COMMISSION STAFF WORKING DOCUMENT A Single Market Strategy for Europe - Analysis and Evidence Accompanying the document Upgrading the Single Market: more opportunities for people and business
Date: 2015-10-28
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, European Commission
Subjects: application of EU law, consumer, goods and services, innovation, single market, small and medium-sized enterprises, tertiary sector

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 28.10.2015  SWD(2015) 202 final   COMMISSION STAFF WORKING DOCUMENT A Single Market Strategy for Europe - Analysis and Evidence Accompanying the document Upgrading the Single Market: more opportunities for people and business {COM(2015) 550 final} {SWD(2015) 203 final}  
 
 
 
 
  
  
 
 
 
 
 
1. 

2. 

2.1. 
2.2. 
2.3. 
2.4. 
2.5. 

3. 

3.1. 
3.2. 
3.3. 

4. 

4.1. 
4.2. 

4.3. 

5. 

Contents 

UPGRADING THE SINGLE MARKET ................................................... 3 

CREATING  OPPORTUNITIES 
BUSINESSES ............................................................................................. 4 

FOR  CONSUMERS  AND 

Enabling the balanced development of the collaborative economy ............ 4 
Helping SMEs and start-ups to grow .......................................................... 8 
Making the market without borders for services a practical reality .......... 13 
Addressing restrictions in the retail sector ................................................ 39 
Preventing discrimination of consumers and entrepreneurs ..................... 51 

ENCOURAGING MODERNISATION AND INNOVATION ............... 55 

Modernising our standards system ............................................................ 55 
More transparent, efficient and accountable public procurement ............. 58 
Consolidating Europe's intellectual property framework .......................... 68 

ENSURING PRACTICAL DELIVERY .................................................. 79 

A culture of compliance and smart enforcement ...................................... 79 
Improving  the  delivery  of  the  Services  Directive  by  reforming  the 
notification procedure ............................................................................... 86 
Strengthening the Single Market for goods ............................................... 90 

REFERENCES ........................................................................................ 101 

2 

 
 
 
 
1. 

UPGRADING THE SINGLE MARKET 

A  deeper  and  fairer  Single  Market  is  one  of  the  European  Commission’s  10  political 
priorities.  Removing  remaining  regulatory  and  non-regulatory  barriers  in  the  Single  Market 
for goods and services was identified as a priority in the 2015 Annual Growth Survey1.  

The Single Market is arguably among European Union’s greatest achievements. For over 20 
years, it has helped companies to benefit from economies of scale, triggered efficiency gains 
that support EU competitiveness and offered consumers an increased choice of products and 
services at lower prices. 

For all the progress made, too many significant economic barriers remain, notably in the area 
of  services.  The  Commission  estimates  that  more  ambitious  implementation  of  the  Services 
Directive would add 1.8 % of EU GDP2. 

The recent report on Single Market integration and competitiveness in the EU and its Member 
States3 underlines that labour productivity growth could be increased in the EU if regulatory 
barriers to competitiveness and integration were removed, thus allowing for improvements in 
the allocation of resources across firms and sectors in the Single Market. The reallocation of 
resources will have to proceed along three axes: 

i.  movements of capital and human resources from low to high productivity firms within 

sectors in the Member States; 

ii.  new  technological  developments,  changes  in  input  prices  and  the  emergence  of  new 
business  models  suggest  that  cross-sectoral  reallocation  of  human  and  capital 
resources  may  take  increasing  importance  in  the  future  as  a  source  of  productivity 
growth; and 

iii. 

as  a  third  source  of  productivity  growth,  the  geographical  reallocation  of  resources 
within  the  Single  Market  and  a  better  insertion  of  EU  firms  in  international  value 
chains. 

As  Single  Market  opportunities  have  not  yet  been  fully  exploited  in  this  respect,  the 
Commission  is  bringing  forward  a  Single  Market  Strategy4  comprised  of  a  set  of  feasible 
measures  that  are  critical  to  meeting  these  objectives  and  thus  reaping  the  benefits  of  the 
Single  Market.  The  measures  are  coherent  with  and  build  on  other  Commission  initiatives. 
The strategy supports a broader European strategy to boost growth and jobs. It also addresses 
the  objective  of  a  deeper  and  fairer  Single  Market  with  a  strengthened  industrial  base. 
Furthermore,  it  focuses  on  making  the  Single  Market  a  springboard  for  EU  companies, 
notably SMEs and start-ups in particular, to scale up and expand their operations. 

