. 
The  rationale  of 
these  Community-level  agreements,  known  as  Horizontal 
Agreements, is to bring the air service agreements between Member States and third 
countries into line with EU law. 

Four  Horizontal  Agreements  containing  provisions  on  EU  competition  law  were 
signed in 2007 between the Community, on the one hand, and Paraguay, Malaysia, 
Kyrgyzstan  and  United  Arab  Emirates  on  the  other.  These  Horizontal  Agreements 
ensure  that  the  55  air  service  agreements  between  Member  States  and  the  four 
countries concerned are brought fully into line with EU law, inter alia by resolving 
any infringements of Articles 10 and 81 EC in these air service agreements. A further 
seven Horizontal Agreements were initialled in 2007 with Panama, Jordan, Armenia, 
Mongolia,  Pakistan,  Nepal  and  Kazakhstan,  containing  similar  provisions  and 
referring  to  91  air  service  agreements  between  Member  States  and  those  seven 
countries. 

359 
360 

Commission decisions C(2007) 434, 15.2.2007 and C(2007) 2230, 31.5.2007. 
Case 267/86 Pascal Van Eycke v ASPA NV [1988] ECR 4769, paragraph 16. 

EN 

92 

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2.5.5.  Applying State Aid Rules to Air Transport 

415. 

416. 

417. 

418. 

During  2007,  the  Commission  adopted  several  decisions  in  the  air  transport  sector. 
This  was  partly  the  result  of  the  successful  dialogue  with  Member  States  aimed  at 
bringing  the  existing  aviation  support  measures  into  line  with  the  2005  Aviation 
State  aid  guidelines  by  June,  as  well  as  the  result  of  a  large  number  of  complaints 
made in particular about the relations between airport managers and airlines. 

The  Commission  approved  State  aid  to  investments  in  airport  infrastructure  at 
airports  in  Italy  (Tortolì-Arbatax  Airport  in  Sardinia361),  Poland  (Łódź,  Rzeszów 
Jasionka362)  United  Kingdom  (Newquay  Cornwall  Airport363)  and  Germany 
(Augsburg  Airfield364,  Memmingen  Regional  Airport365,  Kiel-Holtenau366)  where  it 
concluded that the support measures envisaged were proportionate and necessary to 
the  development  of  the  airports.  In  other  cases  the  Commission  considered  that 
financing  of  certain  airport  infrastructures  –  in  the  absence  of  a  transfer  of  State 
resources  -  were  not  to  be  considered  as  State  aid  (the  Rehabilitation  of  Tallinn 
Airport  Airside  project367  and  the  Upgrading  of  Tallinn  airport  passenger  terminal 
and plant health and veterinary border inspection point projects368). 

Another  category  of  support  measures  in  Italy  (Grosseto  airport369,  Puglia  regional 
airports370), Belgium (Antwerp Airport371) and Sweden (Norrköping372) was linked to 
start-up  aid  for  airlines  departing  from  smaller  regional  airports  where  such 
temporary support was intended to contribute to the development of the airport and 
of the whole region. 

The Commission also widened the scope of its inquiry relating to matters covered by 
the 2005 Aviation State aid guidelines. A number of formal investigation procedures 
were opened in respect of a number of airports. These cases involved the financing of 
the airports and business relationships with various airlines. The airports concerned 
were  those  of  Lübeck-Blankensee373,  Tampere-Pirkkala374,  Berlin-Schönefeld375, 
Alghero376, Dortmund377 and Pau-Bearn378. 

361 
362 
363 
364 
365 
366 
367 
368 
369 
370 
371 
372 
373 
374 
375 
376 
377 
378 

N 491/06 (OJ C 133, 15.6.2007, p. 4). 
NN 22/07 & NN 21/07 (OJ C 319, 29.12.2007, p. 3). 
N 303/07 (OJ C 319, 29.12.2007, p. 1). 
N 619/06 (OJ C 133, 15.6.2007, p. 7). 
N 620/06 (OJ C 133, 15.12.2007, p. 8). 
NN 57/07 (OJ C 307, 18.12.2007, p. 11). 
N379/06 (OJ C 196, 24.8.2007, p. 3). 
N380/06 (OJ C 196, 24.8.2007, p. 4). 
N 194/07 (OJ C 284, 27.11.2007, p. 2). 
N 55/07 (OJ C 133, 15.6.2007, p. 10). 
N 156/07 (OJ C 271, 14.11.2007, p. 2). 
N 791/06 (OJ C 227, 27.9.2007, p. 6). 
C 24/07 (OJ C 287, 29.11.2007, p. 27). 
C 25/07 (OJ C 244, 18.10.2007, p. 13). 
C 27/2007 (OJ C 257, 30.10.2007, p. 16). 
C 37/2007 (OJ C 12, 17.1.2008, p. 7). 
C 26/2007 (OJ C 217, 15.9.2007, p. 25). 
C 53/2007, not yet reported. 

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419. 

During 2007 the Commission completed its investigation into government assistance 
to a carrier in difficulty (Cyprus Airways379), concluding  that  the restructuring plan 
submitted  by  the  Cypriot  authorities  was  compatible  with  the  common  market.  In 
relation  to  the  long-running  case  of  Olympic  Airways/Airlines,  the  Commission 
opened  a  further  investigative  procedure  into  alleged  State  aid  granted  to  this 
company  since  2005380.  In  addition,  in  the  Olympic  Airways  dossier,  the  Court  of 
First Instance381 confirmed Commission Decision 2003/372/EC382 while annulling it 
partially  because  it  did  not  contain  an  adequate  statement  of  reasons  with  regard  to 
toleration of non-payment of charges due to Athens Airport and VAT on fuel and spare 
parts. 

2.5.6. 

International aviation policy – EU-US open aviation agreement 

420. 

421. 

422. 

On  30  April,  the  European  Union  and  the  United  States  of  America  signed  an 
agreement  establishing  an  open  aviation  area  between  the  EU  and  US383.  This 
agreement, which enters into force on 30 March 2008, allows for the consolidation of 
the  EU  aviation  sector  by  recognising  all  European  airlines  as  "Community  air 
carriers"  and  allowing  any  such  Community  air  carrier  to  fly  between  any  point  in 
the EU and any point in the US, without any restriction on pricing or capacity. 

This agreement replaces individual agreements between each Member State and the 
US,  which  usually  included  nationality  restrictions  on  airlines  and  which  the  Court 
had found to be in breach of the Treaty384. 

This  agreement  is  a  significant  step  towards  liberalising  international  aviation  and 
can  be  expected  to  foster  competition  on  these  markets.  It  also  includes  provisions 
for  the  strengthening  of  cooperation  between  the  Commission  and  the  US 
Department  of  Transportation  (DoT)  in  the  field  of  competition385.  In  this  context, 
the  Commission  is  committed  to  working  with  the  DoT  in  order  to  promote 
compatible regulatory approaches on these markets. 

H – POSTAL SERVICES 

1. 

OVERVIEW OF THE SECTOR 

423. 

Postal services in the EU generate about 0.9% of the gross domestic product (GDP). 
The postal sector is thus very important for the EU economy as a whole. Virtually all 
Universal Service Providers (“USPs”)  in the EU are public undertakings controlled 
by the Member States, with the notable exception of Germany and the Netherlands. 

424. 

Postal  services  are  an  essential  vehicle  of  communication  and  trade,  and  they  are 
vital  for  many  economic  and  social  activities.  Many  key  sectors,  such  as  e-

379 
380 
381 
382 
383 
384 
385 

C 10/06, not yet reported. 
C 61/07, not yet reported. 
T 68/03, not yet reported. 
C 19/02 (OJ L 132, 28.5.2003, p. 1). 
OJ L 134, 25.5.2007, p. 4. 
For instance Case C-466/98 European Commission v UK [2002]. 
In particular Annex 2 of the agreement, cf supra. 

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commerce, publishing, mail order, insurance, banking and advertising depend on the 
postal  infrastructure.  Postal  services  bring  social  benefits  which  cannot  always  be 
qualified in economic terms. Postal services are labour intensive and are also one of 
the  principal  public  employers  in  Europe.  Employment  in  the  sector  is  first  and 
foremost  provided  by  USPs  and  is  fairly  stable;  USPs  employ  about  1.71 million 
persons386.  However  the  number  of  jobs  related  to  postal  activities,  i.e.  that  are 
directly dependent on or result from the postal sector387, is roughly 5 million. 

425. 

Postal services are changing rapidly. The sector is at the crossroads of three dynamic 
business  areas  which  are  vital  to  the  European  economy,  namely  communications, 
advertising  and  transportation/logistics.  The  main  drivers  for  change  within  the 
postal  sector  include  demand  and  changing  customer  needs,  organisational  change, 
market opening, automation/new technologies and electronic substitution. 

426.  Most USPs in the EU are active in at least five separate service markets. All USPs 
provide  express  and  unaddressed  mail  services.  Similarly,  most  USPs  offer  mail 
preparation  services,  hybrid  mail  services,  e-mail  services  and  financial  services. 
Eight  public  postal  operators  (“PPOs”),  mainly  active  in  Member  States  with  high 
volume markets, are active in ten or more different mail related markets. To varying 
extents  these  activities  share  the  same  commercial  and  logistical  infrastructure, 
which  is  also  used  for  the  provision  of  services  under  monopoly  and/or  universal 
service obligations. 

427. 