The measures fall into three categories: 

1.  Creating opportunities for consumers, professionals and businesses by enabling the 
balanced development of the collaborative economy, giving start-ups the opportunity 
to  scale  up  and  grow  cross-border,  unlocking  investment  (in  particular  for  SMEs), 
creating  a  ‘services  passport’  for  companies,  modernising  the  regulation  of 
professions,  addressing  restrictions  in  retail  establishment  and  preventing  unjustified 
discrimination against consumers and entrepreneurs; 

1 COM(2014) 902. 
2 http://ec.europa.eu/economy_finance/publications/economic_paper/2012/pdf/ecp_456_en.pdf  
3  Integration  and  Competitiveness  in  the  EU  and  its  Member  States,  Commission  Staff  Working  Document, 
(2015) 203. 
4 COM(2015) 550. 

3 

 
                                                 
2.  Encouraging  and  enabling  the  modernisation  and  innovation  that  Europe  needs, 
through  more  transparent,  efficient,  sustainable  and  accountable  public  procurement, 
promoting  innovation  procurement,  modernising  the  EU’s  intellectual  property 
framework,  and  raising quality  and  promoting  interoperability  through  a  modernised 
standardisation system and European standards; and 

3.  Ensuring  practical  delivery  that  benefits  consumers  and  businesses  in  their  daily 
lives,  by  taking  a  smart  and  collaborative  new  approach  to  enforcement  and 
implementation,  improving  the  delivery  of  the  Services  Directive  by  reforming  the 
notification procedure and strengthening the Single Market in goods. 

This document is structured around these three categories and provides evidence to underpin 
each  measure.  Each  measure  is  complemented  by  an  analysis  of  the  policy  context  and  a 
description  of  the  problem  encountered  and  the  expected  impacts.  The  legislative  measures 
will be subject to further impact assessment work, which will ultimately form the basis for the 
Commission’s decisions.   

2. 

CREATING OPPORTUNITIES FOR CONSUMERS AND BUSINESSES 

2.1. 

Enabling the balanced development of the collaborative economy 

Policy context 
The  collaborative  economy5  is  developing  rapidly.  The  take  up  of  collaborative  business 
models has been particularly widespread in certain sectors, such as transport, accommodation 
and professional services, but is growing across the whole economy6. 

The  collaborative  economy  creates  new  opportunities  for  services  providers,  innovative 
entrepreneurs  and  existing  companies.  It  leads  to  greater  choice  for  consumers,  and  often 
lower  prices  in  the  market.  It  can  also  contribute  to  increasing  economic,  social  and 
environmental  value  of  idle  assets  and  resources,  and  increasing  employment  through  more 
flexible job schedules. In some cases, the emergence of new business models impacts existing 
markets, creating tensions with existing goods and services providers. In part this stems from 
uncertainty relating to applicable regulation, e.g. on licensing, consumer protection, taxation, 
social security and employment models.  

Some  Member  States  and  local  authorities  have  begun  to  react  to  the  regulatory  challenges 
posed  by  the  collaborative  economy  in  a  varied  and  often  ad  hoc  way,  thus  risking  the 
creation  of an  uneven  playing  field for  companies  across  different  Member States or  across 
regions  within  the  same  Member  State.  The  Commission  has  already  received  a  number  of 
complaints in relation to regulatory measures taken in some Member States. 

A  clear  and  adequate  regulatory  environment  is  essential  to  ensure  that  the  benefits  of  the 
collaborative economy fully materialise. Divergent approaches and hasty regulatory responses 
may  lead  to  the  fragmentation  of  the  Single  Market  and  to  the  under-exploitation  of  the 
opportunities that the collaborative economy offers to entrepreneurs and consumers in the EU.  

The  importance  of  the  collaborative  economy  has  also  been  recognised  in  the  context  of 
action  on  platforms  in  the  Digital  Single  Market  Strategy7,  which  announced  that  the 

5 Sometimes also known as,  inter alia, collaborative consumption, the sharing economy, peer (P2P) economy, 
the access economy, etc.  
6  Stokes  K.,  Clarence  E.,  Anderson  L.,  Rinne  A,  'Making  sense  of  the  UK  collaborative  economy',  Nesta 
Collaborative Lab, 2014. 
7 European Commission,  A Digital Single Market Strategy for Europe, COM(2015) 192 and SEC(2015)100. 