The  objective  analysis  of  competitors'  market  shares  of  as  well  as  the  subjective 
perception of key players both confirm that, even in cases where the monopoly has 
been  completely  abolished  or  substantially  reduced,  real  competition  is  only  in  its 
infancy. Meaningful competition in the letter post market has yet to develop. In the 
letter post segment, most of which is subject to monopoly rights, profit margins can 
vary between 10% and 20%, while in the parcel and express segment profit margins 
are  between  2.5%  and  10%388.  Therefore,  despite  ongoing  diversification  of 
activities, monopolies are still the main source of cash flow and profits for USPs. 

2. 

POLICY DEVELOPMENTS 

2.1. 

Objectives of the Commission 

428. 

Postal services are an important component of the internal market for services389. In 
connection  with  the  relaunch  of  the  Lisbon  strategy  in  2005,  postal  services  were 
described as a source of economic growth and job creation390. The Commission also 
considered  postal  services  to  be  an  essential  element  for  ensuring  social  and 
territorial  cohesion  and  for  contributing  to  competitiveness391.  Postal  services  is 

386 
387 
388 

389 

390 
391 

WIK Consult, Main Developments in the Postal Sector (2002-2004), 2006. 
Pls Rambøll, Employment trends in the EU postal sector, October 2002. 
See  Section  4.4  of  Annex  to  Commission  Report  on  the  application  of  the  Postal  Directive 
(Directive 97/67/EC as amended by Directive 2002/39/EC), SEC (2006) 1293. 
Communication  from  the  Commission,  Internal  Market  Strategy  –  Priorities  2003-2006,  COM(2003) 
238 final, p. 13. 
Presidency Conclusions, Brussels European Council, 22/23 March 2005. 
Communication  from  the  Commission,  Common  Actions  for  Growth  and  Employment:  The 
Community Lisbon Programme, COM(2005) 330 final. 

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429. 

430. 

moreover one of the sectors where the Commission's review of the Lisbon strategy 
conducted in December recommends enhanced monitoring from a competition policy 
point of view392. 

The Postal Directive393 in force lays down a harmonised regulatory framework, the 
main  elements  of  which  are  the  minimum  characteristics  of  the  universal  postal 
service which is to be guaranteed by all Member States, quality standards for intra-
EU cross-border services, tariff principles  and principles governing transparency of 
accounts  of  universal  service  providers,  and  the  separation  of  regulatory  and 
operational functions in the postal sector and, especially, common  maximum limits 
for those services which may be reserved by a Member State to its universal service 
provider(s) to the extent necessary to ensure the maintenance of the universal service. 
These maximum limits have been progressively reduced in 1999, 2003 and 2006. 

The 2006 Commission Report on the application of the Postal Directive394 confirmed 
that  a  wide  range  of  high  quality  universal  postal  services  are  available  throughout 
the  Community,  in  compliance  with  the  requirements  of  the  Postal  Directive.  The 
guiding  principles  of  the  Commission's  policy  towards  this  sector  are  the 
preservation  of  this  acquis  and,  at  the  same  time,  the  adaptation  to  a  more 
competitive and customer-focused environment. This policy has thus been geared, on 
the one hand, towards a stepwise reduction of the services on which monopoly rights 
are granted to USPs and, on the other hand, towards the preservation of competition 
in liberalised areas of the postal market so as to avoid a de facto re-monopolisation 
by USPs. 

2.2. 

Initiatives of the Commission 

431. 

On  18  October  2006,  the  Commission  put  forward  a  proposal  to  open  EU  postal 
markets fully to competition by 2009, in line with the indicative target date set out in 
the  current  Postal  Directive.  In  2007,  the  Commission  actively  negotiated  its 
proposal  under  the  co-decision  procedure  (Article  251  EC).  Following  Parliament's 
first reading of, the Council reached a political agreement in the Telecommunications 
and  Energy  Council  in  Luxembourg  on  1  October.  On  the  basis  of  this  agreement, 
the common position was formally adopted by the Council on 8 November. Since the 
lead  committee  in  the  European  Parliament  (Transport  and  Tourism)  supported  the 
common  position  without  any  amendments,  the  Directive  should  be  adopted  soon. 
Although the starting date for market opening laid down in the Common Position is 
2011 and, for certain Member States, 2013, which is later than the 2009 target date 
set in the original proposal, the Commission believes that the Common Position is a 
compromise that is acceptable for all. It achieves what the Commission was aiming 
for, namely unconditional market opening while safeguarding the universal service. 

392 

393 

394 

Proposal for a Community Lisbon Programme 2008 – 2010 Brussels, 11.12.2007 COM(2007) 804 final. 
See in particular Objective 5: The Community will strengthen the single market, increase competition in 
services, and take further steps to integrate the financial services market. 
Directive 97/67/EC of the European Parliament and Council of 15 December 1997 on common rules for 
the development of the internal market of Community postal services and the improvement of quality of 
service (OJ L 15, 21.1.1998, p. 14), as amended by Directive 2002/39 of the European Parliament and 
of  the  Council  of  10  June  2002  amending  Directive  97/67/EC  with  regard  to  the  further  opening  to 
competition of Community postal services (OJ L 176, 5.7.2002, p. 21). 
COM(2006)596 final. Previous reports were COM(2005) 102 final and COM(2002) 632 final. 

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432. 

433. 

It  also  incorporates  provisions  that  guarantee  that  market  opening  will  work  and 
monopoly is not introduced "by the back door". 

Regarding  the  application  of  State  aid  rules  to  the  postal  sector  in  2007,  the 
Commission adopted several decisions with a view to ensuring that postal operators 
and their subsidiaries do not enjoy unduly granted advantages which could neutralise 
the effects of the on-going liberalisation. 

In particular, the Commission thoroughly examined compensations for public service 
obligation  granted  to  postal  operators  to  ensure  that  these  compensations  do  not 
exceed the actual costs of discharging the public service obligations and do not cross- 
subsidise commercial activities. 

434.  Where  compensation  for  a  service  of  general  economic  interest  (SGEI)  does  not 
fulfil  the  conditions  set  out  in  the  Altmark395  case  law,  and  therefore  has  to  be 
characterised as State aid, it can nevertheless be declared compatible with the Treaty 
according to Art 86(2)396. The conditions under which compensation for SGEI can be 
declared  compatible  were  clarified  by  the  2005  Community  Framework397.  The 
Framework  requires  in  particular  that  the  compensation  does  not  exceed  the  costs 
incurred  in  discharging  the  public  service  obligations.  Where  the  undertaking  also 
carries out activities falling outside the scope of the SGEI, only the costs associated 
with the SGEI may be taken into consideration. In the light of the Chronopost398 case 
law, the Commission has gone further into the analysis of the methods applied by the 
postal operators to allocate costs between universal services and other services and to 
calculate the financial burden of the public tasks. 

435. 

On 7 March, as the requirements of the 2005 Community Framework were satisfied, 
the  Commission  authorised  a  proposed  GBP  313 million  funding  by  the  UK 
Government to allow Post Office Ltd to continue to provide public services through 
the  network  of  post  offices  in  the  financial  year  beginning  1  April399.  On  29 
November,  the  Commission  authorised  GBP  634 million  for  the  following  three 
years  starting  1  April  2008,  as  well  as  the  continuation,  over  the  same  period,  of 
existing loan facilities which allow the network to fund the provision of cash services 
at post office counters400. 

436. 

On  12  September,  the  Commission  decided  to  open  a  formal  investigation  against 
Germany to assess whether Deutsche Post AG was overcompensated for the carrying 

395 
396 

397 

398 
399 
400 

Case C-280/00, Altmark Trans GmbH [2003] ECR I-7747. 
Under  Article  86(2),  undertakings  entrusted  with  a  SGEI  can  escape  the  application  of  the  rules  on 
competition if the application of these rules obstructs the performance, in law or in fact, of the particular 
tasks assigned to them. 
Community  Framework  for  State  aid  in  the  form  of  public  service  compensation  (OJ  C  297, 
29.11.2005, p. 4) 
Joined cases C-83/01 P, C 93/01 P and C 94/01 P, Chronopost SA [2003] ECR I-6993. 
Case N 822/2006, Debt payment funding to Post Office Limited (OJ C 80,13.4.2007, p. 5) 
Case  N  388/2007,  Post  Office  Ltd:  Transformation.  The  decision  is  available  on  DG  Competition's 
website http://ec.europa.eu/comm/competition/state_aid/register/ii/ and is to be published in the OJ. 

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437. 

438. 

439. 

out  of  its  universal  service  obligations401  in  addition  to  the  aid  already  found  to  be 
incompatible in a 2002 Commission decision402. 

In  addition  to  assessing  the  compatibility  of  compensations  granted  to  postal 
operators for providing SGEIs, the Commission  examined whether postal operators 
were enjoying other advantages. 

The  Commission paid particular attention to the unlimited State guarantees granted 
to some postal operators. Such guarantees usually result in lower financing costs and 
distort  competition.  On  25  April,  the  Commission  formally  took  note  of  the 
agreement by Poland to put an end to the unlimited State guarantee enjoyed by the 
Polish  Post  Office403.  On  29  November,  the  Commission  decided  to  launch  an  in-
depth  investigation  to  examine  whether  France's  la  Poste,  as  a  public  law  entity, 
enjoys an unlimited State guarantee404. 

The Commission also examined public aid to finance La Poste's pension scheme with 
a  view  to  ensuring  that  such  aid  does  not  exceed  what  is  necessary  to  put  the 
beneficiary  of  the  aid  on  an  equal  footing  with  its  competitors  as  regards  social 
security  contributions  and  tax.  On  10  October,  the  Commission  gave  conditional 
authorisation  for  public  aid  to  finance  La  Poste's  pensions  for  civil  servants  since, 
following  the  reform  of  the  pensions,  the  social  security  contributions  and  tax  paid 
by La Poste will be equivalent to those paid by its competitors405. 

440. 

On  21  February,  the  Commission  decided  to  open  an  in-depth  investigation  into  a 
series of funding measures taken by the United Kingdom in favour of Royal Mail406. 
The Commission is examining whether these measures constitute State subsidies or 
whether they meet "market investor" conditions407. 

III – The European Competition Network and cooperation with 
National Courts 

A – GENERAL OVERVIEW 

441. 

2007 was the third full year of implementation of the enforcement system set up by 
Regulation  1/2003.  It  saw  a  further  strengthening  of  cooperation  between  the 

401 

402 

403 
404 

405 

406 

407 

Case  C  36/2007,  Complaint  against  the  German  State  for  unlawful  state  aid  to  Deutsche  Post  (OJ  C 
245, 19.10.2007 p.21)). 
Commission  decision  of  19  June 2002  on measures  implemented  by  Germany  for  Deutsche  Post  AG 
(OJ L 247, 14.9.2002, p.27) 
Case E12/2005, Unlimited State guarantee in favour of Poczta Polska (OJ C 284, 27.11.2007). 
Case  C  56/2007  (ex  E15/2005),  Garantie  illimitée  de  l'Etat  en  faveur  de  La  Poste.  The  decision  is 
available on DG Competition's website http://ec.europa.eu/comm/competition/state_aid/register/ii/ 
Case  C  43/2006,  Projet  de  réforme  du  financement  des  retraites  des  fonctionnaires  de  La  Poste 
française. 
website 
decision 
http://ec.europa.eu/comm/competition/state_aid/register/ 
Case  C  7/2007  (ex  NN  82/2006  and  NN  83/2006),  Alleged  aid  in  favour  of  Royal  Mail  (OJ  C  91, 
26.4.2007, p. 34). 
Provision of funding on  terms  which  would  be  acceptable  to  a  private  investor operating  in  a  market 
economy is not considered to be State aid. 

Competition's 

available 

The 

DG 

on 

is 

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members of the European Competition Network (ECN), i.e. the EU Member States' 
National Competition Authorities (NCAs) and the Commission. The ECN continued 
to  function  well  throughout  the  year  under  the  mechanisms  created  by  Regulation 
1/2003 to ensure the efficient and consistent enforcement of Articles 81 and 82. 

1. 

COOPERATION ON POLICY ISSUES 

442. 

443. 

444. 

445. 

446. 

The actual intensity, scope and potential for cooperation within the ECN go beyond 
the legal obligations set out in Regulation 1/2003. The ECN provides a platform for 
EU  competition  authorities  to  constructively  coordinate  enforcement  action,  ensure 
upstream consistency and discuss policy issues of common interest. During 2007 the 
basic structure of the different ECN fora was maintained as follows. 

First,  the  Director-General  of  DG  Competition  and  the  heads  of  all  NCAs  met  for 
their  annual  meeting  in  the  ECN  context  to  discuss  important  competition  policy 
issues. 

Second, the NCAs and the Commission met on four occasions in so-called "plenary 
meetings",  during  which  general  issues  of  common  interest  relating  to  antitrust 
policy  were  debated  and  experiences  and  know-how  were  exchanged.  Such 
discussions and exchanges further embed a common competition culture within the 
ECN. 

A key area of policy discussed in 2007 was the ability of NCAs, in their application 
of  Articles  81  and  82  EC,  to  disapply  State  measures  that  breach  Article  10  in 
combination  with  the  competition  rules  of  the  Treaty  addressed  to  undertakings 
(following  the  CIF  ruling408  by  the  European  Court  of  Justice).  Typically,  cases 
undertaken  by  the  NCAs  on  this  basis  are  complex,  and  a  debate  was  held  on  the 
conditions  that  have  to  be  met  for  the  disapplication  of  anti-competitive  State 
measures.  These  exchanges  in  the  network  enhance  the  ability  of  NCAs  to  tackle 
appropriate  cases  that  involve  the  possible  disapplication  of  State  measures.  The 
Plenary  also discussed  cartel-related issues, ex officio investigations and the use of 
commitment decisions within the Network. 

Third,  three  working  groups  discussed  specific  issues.  One  working  group  covered 
cooperation  issues  within  the  Network  more  generally,  such  as  cooperation  in  the 
context of sector inquiries and requests for assistance from NCAs pursuant to Article 
22 of Regulation 1/2003. A second working group was dedicated to issues relating to 
abuse  of  a  dominant  position  and  a  third  working  group,  consisting  of  chief 
competition economists from the agencies within the ECN, addressed issues such as 
the  competition  implications  of  information  sharing  and  the  ex-post  evaluation  of 
competition policy enforcement. These working groups provided an excellent forum 
for sharing experiences on concrete issues and for developing best practices. 

408 

Case  C-198/01  Consorzio  Industrie  Fiammiferi  (CIF)  and  Autorità  Garante  della  Concorrenza  e  del 
Mercato [2003] ECR I-8055. 

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447. 

1.1. 

448. 

449. 

450. 

Finally,  15  ECN  sectoral  subgroups409  dedicated  to  particular  sectors  addressed 
specific  issues  and  engaged  in  a  useful  exchange  of  experience  and  best  practices. 
The sectoral subgroups ensure good upstream coordination and engender a common 
approach  and  broad  consistency  in  the  application  of  EU  competition  law,  going 
beyond  individual  cases.  For  example,  the  Energy  subgroup  has  been  very 
productive, most notably with regard to remedies which were debated in detail by the 
heads of NCAs and national energy regulators. 

Further  convergence  of  national  laws  and  instruments  in  the  context  of 
enforcement of Regulation 1/2003 by NCAs 

The  year  2007  saw  the  continuation  of  the  'convergence'  process  observed  in  the 
context of Regulation 1/2003. Over and above the legal obligations arising from the 
implementation of the Regulation, there is a trend towards greater approximation of 
national procedural laws and policies. 

A  prime  example  of  this  trend  towards  further  convergence  is  the  ECN  Model 
Leniency  Programme410.  The  Programme,  which  was  developed  within  the  ECN 
working  group  on  leniency  during  2006,  has  already  achieved  very  encouraging 
results  in  the  course  of  the  first  year  following  its  endorsement.  Seven  Member 
States  (Belgium,  Denmark,  France,  Italy,  the  Netherlands,  Portugal  and  Czech 
Republic)  have  already  revised  their  existing  programmes  or  adopted  new  ones  to 
align with the Model Programme. In addition, the following twelve Member States 
are currently in the process of adopting or revising leniency programmes: Bulgaria, 
Cyprus, Greece, Finland, Hungary, Latvia, Luxembourg, Poland, Romania, Sweden, 
Estonia  and  Spain.  Today,  all  Member  States,  except  for  Slovenia  and  Malta,  have 
adopted  leniency  programmes  or  are  in  the  process  of  adopting  them,  compared  to 
only  four  Member  States  operating  such  programmes  in  2002.  A  full  evaluation  of 
the implementation of the Model Programme is scheduled for the end of 2008. 

Currently,  all  but  four  Member  States  have  abolished  (or  are  in  the  process  of 
abolishing) their notification system. New, often largely convergent, instruments are 
being used increasingly in practice. For example, a large number of NCAs now have 
the  power  to  adopt  commitment  decisions  in  line  with  Article  9  of  Regulation 
1/2003. As a consequence, a significant increase in such decisions was observed in 
2007  as  a  proportion  of  the  decisions  communicated  to  the  Commission  under 
Article 11(4) of Regulation 1/2003 (29 commitment decisions in 2007 as against 7 in 
2006). 

1.2. 

Cooperation in individual cases 

451. 

Cooperation between the ECN members in individual cases is organised around two 
principal  obligations  on  the  part  of  the  NCAs,  namely  to  inform  the  Commission 
when  new  cases  are  opened  (Article  11(3)  of  the  Regulation)  and  before  the  final 
decision  is  taken  (Article  11(4)  of  the  Regulation).  The  first  requirement  of 
informing the Commission and the network facilitates the swift reallocation of cases 

409 

410 

Banking, Securities, Insurance, Food, Pharmaceuticals, Professional services, Healthcare, Environment, 
Energy, Railways, Maritime Transport, Motor vehicles, Telecoms, Media and Sports. 
The  ECN  Model  Programme  is  available  at  http://ec.europa.eu/comm/competition/ecn/index_en.html 
together with a list of frequently asked questions (MEMO/06/356, 29.9.2006). 

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on  the  few  occasions  where  this  appears  necessary,  and  promotes  enhanced  and 
effective  enforcement,  while  the  second  requirement  plays  an  important  role  in 
ensuring the consistent application of EU law. 

1.2.1.  Case allocation 

452. 

The  Commission  was  informed  of  approximately  140  new  case  investigations 
launched  by  NCAs  in  2007.  Amongst  the  new  cases  about  which  the  Commission 
was informed under Article 11(3) of the Regulation, approximately 45% concerned 
the application of Article 81 EC, 31.5% concerned the application of Article 82 EC 
and  23.5%  concerned  the  application  of  both  Articles  81  and  82  EC.  Clusters  of 
cases were observed, inter alia, in the energy, food and media sectors. 