4 

 
                                                 
Commission would address the regulatory challenges posed by the collaborative economy in 
the Single Market Strategy and in the e-commerce framework, as appropriate. 

On  24  September  2015,  the  Commission  launched  a  public  consultation  allowing  all 
interested  parties  (platform  providers,  traditional  service  providers,  new  service  providers, 
users of such services and public authorities) to present their views on the opportunities and 
issues  raised  by  the  emergence  of  the  collaborative  economy  and  the  most  appropriate  EU 
policy  response8.  The  results  of  this  consultation  will  complement  the  analysis  in  this  Staff 
Working Document. 

Problem and impact 

Collaborative business models create new opportunities that add value to underutilised assets 
in  an  innovative  way:  private  homes  are  being  opened  up  to  tourists,  private  cars  are  being 
used for car-sharing/offering lifts, previously owned goods are being rented, sold or swapped, 
laboratories  and  research  findings  are  being  opened  up  to  non-academics,  the  quality  of 
plumbing  and  accountancy  services  is  being  reviewed  online,  depreciating  or  unexploited 
skills are being bartered for community services or odd jobs. The online platforms that enable 
the rise of the collaborative economy range from small local initiatives to large international 
companies. 

Some  of  the  issues  that  are  faced  by  stakeholders  and  have  an  impact  on  the  sustainable 
growth of the collaborative economy and existing business models are specific to the sector in 
which the initiatives take place. Others reflect important cross-cutting concerns that can have 
an impact on the collaborative economy as a whole. 

Regulatory burden and uncertainty 

Collaborative  economy  business  models  present  new  options  to  consumers  in  sectors  that 
have  been  dominated  by  traditional  business-to-consumer  models.  Well-established  rules  in 
these  sectors  often  do  not  fit  the  nature  and  features  of  collaborative  business  models.  This 
may  become  a  disproportionate  burden  that  slows  the  development  of  innovative  services 
down.  Moreover,  it  is  often  unclear  whether  and  how  current  rules  apply  to  individuals  or 
companies adopting collaborative economy models. In that respect, regulators face a number 
of questions.  

Firstly, there may be sectors where business authorisations and registration obligations exist. 
In these cases, it is not clear to what extent such types of obligations apply to individuals and 
services providers in the collaborative economy. For professional providers, the question as to 
whether existing obligations are justified by overriding public interest reasons may be asked 
not only in relation to providers embracing collaborative business models, but also in relation 
to  traditional  providers.  In  addition,  it  would  have  to  be  assessed  whether  restrictions  are 
proportionate  and  justified  under  existing  fundamental  freedoms  and  EU  legislation  such  as 
the Services Directive9.  

Secondly,  consumer  protection  legislation  aims  to  protect  the  safety  and  interests  of 
consumers  and  to  target  problems  stemming  from  information  asymmetry  or  a  weaker 
bargaining  position  when  dealing  with  service  providers.  When  collaborative  models  are 
used, the transaction is often peer-to-peer, thus raising questions as to whether the same level 

8  European  Commission,  open  consultation  on  ‘Regulatory  environment  for  platforms,  online  intermediaries, 
data and cloud computing and the collaborative economy’: https://ec.europa.eu/eusurvey/runner/Platforms/ 
9  European  Union,  'Directive  2006/123/EC  of  the  European  Parliament  and  of  the  Council  on  services  in  the 
internal market', 2006. 

5 

 
                                                 
of  asymmetry  may  occur.  It  is  not  clear  to  what  extent  some  of  those  issues  may  be  fully 
addressed  by  the  reputational  systems  and  control  mechanisms  usually  set  up  by  the 
collaborative  economy  platforms  and  used  by  providers  and  users.  Lack  of  consumer  trust 
may discourage transactions and reduce the benefits of the collaborative economy. 