453.  With  regard  to  work-sharing  within  the  Network,  the  flexible  and  pragmatic 
approach introduced by the Regulation and the Network Notice continued to function 
very  well  in  practice.  In  2007,  as  in  previous  years,  there  were  very  few  instances 
where case-allocation discussions took place, and even fewer occasions where a case 
changed hands. The situations where work-sharing plays a role typically arise when a 
complainant or a leniency applicant chooses to contact both the Commission and one 
or  more  NCAs.  In  2007,  a  small  number  of  complaints  were  re-allocated  from  the 
Commission  to  those  NCAs  that  were  willing  to  follow  up  the  matters  raised. 
Furthermore, in a limited number of instances, the Commission and NCAs agreed on 
a way of dividing work on a case-by-case basis. 

454. 

The flexible approach of the Regulation and the Notice was confirmed by the Court 
of First Instance in its judgments in cases T-339/04 and 340/04 France Telecom v. 
Commission411.  The  Court  ruled  for  the  first  time  on  questions  of  work  sharing 
between the Commission and a NCA in the ECN. In essence, the CFI confirmed that 
the Regulation has not in any way established a division of competences that could 
preclude  the  Commission  from  investigating  a  case  that  a  NCA  is  already  dealing 
with. Nor can this be derived from the Joint Statement412, the Network Notice413 or 
general principles of Community law, including subsidiarity. 

1.2.2.  Coherent application of the rules 

455. 

456. 

In 2007, the Commission services reviewed or advised on a very significant number 
of cases originating from NCAs, following up on information provided under Article 
11(4) or upon informal request. These cases related to a broad range of infringements 
in different sectors of the economy. 

Cases  dealt  with  by  NCAs  are  often  related  to  the  Commission's  own  enforcement 
action.  For  example,  the  French  competition  authority  accepted  commitments  from 
Citroën concerning competition concerns that were closely related to those addressed 
by the Commission in its decisions involving Toyota, Fiat, DaimlerChrysler and GM. 
Similarly,  both  the  Commission  and  a  number  of  NCAs  have  investigated 
multilateral interchange fees in different contexts. These types of cases call for very 

411 
412 

413 

Judgment of 8 March 2007, not yet reported. 
Joint Statement of the Council and the Commission on the functioning of the Network available from 
the Council register at: http://register.consilium.eu.int (document No 15435/02 ADD 1). 
OJ C 101, 27.4.2004, p. 43. 

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457. 

close  cooperation  in  order  to  achieve  maximum  consistency,  for  the  benefit  of 
undertakings  that  want  a  level  playing  field.  It  is  important  to  underline,  however, 
that  the  Network  aims  at  coherence,  not  absolute  uniformity.  Ensuring  an  overall 
level  playing  field  for  European  business  is  achieved  when  the  same  type  of 
arguments and considerations govern enforcement action by ECN members. Market-
specific  or  case-specific  elements  may  result  in  a  different  outcome  for  cases  that 
might  initially  appear  to  be  the  same.  Different  ECN  members  may  also  opt  for 
different instruments – such as prohibition or commitment decisions – to address the 
concern identified. 

For example, in 2007 the German NCA informed the Commission of its commitment 
decisions  in  respect  of  long-term  gas  supply  agreements.  These  decisions  are 
modelled  on  the  E.ON  Ruhrgas  decision  of  the  German  NCA  which,  in  essence, 
prohibited  E.ON  Ruhrgas  from  continuing  the  existing  gas  supply  agreements  and 
from concluding new agreements with regional and local gas resellers, if they exceed 
a two-year duration for a capacity coverage of more than 80% of the resellers' needs 
and if they exceed a four-year duration for a capacity coverage between 50 and 80%. 
These German gas cases may invite comparison with the Commission's commitment 
decision  in  the  Distrigas  case  (see  I.A.2.3.2.  above).  From  the  Commission's 
perspective,  the  approach  adopted  in  both  instances  is  an  example  of  coherent 
application  that  follows  common  principles  without  seeking  absolute  uniformity  of 
outcome. Both the Commission and the NCA looked at the overall foreclosure effect 
of  the  agreements  under  scrutiny,  and  a  major  element  of  their  analysis  was  the 
consideration of the market coverage of such agreements. The outcome in both cases 
is  adapted  to  the  specific  features  of  the  undertakings  and  markets  concerned  and 
takes  account  of  the  ability  of  the  undertakings  concerned  to  implement  the 
commitments. 

458. 

To date, the Commission has not made use of the possibility of relieving an NCA of 
its competence in a given case by initiating proceedings under Article 11(6). 

2. 

APPLICATION  OF  EU  COMPETITION  RULES  BY  NATIONAL  COURTS  IN  THE  EU: 
REPORT ON THE IMPLEMENTATION OF ARTICLE 15 OF REGULATION 1/2003 

2.1. 

Assistance in the form of information or in the form of an opinion 

459. 

Article 15(1) of Regulation 1/2003 allows national judges to ask the Commission for 
information  in  its  possession  or  for  an  opinion  on  questions  concerning  the 
application of the EU competition rules. 

460. 

In  2007,  the  Commission  issued  three  opinions:  two  in  reply  to  requests  from 
Swedish courts and one to a Spanish court. 

2.1.1.  The opinions requested by Swedish courts 

461. 

First,  the  Swedish  Market  Court  (Marknadsdomstolen)  submitted  a  request  for  an 
opinion  at  the  end  of  2006.  This  request  related  to:  (i)  the  notion  of  "undertaking" 
under the Swedish Competition Act (which is to be interpreted in the light of Articles 
81 and 82 EC) and (ii) the notion of "legitimate interest" for public authorities under 
Article  7(2)  of  Regulation  1/2003.  The  case  concerned  two  municipalities  in  the 

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northern  part  of  Sweden  that  had  entered  into  an  agreement  with  the  dominant 
electricity  provider,  Ekfors,  for  the  provision  of  network  services  and  lighting  for 
roads and other public places. Following a disagreement about the level of the fees, 
Ekfors decided  to discontinue its services until the disagreement had been resolved 
and the municipalities were left without lighting. Ekfors argued in this context that 
the  municipalities  could  not  be  regarded  as  "undertakings"  and  therefore  had  no 
"legitimate interest" to complain. 

The  Commission's  opinion  outlined  the  considerations  that  should  be  taken  into 
account in order to assess whether an entity constitutes an undertaking. The opinion, 
inter  alia,  outlined  criteria  to  distinguish  (non-economic)  public  authority  activity 
from  economic  activity  and  explained  that  the  same  entity  can  constitute  an 
undertaking  with  respect  to  one  activity  while  not  constituting  an  undertaking  with 
respect  to  another  activity.  As  regards  the  notion  of  "legitimate  interest"  of  public 
authorities  under  Article  7(2)  of  Regulation  1/2003,  the  opinion  referred  to  the 
relevant paragraphs in the Commission Notice on the handling of complaints. 

Secondly, further to a request received in 2006, the Commission provided an opinion 
to  the  Swedish  Supreme  Court  (Högsta  Domstolen).  The  case  before  this  court 
concerned, inter alia, whether the port of Ystad had abused its dominant position as 
the provider of port services by charging excessive fees for the services used by the 
Danish stated-owned ferry operator, Bornholms Traffiken. 

The  request  for  an  opinion  related  to  the  definition  of  the  relevant  market.  The 
Commission's  opinion  clarified  the  criteria  and  the  evidence  on  which  it  relied  to 
reach a decision on the relevant market in a case such as the one pending before the 
Högsta  Domstolen.  The  opinion  referred,  in  particular,  to  the  Commission's  Notice 
on the definition of relevant market and to the case law of the Court of Justice414 and 
its own decision practice415. 

462. 

463. 

464. 

2.1.2.  The opinion requested by a Spanish court 

465. 

A request for an opinion was submitted in 2006 in the context of litigation between a 
supplier  on  the  Spanish  wholesale  market  for  petroleum  products  and  a  service 
station  operator.  The  Spanish  court  (Juzgado  de  lo  Mercantil  n°2  de  Madrid) 
requested the Commission's opinion on the definition of the relevant market, whether 
such a contract between a wholesaler and a service station operator could affect inter-
State trade and lead to a restriction of competition, which factors should be taken into 
account when assessing market foreclosure, and whether Community law allows the 
declaration of nullity of a contract after it has expired. 

466. 

The opinion set out the criteria and the evidence on which the Commission relies to 
reach  a  decision  on  the  relevant  market  in  a  case  such  as  the  one  pending,  in 

414 

415 

Cases C-179/90 Merci convenzionali porto di Genova Spa. v Siderurgica Gabrielli SpA [1991] ECR I-
5889, at para. 15, Case C-18/93 Corsica Ferries Italia v Corpo dei piloti del porto di Genova (Corsica 
Ferries II) [1994] ECR I-1783, at para. 41. 
Euro-Port  A/s  v  Denmark  (Port  of  Rødby)  (OJ  L  55,  26.2.1994,  p.  52  at  para.  7),  Sea  Containers  v 
Stena Sealink (OJ L 15, 18.1.1994, p. 8, at paras 12 and 65) and Scandlines v Port of Helsingborg and 
Sundbusserne v Port of Helsingborg, Commission Decision of 23 July 2004 which is published on the 
Commission's website (http://ec/europa/eu/comm/competition/antitrust/cases/decisions/36579/en.pdf). 

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particular by reference to the Commission's Notice on the relevant market and to its 
decision in Repsol416. It underlined that the issue of whether there is a restriction of 
competition  has  be  assessed  in  the  context  of  the  network  of  such  contracts 
concluded  by  the  wholesaler  and  that  the  effect  on  trade  must  be  assessed 
accordingly. In this context, reference was made to the Commission's Notice on the 
effect  on  trade  and  the  Commission's  decision  in  Repsol.  The  opinion  further 
explained how to assess whether the market is foreclosed in line with the European 
Court's  case  law  (Delimitis)  and  Commission  case  practice  (Repsol).  Finally,  the 
opinion confirmed that the principle of automatic nullity is absolute and is capable of 
having a bearing on all the effects, either past or future, of the agreement or decision 
concerned, including giving rise to retroactive effect417. 

2.2. 

Judgments of national courts 

467. 

Article 15(2) of Regulation 1/2003 requires the EU Member States to forward to the 
Commission  a  copy  of  any  written  judgment  issued  by  national  courts  deciding  on 
the application of Articles 81 or 82 EC. The Commission received copies of some 50 
judgments handed down in 2007, which were posted on DG Competition's website in 
so far as the transmitting authority did not classify them as confidential (confidential 
judgments are merely listed). 

2.3. 

Amicus curiae intervention under Article 15(3) of Regulation 1/2003 

468. 

469. 

470. 

Article 15(3) of Regulation 1/2003 provides that, where the coherent application of 
Articles 81 or 82 EC so requires, the Commission, acting on its own initiative, may 
submit written observations to courts of the Member States, and may also make oral 
observations with the permission of the court in question. 

The Commission decided to intervene as amicus curiae pursuant to Article 15(3) of 
Regulation  1/2003  in  a  case  in  the  Netherlands  concerning  the  tax  deductibility  of 
Commission competition fines. In the initial judgment of 22 May 2006 on this issue, 
the Dutch Rechtbank van Haarlem (Court of First Instance in Haarlem, particularly 
in tax matters) ruled that fines imposed by the Commission for infringement of EC 
competition  rules  are  deductible  from  income  tax.  The  court  found  that,  although 
Dutch  law  provides  that  administrative  fines  cannot  be  deducted  from  income  tax, 
fines  imposed  by  the  Commission  cannot  be  understood  according  to  the  national 
definition  of  a  "fine"  as,  unlike  fines  imposed  under  Dutch  law,  they  consist  of 
punitive elements and elements intended to neutralise illegal gains. 

An  appeal  against  this  judgment  was  made  to  the  Gerechtshof  van  Amsterdam 
(Belastingkamer)  (Court  of  Appeal  of  Amsterdam,  tax  chamber).  The  Commission 
moved to intervene as amicus curiae to highlight that Community fines for breach of 
the  EC  competition  rules  are  not  intended  to  skim  off  illegal  gains,  and  that  the 
principle of equivalence would be breached if fines imposed under EC competition 
law  could  be  deducted,  unlike  fines  under  national  law.  Moreover,  it  would  go 
against  the  principle  of  effectiveness,  because  the  impact  of  Commission  decisions 

416 

417 

The complete decision is available on the Commission's website: 
http://ec.europa.eu/comm/competition/antitrust/cases/index/by_nr_76.html#i38_348 
Case 48/72 Brasserie de Haecht II [1973] ECR 77, para. 26 and C-453/99 Courage v Crehan [2001] 
ECR I-6297, para. 22. 

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would necessarily be reduced if companies that were fined for violation of Articles 
81 and 82 were able (at least partially) to deduct the amount  from national  income 
tax. 

471. 

In an interim judgment of 12 September, the Gerechtshof van Amsterdam decided to 
ask for a preliminary ruling to the European Court of Justice under Article 234 EC 
regarding  the  possibility  for  the  Commission  to  intervene  on  the  basis  of  Article 
15(3)  in  such  national  (tax)  litigation.  The  Dutch  court  essentially  considers  that 
there is a reasonable doubt as to whether the Commission can submit observations in 
cases other than 'competition cases in the strict sense'. 

2.4. 

Financing the training of national judges in EU competition law 

472. 

Continuous training and education of national judges in EU competition law is very 
important  in  order  to  ensure  both  effective  and  coherent  application  of  those  rules. 
Since 2002, the Commission has co-financed 35 training projects, which by the end 
of 2007 had provided training for approximately 3 500 judges. A new Legal Base has 
been  adopted  on  25  September  (Decision  of  the  European  Parliament  and  the 
Council  No.  1149/2007/EC,  establishing  for  the  period  2007-2013  the  specific 
programme  "Civil  Justice").  The  corresponding  Work  Programme  2007  allows  for 
action  grants  to  support  projects  aimed  at  promoting  judicial  cooperation  between, 
and the training of, national judges in the context of the implementation of Articles 
81  and  82  EC  including  the  issue  of  private  enforcement,  with  the  aim  of 
contributing to the development and implementation of European competition policy 
and Community cooperation measures in the field of competition in order to ensure 
the  consistency  of  Community  competition  policy.  The  budget  foreseen  for  these 
action grants in 2007 is EUR 800 000. A call for proposals has been launched at the 
end of 2007. 

IV – International activities 

473. 

In an increasingly globalised world economy, competition policy must also adopt a 
global  outlook.  DG  Competition  responds  to  this  challenge  by  reinforcing  and 
extending  its  relations  with  partners  all  over  the  world  in  both  bilateral  and 
multilateral  fora.  Commissioner  Kroes  attaches  the  highest  importance  to  effective 
international  co-operation  in  the  area  of  competition.  Her  bilateral  meetings  with 
counterparts  in  the  US,  Japan  and  China,  as  well  as  her  participation  in  the  ICN 
annual conference, testify to this commitment. 

A – ENLARGEMENT, WESTERN BALKANS AND NEIGHBOURHOOD POLICY 

474. 

In  the  context  of  Enlargement,  candidate  countries  must  fulfil  a  number  of 
requirements  in  the  field  of  competition  as  a  condition  for  joining  the  European 
Union. Candidate countries must adopt national legislation compatible with the EU 
acquis.  They  must  also  put  in  place  the  necessary  administrative  capacity  and 
demonstrate  a  credible  enforcement  record.  DG  Competition  provides  technical 
assistance and support to help the candidate countries fulfil these requirements and it 
continuously  monitors  the  extent  to  which  the  candidate  countries  are  prepared  for 
accession. 

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475. 

476. 

477. 

During 2007, cooperation with Croatia and Turkey was particularly close. These two 
candidate countries must fulfil "opening benchmarks" before accession negotiations 
on  the  competition  chapter  can  start.  Issues  such  as  shipbuilding  and  steel 
restructuring were high on the agenda for Croatia, while Turkey has yet to introduce 
a system for the control and monitoring of State aid. 

DG  Competition  assisted  the  Western  Balkan  countries  in  further  aligning  their 
competition rules with EU law. This included, among others, help in drafting laws on 
competition and State aid and advice on setting up the necessary institutions for the 
enforcement  of  these  rules.  DG  Competition  was  involved  in  negotiating  the 
competition provisions in the Stabilisation and Association Agreements with Serbia, 
Montenegro and Bosnia and Herzegovina. 

In  the  framework  of  the  Neighbourhood  Policy,  DG  Competition  monitored  the 
implementation  of  the  competition-related  priorities  in  the  bilateral  Action  Plans 
agreed between the EU and ENP countries, which set out an agenda of political and 
economic reforms in the short and medium term. 

B – BILATERAL CO-OPERATION 

478. 

The  Commission  cooperates  with  numerous  competition  authorities  on  a  bilateral 
basis  and  in  particular  with  the  authorities  of  the  European  Union's  major  trading 
partners. The European Union has entered into dedicated cooperation agreements in 
competition matters with the United States, Canada and Japan. 

1. 

AGREEMENTS WITH THE USA, CANADA AND JAPAN 

479. 

480. 

As  in  previous  years,  there  was  very  close  co-operation  with  the  United  States  of 
America. Based on two dedicated competition cooperation agreements418, there were 
frequent  contacts  between  DG  Competition  and  the  Antitrust  Division  of  the  US 
Department  of  Justice  (DoJ)  and  the  US  Federal  Trade  Commission  (FTC).  These 
contacts ranged from cooperation in individual cases to more general matters relating 
to  competition  policy.  Numerous  meetings  and  video-  or  phone-conferences  took 
place to discuss issues such as cooperation in cartel investigations, abuse of dominant 
positions or the application of competition rules in particular sectors. 

In  case-related  contacts,  case  teams  usually  update  each  other  on  the  status  of  the 
investigations  (subject  to  the  limits  laid  down  in  the  above-mentioned  bilateral 
agreements). Merger control, in particular, calls for effective co-ordination with the 
DoJ  and  the  FTC.  The  2002  EU-US  Best  Practices  on  Cooperation  in  Reviewing 
Mergers419  provide  a  useful  framework  for  cooperation,  especially  by  indicating 
critical  points  in  the procedure  where cooperation could be  particularly useful. The 
Owens Corning/Saint Gobain and Schering-Plough/AkzoNobel cases can be cited as 
examples of fruitful cooperation between the EU and US agencies. 

418 

419 

1991 EU-US Competition Cooperation Agreement (OJ L 95, 27.4.1995, pp. 47 and 50) and 1998 
positive comity agreement (OJ L 173, 18.6.1998, pp. 26-31). 
See http://ec.europa.eu/comm/competition/mergers/legislation/eu_us.pdf 

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481. 

482. 

483. 

Commissioner  Kroes  met  her  US  counterparts,  Chairman  Deborah  Majoras  of  the 
Federal  Trade  Commission  and  Tom  Barnett,  Assistant  Attorney  General, 
Department  of  Justice,  at  the  annual  bilateral  meeting  (held  on  30  October  in 
Washington) and on several other occasions. 

Cooperation  with  the  Canadian  Competition  Bureau  is  based  on  the  EU/Canada 
Competition  Cooperation  Agreement  signed  in  1999420.  Contacts  between  the 
Commission  and  the  Bureau  have  been  frequent  and  fruitful.  Case-related  contacts 
concerned mainly merger and cartel investigations. In the area of cartels the contacts 
focused  on  coordination  of  investigative  measures;  in  the  area  of  mergers  the 
discussions  centred  on  possible  remedies.  The  Commission  and  the  Canadian 
Competition  Bureau  also  continued  their  dialogue  on  general  competition  issues  of 
common concern. High-level meetings took place both in Brussels and Ottawa, and 
there were reciprocal visits between agency officials from both sides.. 

Cooperation  with  the  Japan  Fair  Trade  Commission  (JFTC)  is  based  on  the  2003 
Cooperation Agreement421. Commissioner Kroes met JFTC Chairman Takeshima at 
the  occasion  of  the  annual  bilateral  meeting  on  14  September  in  Brussels.  At  the 
centre  of  discussions  were  policy  initiatives  on  both  sides,  as  well  as  recent 
enforcement actions. In addition to contacts on individual cases, the Commission and 
the JFTC continued their ongoing dialogue on general competition issues of common 
concern. 

2. 

COOPERATION WITH OTHER COUNTRIES AND REGIONS 

484. 

485. 

The  European  Commission  continued  its  close  cooperation  with  the  EFTA 
Surveillance Authority in enforcing the Agreement on the European Economic Area 
(EEA). Protocol 23 to the EEA Agreement was amended in order to allow the EFTA 
Surveillance  Authority  and  the  competition  authorities  of  the  EFTA  States  to 
participate in policy discussions within the European Competition Network. 

Cooperation  with  China  under  the  “EU-China  competition  policy  dialogue”422 
remained  a  priority  in  2007.  Commissioner  Kroes  visited  China  for  the  annual 
bilateral  meeting  on  3  September.  Contacts  between  DG  Competition  and  the 
Chinese administration were intense and mainly dealt with questions concerning the 
newly  adopted  anti-monopoly  law,  the  future  implementing  legislation  and  the 
administrative setup of the Chinese enforcement agencies. On 20-21 November, DG 
Competition organised a workshop in Brussels on EU merger control for a high-level 
delegation  from  the  Ministry  of  Commerce  and  representatives  of  the  Legislative 
Affairs  Office  of  the  State  Council.  It  also  hosted  a  visitor  from  the  Ministry  of 
Commerce for a period of five months. 

486. 

In the course of the year, DG Competition and the Korean Fair Trade Commission 
(KFTC)  met  on  several  occasions  to  negotiate  a  bilateral  cooperation  agreement  in 
the  field  of  competition.  This  agreement  will  contain  provisions  on  enforcement 
cooperation, notification, consultation and exchange of non-confidential information. 

420 
421 
422 

1999 EU-Canada Competition Cooperation Agreement (OJ L 175, 10.7.1999, p. 50). 
2003 EU-Japan Competition Cooperation Agreement (OJ L 183, 22.7.2003, p. 12). 
Terms of Reference of the EU-China competition policy dialogue (May 2004). 

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Talks are fairly advanced. When it enters into force, the agreement will replace the 
existing Memorandum of Understanding423 between DG Competition and the KFTC. 

487.  Moreover, DG Competition played an active role in the ongoing negotiations on Free 
Trade  Agreements  with  India  and  South  Korea,  and  on  the  trade  part  of  the 
Association Agreements with the Andean Community, with a view to ensuring that 
anti-competitive  practices  (including  State  aid)  do  not  erode  the  trade  and  other 
economic benefits sought through those agreements. 

C – MULTILATERAL CO-OPERATION 

1. 

INTERNATIONAL COMPETITION NETWORK 

488. 

DG  Competition  continued  to  play  a  leading  role  in  the  International  Competition 
Network  (ICN).  More  specifically,  DG  Competition  is  a  member  of  the  Steering 
Group,  co-chair  of  the  cartels  Working  Group  and  an  active  member  of  the  other 
Working  Groups  (on  Mergers,  Competition  Policy  Implementation,  and  Unilateral 
Conduct).  

489. 

At  the  2007  ICN  Annual  Conference  (held  in  Moscow  from  31  May  to  1  June), 
Commissioner Kroes and Director-General Philip Lowe delivered keynote speeches. 

1.1.  Working Groups 

490. 

491. 

The  Unilateral  Conduct  Working  Group  (UCWG),  which  was  set  up  in  2006, 
delivered its first results at the 2007 ICN conference in the form of reports covering 
the aims of legislation on unilateral conduct and definitions of dominance. The year 
2006-2007  was  UCWG's  first  year  of  activity.  Its  report  to  the  Moscow  Annual 
conference contains three parts: the objectives of laws regarding unilateral conduct, 
the  assessment  of  dominance/Significant  Market  Power  (SMP),  and  State-created 
monopolies. In 2007, UCWG also worked on Recommended Best Practices (RPs) for 
the  assessment  of  dominance/substantial  market  power  and  State-created 
monopolies,  as  well  as  on  a  fact-finding  report  on  two  particular  types  of  conduct: 
exclusive dealing/single branding and predatory pricing. The reports and the RPs will 
be presented at the 7th Annual Conference in Kyoto in April 2008. 

The  Cartels  Working  Group,  co-chaired  by  DG  Competition,  presented  a  report  to 
the  2007  annual  conference  on  cooperation  between  competition  agencies  in  cartel 
investigations (this report was drafted within DG Competition). The Working Group 
also delivered reports on obstruction of justice in cartel investigations, the interaction 
between public and private enforcement in cartel cases as well as a chapter on case 
initiation  for  the  ICN  cartel  enforcement  manual.  The  2007  ICN  Cartels  workshop 
was held in El Salvador from 30 October to 1 November. 

423 

Memorandum of Understanding on cooperation between the Fair Trade Commission of the Republic of 
Korea and the Competition Directorate-General of the European Commission (October 2004). 

EN 

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1.2. 

OECD 

492. 

DG  Competition  continued  to  contribute  actively  to  the  work  of  the  OECD 
Competition  Committee  and  participated  in  all  round  tables  on  competition  policy 
(including  on  refusal  to  deal  and  facilitating  practices  in  oligopolies,  dynamic 
efficiencies in merger analysis, evaluation of the actions of competition authorities, 
energy security and vertical mergers). DG Competition submitted contributions to all 
roundtables  and  gave  presentations  on  the  results  of  the  energy  sector  inquiry,  the 
maritime  review,  the  draft  EC  guidelines  on  non-horizontal  mergers  (subsequently 
adopted in November) and the decision in the Ryanair/Aer Lingus merger case (see 
II.G.2.5.2. above). 

EN 

109 

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V – Outlook for 2008 

A – ANTITRUST 

493. 

During  2008,  the  Commission  will  commence  a  review  of  the  block  exemption 
regulations  on  vertical  restraints  and  horizontal  cooperation  which  expire  in  2010, 
with a view to either amending or extending them. 

B – MERGERS 

494. 

During  2008,  the  Commission  will  undertake  a  review  of  the  functioning  of  the 
jurisdictional provisions of the EC Merger Regulation, including the operation of the 
system of case referral between the Commission and Member States, with a view to 
submitting a Report to the Council of Ministers by 1 July 2009. 

C – STATE AID 

495. 

In 2008, the Commission will continue to implement the State Aid Action Plan. The 
Commission will adopt, in particular, the new environmental State aid guidelines, the 
General  Block  Exemption  Regulation  and  the  new  Communication  on  guarantees. 
The  Commission  will  also  ensure  the  effective  implementation  of  these  new  texts, 
including in-depth assessment of major cases. As announced in the State Aid Action 
Plan, it will pursue the systematic recovery of incompatible aid in cooperation with 
Member States. 

496. 

In  the  field  of  Services  of  General  Economic  Interest,  the  Commission  will 
contribute to improving predictability by responding to questions from stakeholders 
in the context of the interactive information system announced in the Communication 
on services of general interest adopted on 20 November 2007424. 

D – INTERNATIONAL ACTIVITIES 

497. 

498. 

DG Competition’s work with the candidate countries, the Western Balkan countries 
and the Neighbourhood Policy countries will continue in 2008. 

DG  Competition  intends  to  further  strengthen  its  cooperation  with  the  Korean 
competition  authority  by  concluding  a  dedicated  intergovernmental  cooperation 
agreement in the field of competition. 

499. 

The  focus  in  2008  will  be  on  cooperation  with  emerging  economies  such  as  China 
and India. 

424 

See the Commission Communication "Services of general interest, including social services of general 
interest: a new European commitment" (COM(2007) 725 final). The Communication accompanied the 
general Single Market Review Communication ("A single market for 21st century Europe") adopted on 
20 November 2007. 

EN 

110 

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500. 

The Commission will (continue to) negotiate Free Trade Agreements with a number 
of  countries,  e.g.  Korea  and  India  and  Association  Agreements  with  the  Andean 
Community. DG Competition will contribute to the negotiations on the competition 
provisions  of  these  agreements  aimed  at  guaranteeing  a  level  playing  field  for 
European companies. 

501. 

The  annual  conference  of  the  International  Competition  Network  will  be  held  in 
Kyoto,  Japan  from  14  to  16  April  2008.  DG  Competition  will  attend  and  play  an 
active role in this important international event. 

E – SECTOR DEVELOPMENTS 

1. 

ELECTRONIC COMMUNICATIONS 

502. 

The remedies imposed within the context of ex ante regulation remain an issue where 
the  Commission  intends  to  achieve  a  greater  harmonisation  of  the  regulatory 
principles applied by the NRAs. The wide discrepancy of termination rates in the EU 
demonstrates the need to achieve real cost orientation. The Commission also believes 
that  asymmetric  rates  between  operators  are  only  justified  in  the  case  of  cost 
differences outside the control of the operators, and that such asymmetries should be 
phased out over time. The Commission will cooperate with the European Regulators 
Group  to  propose  a  Commission  Recommendation  on  remedies  in  termination 
markets. It is planned to adopt such a Recommendation by mid-2008. 

503.  Moreover,  access  to  next  generation  networks  is  critically  important  for  alternative 
network operators that have invested in infrastructure at the level of local exchanges. 
Effective  remedies  need  to  be  devised  which  will  address  the  issue  of  stranded 
investments  while  at  the  same  time  safeguarding  incentives  to  invest  in  those  next 
generation  networks.  A  Commission  Recommendation  on  the  regulation  of  next 
generation access networks is scheduled to be adopted towards the end of 2008. 

504. 

The  Commission  has  started  to  review  its  Recommendation  for  the  Article  7 
Framework Directive (FD) notification procedure425. Based on the experience gained 
with more than 750 notifications under Article 7 FD426, it seems possible to simplify 
the  notification  procedure  and  to  clarify  some  issues  with  the  aim  of  streamlining 
existing 
a  new  Procedural 
Recommendation is planned for Spring 2008. The Commission is required to report 
to Council and the European Parliament in 2008 on the functioning of the Regulation 
and  in particular  whether it should be extended in duration and/or  scope  to include 
other services such as roaming SMS or data. 

administrative  practices.  The 

adoption  of 

425 

426 

Commission Recommendation of 23 July 2003 on notifications, time limits and consultations provided 
for in Article 7 of Directive 2002/21/EC of the European Parliament and of the Council on a common 
regulatory  framework  for  electronic  communications  networks  and  services  (OJ  L  190,  30.7.2003, 
p. 13). 
Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common 
regulatory framework for electronic communications networks and services (Framework Directive) (OJ 
L 108, 24.4.2002, pp. 33-50). 

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505.  While  in  the  area  of  State  aid  the  Commission  expects  further  cases  of  broadband 
support  in  densely-populated  and  rural  areas  to  be  notified  for  approval,  the  move 
towards  “next  generation  networks”  is  expected  to  lead  to  new  patterns  of  public 
intervention. The Commission will continue to monitor these developments to ensure 
that public intervention is targeted at genuine market failures and does not crowd out 
private investment. In the area of mergers, the Commission will continue to preserve 
the efficient competitive structure of electronic communications markets. 

2. 

INFORMATION TECHNOLOGY 

506. 

507. 

The Commission will continue to monitor market  developments  closely and ensure 
that  competition  is  not  hindered,  for  example  through  reduced  interoperability  and 
compatibility  with  open  standards.  Continued  attention  will  also  be  given  to  the 
growing importance of intellectual property rights in standards and the concomitant 
actions taken by standards-setting organisations to accommodate these rights. More 
broadly, it will continue to monitor developments in standard-setting bodies, so as to 
ensure  that  procedures  within  standard-setting  bodies  are  transparent  and  that  they 
contribute to the achievement of pro-competitive outcomes. 

The  Commission  will,  in  particular,  ensure  that  existing  markets  remain  open  and 
that  entry  into  new  markets  is  not  blocked  through  unilateral  actions  by  dominant 
companies  or 
through  restrictive  agreements.  By  removing  and  preventing 
anticompetitive  barriers  to  innovation  and  market  entry,  DG  Competition  will 
contribute  to  investment  and  growth  in  ICT  markets  and  thereby  to  the  deepening 
and extension of the European knowledge economy as a whole. 

3. 

MEDIA 

508. 

509. 

Technological developments in the media markets will continue to raise new issues 
for  the  Commission's  enforcement  activities.  Priorities  will  be  similar  to  those  in 
2007. DG Competition will focus on ensuring that scarce premium media content is 
made  available  in  compliance  with  EU  competition  rules,  and  will  monitor  the 
transition  from  analogue  to  digital  broadcasting  and  maximise  consumer  benefits 
from  new  forms  of  distribution  by  fighting  anti-competitive  restrictions  at  both  the 
collective  rights  management  level  and  the  distribution  level.  In  addition,  merger 
control  will  continue  to  preserve  the  efficient  competitive  structure  of  multimedia 
media markets. 

The  Commission  will  continue  to  apply  its  established  policy  concerning  State  aid 
for  the  digital  switchover.  As  the  target  date  approaches  for  the  switchover  from 
analogue  to  digital  broadcasting,  Member  States  are  likely  to  propose  further 
initiatives to facilitate the process. In assessing these initiatives, the Commission will 
pay  particular  attention  to  technological  neutrality  and  to  the  ultimate  objective  of 
ensuring wide consumer access to digital broadcasting. 

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510. 

511. 

The  Commission  initiated  the  review  of  the  Broadcasting  Communication  by 
launching  a  broad  consultation  in  early  2008427,  giving  Member  States  and 
stakeholders  the  opportunity  to  submit  their  views  on  the  various  aspects  of  the 
public funding of public service broadcasting, including the scope of public service 
activities  in  the  new  media  environment.  After  having  analysed  the  submissions 
received, the Commission will come forward – where appropriate – with a proposal 
for a revised Broadcasting Communication, possibly by mid-2008. 

The  results  of  the  Commission  study  into  the  economic  and  cultural  effects  of 
territorial conditions applied in film support schemes are expected in the first half of 
2008. Having extended the Cinema Communication until 31 December 2009 at the 
latest,  the  Commission  will  need  to  consider  the  implications  of  the  study  for  the 
Commission's  future  approach  to  State  aid  for  films,  including  whether  or  not  to 
review  the  cinema  communication.  Any  changes  to  the  Cinema  Communication 
would  require  a  process  of  formal  consultation  with  the  Member  States  and 
interested parties. 

4. 

HEALTH-RELATED MARKETS 

512. 

513. 

514. 

427 

428 

In  2008  the  work  of  DG  Competition  in  the  area  of  health-related  markets  will  be 
largely determined by the inquiry into the pharmaceutical sector that was initiated on 
15  January  2008  428.  The  scope  of  the  inquiry  is  defined  as  "the  introduction  of 
innovative  and  generic  medicines  for  human  consumption  onto  the  market".  In  the 
context  of  this  inquiry,  unannounced  inspections  were  carried  out  at  a  number  of 
pharmaceutical  companies  in  Europe.  The  inquiry  is  a  response  to  indications  that 
competition  in  pharmaceuticals  markets  in  Europe  may  not  be  working  properly: 
fewer new medicines are being brought to market, and the entry of generic medicines 
sometimes seems to be delayed. The inquiry will therefore examine the reasons for 
this state of affairs. 

In particular, the inquiry will examine whether agreements between pharmaceutical 
companies,  such  as  settlements  in  patent  disputes,  may  infringe  the  Treaty's 
prohibition  of  restrictive  business  practices  (Article  81  EC).  It  will  also  investigate 
whether companies may have created artificial barriers to entry (through the misuse 
of patent rights, vexatious litigation or other means) and whether such practices may 
infringe the Treaty's prohibition of abuses of dominant positions (Article 82 EC). 

An interim report is due in the autumn of 2008 and final results are expected in the 
spring of 2009. The inquiry's findings will, if necessary, allow the Commission or the 
national  competition  authorities  to  focus  any  future  action  on  the  most  serious 
competition  concerns  as  well  as  to  identify  remedies  to  resolve  the  specific 
competition problems in individual cases. 

information 

Further 
http://ec.europa.eu/comm/competition/consultations/open.html 
For the press release and the Decision to open a sector inquiry, see EUROPA - European Commission - 
Competition. 

Competition: 

available 

website 

DG 

the 

on 

of 

is 

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5. 

FINANCIAL SERVICES SECTOR 

515. 

516. 

517. 

518. 

519. 

520. 

429 

430 

431

432 

The outlook of the financial services sector for 2008 is to a large extent determined 
by the entry into force of the Single Euro Payments Area (SEPA). 

The  SEPA  framework  for  payment  cards  was  launched  on  1  January  2008.  An 
important milestone in the SEPA migration process was reached on 28 January 2008 
when the first electronic payments for credit transfers in euro were made throughout 
the  EU  and  in  the  neighbouring  countries  of  Iceland,  Liechtenstein,  Norway  and 
Switzerland429,  using  the  new  SEPA  standards.  For  technical  and  legal  reasons  the 
launch  of  the  SEPA  payment  instruments  for  direct  debits  will  take  place 
subsequently430,  but  should  not  occur  later  than  1  November  2009.  For  card 
payments, the SEPA Cards Framework431 has been in force since 1 January 2008. 

The creation of a Single Euro Payments Area is expected to enhance competition by 
removing  national  barriers,  thereby  increasing  competition  between  banks.  If 
properly implemented, it is likely that the creation of a Single Euro Payments Area 
will – in whole or in part - remove the barriers to competition which were identified 
in the Financial Sector Inquiry Report432. 

However,  the  design  and  implementation  of  the  SEPA  project  is  led  by  the  EPC, 
which  is  an  association  of  undertakings.  SEPA  thus  consists  of  agreements  and 
cooperation  between  competing  undertakings.  It  therefore  merits  close  competition 
scrutiny to assess whether the co-operation produces foreclosure effects which might 
amount to a restriction of competition (Article 81 EC). DG Competition's assessment 
takes  into  account  the  fact  that  the  success  of  SEPA  depends  first  and  foremost  on 
the  proactive  engagement  and  co-operation  of  the  European  payments  industry. 
Nevertheless,  restrictions  on  competition  need  to  be  justified:  i.e.  the  undertakings 
need to demonstrate that their co-operation leads to increased efficiencies which not 
only benefit the industry but are also be passed on to consumers (Article 81(3) EC). 

DG Competition is following the process of SEPA migration in close collaboration 
with DG Internal Market, the ECB and the EPC. 

The  possibility  cannot  be  excluded  that  the instability  and  volatility  which  affected 
markets  towards  the  end  of  2007  will  continue  well  into  2008.  Against  this 
background it is possible that banks may suffer significant losses, for example as a 
result  of  mortgage  payment  defaults  or  mortgage  asset  devaluation,  in  their  2007 

SEPA  is  currently  defined  as  the  area  consisting  of  the  27  Member  States  plus  Iceland,  Lichtenstein, 
Norway and Switzerland. 
In order to allow for smooth SEPA direct debit implementation, the Payment Services Directive (PSD), 
as the necessary legal basis, needs to be transposed into national law of each Member State first by 1 
November 2009. 

http://www.europeanpaymentscouncil.eu/documents/SEPA%20Cardsframework_027_05_Vers

ion2%200.pdf 
For example, the SEPA Cards Framework (SCF) obliges payment card schemes to allow participation 
on  the  basis  of  transparent  and  non-discriminatory  criteria,  prevents  discrimination  according  to 
nationality, imposes SEPA-wide, transparent pricing structures for payment card schemes and imposes 
unbundling of card scheme governance and management from infrastructure. 

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accounts.  The  possibility  cannot  be  ruled  out  that  other  banks  may  need  additional 
capital or State support in order to overcome the ongoing crisis. 

6. 

POSTAL SERVICES 

521. 

522. 

523. 

524. 

525. 

526. 

527. 

In  2008,  while  the  adoption  of  the  Postal  Directive  is  expected  to  happen  swiftly, 
most EU Member States will still maintain monopoly rights to USPs. However, some 
Member  States  (Finland,  Sweden,  United  Kingdom  and,  as  of  1  January  2008, 
Germany)  have  abolished  the  reserved  area,  while  others  have  a  more  reduced 
reserved area than is allowed under the Directive. This means that a significant share 
of  EU  letter  post  volumes  is  expected  to  be  completely  open  to  competition  even 
ahead of the original 2009 deadline proposed by the Commission. 

Irrespective  of  de  jure  market  opening,  the  fact  remains  that,  for  most  market 
segments  and  services,  USPs  in  each  Member  State  will  retain  a  predominant 
position,  as  the  need  for  an  own  network  and  strict  industry  requirements  keep  the 
barriers to entry in several Member States high. 

The operators' focus on business segments is expected to continue because business 
products  (unaddressed  and  addressed  direct  mail  in  particular)  are  showing 
substantially higher rates of growth than traditional letter mail. 

In  2008,  EU  competition  rules,  in  particular  Articles  81-82  and  86  EC,  will  thus 
continue  to  apply  in  a  context  in  which  most  USPs  in  the  EU  will  still  have  legal 
monopolies  or  positions  of  unparalleled  strength  and  in  which  the  most  dynamic 
segments  of  the  market  are  exist  alongside  such  monopolies.  The  preparation  for  a 
more  competitive  environment  by  2011  creates  the  risk  of  unlawful  attempts  by 
USPs  to  diversify  and  expand  their  operations  and,  possibly,  leverage  their  market 
power in service or geographic markets neighbouring their monopoly, e.g. direct or 
express  mail  and  business  segments.  Preserving  residual  or  nascent  competition  in 
service markets adjacent to the monopoly will thus continue to be a key concern. 

From an anti-trust point of view, the Commission will thus continue to give priority 
to investigations which concern EU-wide or cross-border issues, to address barriers 
to  competition  set  up  as  a  result  of  State  measures  or  by  attempts  to  unlawfully 
leverage market power and to set legal or economic precedents. 

From  a  State  aid  viewpoint,  the  Commission  will  continue  to  ensure  that  Member 
States  do  not  over-compensate  postal  operators  entrusted  with  Services  of  General 
Economic  Interest  (SGEI)  and  that  commercial  activities  outside  the  SGEI  are  not 
cross-subsidised. The Commission will also check that Member States do not grant 
other  types  of  State  aids  to  postal  providers  or  to  their  subsidiaries,  such  as 
guarantees or funding which do not satisfy the "market investor" conditions. 

Pending the final vote of the European Parliament on the new Postal Directive, the 
Commission  will  continue  to  prepare  for  market  opening  from  2011.  In  its  current 
form  the  Directive  mandates  the  Commission  to  provide  assistance  to  Member 
States,  in  particular  regarding  the  calculation  of  the  net  cost  of  the  universal 

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service433. Accordingly the Commission has already started to examine the different 
methods  for  the  calculation  of  the  net  cost  of  the  universal  service  and  will  attach 
special importance to this issue throughout 2008. 

VI – Interinstitutional cooperation 

528. 

The Commission continued its cooperation with the other Community institutions in 
accordance  with  the  respective  agreement  or  protocols  entered  into  by  the  relevant 
institutions434. 

1. 

EUROPEAN PARLIAMENT 

529. 

530. 

531. 

532. 

533. 

433 

434 

As is the case each year, the European Parliament issued an own-initiative report on 
the  Commission's  Annual  Report  on  Competition  Policy  of  the  previous  year, 
following an exchange of views on the issues raised in the report. 

The Commission also participated in discussions held in the European Parliament on 
Commission  policy  initiatives,  such  as  on  State  aid  reform  (in  particular  on  the 
environmental  guidelines  and  on  the  proposal  for  a  General  Block  Exemption 
Regulation) and the inquiry into the financial services sector. 

The  Commissioner  and/or  the  Director  General  responsible  for  Competition  hold 
regular  exchanges  of  views  with  the  responsible  Parliamentary  committees  on  the 
subject of competition policy. In 2007, there were four exchanges of views were held 
with  the  Economic  and  Monetary  Affairs  Committee  and  one  meeting  with  the 
Internal  Market  and  Consumer  Protection  Committee.  Issues  of  major  importance 
during  these  2007  meetings  included  the  energy  sector  inquiry  and  its  follow-up, 
implementation of the State Aid Action Plan, the report on the retail banking sector 
inquiry,  the  business  insurance  inquiry  and  the  continued  efforts  to  combat  illegal 
cartels. Outside the framework of these more formalised meetings, cooperation with 
the European Parliament may also take the form of bilateral meetings with individual 
Members of Parliament on specific topics of interest to them. 

The  Committee  on  Economic  and  Monetary  Affairs  also  receives  regular  lists  of 
pending  cases  in  the  public  domain,  as  well  as  information  on  the  main  policy 
initiatives in the field of competition. 

the  Commission  also  cooperates  closely  both  with 

Finally, 
the  European 
Ombudsman and Members of the European Parliament by replying to Parliamentary 
Questions  and  Petitions.  In  2007,  the  Commission  responded  to  530  written 

See  Article  23a  and  Annex  I  of  the  Common  position  adopted  by  the  Council  with  a  view  to  the 
adoption of a Directive of the European Parliament and of the Council amending Directive 97/67/CE 
with regard to the full accomplishment of the internal market of Community postal services.  
Framework  Agreement  of  26  May  2005  on  relations  between  the  European  Parliament  and  the 
Commission; Protocol of Cooperation between the European Commission and the European Economic 
and  Social  Committee  of  7  November  2005;  Protocol  on  the  Cooperation  Arrangements  between  the 
European Commission and the Committee of the Regions of 17 November 2005. 

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questions,  77  oral  questions  and  39  petitions  involving  matters  of  competition 
policy435. 

2. 

COUNCIL 

534. 

3. 

535. 

The Commission also cooperates closely with the Council, informing it of important 
policy initiatives in the field of competition, such as on the State aid reform and the 
energy and financial services sector inquiries; the Commission also attends meetings 
of  Council  working  groups  dealing  with  competition  policy  matters,  and  maintains 
close links with the respective Presidencies. Depending on the case, the cooperation 
may also consist in participation in informal Council formations or contributions to 
meetings of the European Council. In 2007, the Commission made contributions on 
competition policy mainly in respect of conclusions adopted in the Competitiveness 
Council  (such  as  on  the  Lisbon  strategy,  Industrial  policy  and  SME  policy),  the 
Transport,  Telecommunications  and  Energy  Council  (Internal  Energy  Market 
Legislative Package) and Ecofin Council formations (Single Market Review, Single 
Euro Payments Area and risk capital). 

EUROPEAN  ECONOMIC  AND  SOCIAL  COMMITTEE  AND  COMMITTEE  OF  THE 
REGIONS 

The Commission also informs the European Economic and Social Committee and the 
Committee of the Regions about major policy initiatives and participates in debates 
that may be held at the respective Committee, for instance in the case of the adoption 
of  the  annual  report  by  the  European  Economic  and  Social  Committee  on  the 
Commission's  Annual  Report  on  Competition  Policy.  In  2007,  the  Commissioner 
responsible for Competition met with the Section of the EESC responsible for Single 
Market, Production and Consumption to have an exchange of views on major policy 
developments,  in  areas  such  as  State  aid,  financial  sector  inquiries  and  the  fight 
against cartels. 

435 

Of  these  the  Commissioner  in  charge  of  Competition  directly  responded  to  161  written  questions,  14 
oral questions and 14 petitions. 

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