Thirdly,  the  emergence  of  the  collaborative  economy  also  brings  new  questions  as  regards 
liability. Platforms may take no responsibility other than to facilitate a transaction between a 
provider and a user. This creates uncertainty about whether providers are sufficiently covered 
to  address  their  liability,  especially  given  the  fact  that  appropriate  insurance  schemes  for 
collaborative economy services are still in the early stages of development.  

All parties are negatively affected by regulatory uncertainty. Providers face the uncertainty of 
the  applicable  regulatory  framework,  which  leads  to  legal  and  financial  risks,  including  the 
risk of disproportionate regulatory reactions. Incumbents often claim the  existence of unfair 
competitive advantages for providers under the collaborative economy, who may be subject to 
different  rules,  while  offering  a  service  that  is  considered  a  close  substitute/replacement  of 
their  services.  Regulatory  uncertainty  and  fragmentation  across  and  within  Member  States 
complicates  (or  even  impedes)  market  access  and  limits  investment  opportunities  for 
platforms. Users are concerned by issues linked to insurance, safety, trust,  data privacy, etc. 
Finally,  public  authorities  face  important  policy  and  regulatory  challenges  given  the  wide 
variety  of  collaborative  economy  initiatives  across  many  sectors;  the  delicate  balance  that 
needs  to  be  found  between  consumer  choice,  stimulating  innovation,  protecting  consumers 
and  ensuring  fair  competition;  and  the  different  layers  of  government  responsibility  (local, 
national and EU level) related to collaborative economy issues. This leads to the question of 
ensuring a level playing field. 

The  existing  level  of  regulations  as  they  apply  to  traditional  service  providers  cannot 
automatically  and  in  each  and  every  case  be  considered  a  benchmark  for  the  collaborative 
economy. This means that the objective of creating a level playing field between collaborative 
and  traditional  economy  actors  could  also  imply  reducing  regulatory  requirements  for  the 
provision of services through traditional channels. 

Unexploited potential 

Possibilities offered by the collaborative economy have not yet been explored fully and many 
business  models  are  still  being  tested.  EU  policies  should  support  consumer  choice  and 
entrepreneurship  in  this  field,  empower  people  to  capitalise  on  their  assets,  property, 
knowledge,  and  skills,  and  stimulate  small  and  micro-entrepreneurship  amongst  the  general 
public. This clearly includes providers of traditional services that may also want to offer their 
services through collaborative economy platforms.  

Collaborative economy models may also be applied in the field of collaborative production, 
where  the  combination  of  open-design,  crowd-sourcing  and  decentralised  manufacturing  is 
still  new.  The  possibility  to  find  efficiencies,  to  save  money,  but  also  to  use  each  other's 
networks and customers are features of the collaborative economy offering opportunities for 
businesses also in the field of collaborative production, marketing and branding activities or 
logistics10.  

10 Business Innovation Observatory, 'Collaborative economy, Collaborative production and the maker economy', 
Case Study 51, September 2015. 

6 

 
                                                 
Wider questions 

The collaborative economy raises a number of additional wider questions. These include the 
evolution  towards  a  more  on-demand  economy  and  the  impact  this  has  on  workers.  On  the 
one  hand,  the  collaborative  economy  allows  workers/entrepreneurs  to  organise  their  work 
(and time) on a more independent basis and creates new opportunities for the unemployed to 
enter the workforce. On the other hand, this could mean a shift of certain risks from firms to 
workers (e.g. income instability, absence of minimum wages, etc.), thus changing the nature 
and balance of labour relationships. 

In addition, there could be mixed effects on public budgets: on the one hand, the introduction 
of  more  informal  and  on-demand  activities  under  the  collaborative  economy  could  have  a 
negative  impact  due  to  less  revenue  being  generated  from  taxes  and  social  security 
contributions. On the other hand, collaborative economy platforms offer new opportunities to 
increase  tax  revenues,  as  well  as  to  fight  tax  evasion  through  the  traceability  of  every 
operation. 

Finally, the collaborative economy involves not only sharing goods and services but, in many 
cases, personal data as well. Protecting the privacy of providers and consumers is important to 
secure and maintain the trust of the different actors involved. 

Impact 

The  collaborative  economy  can  enable  a  more  efficient  use  of  resources,  knowledge,  skills, 
and assets, thereby increasing productivity and allowing for alternatives to traditional services 
and goods. It can offer consumers more choice and convenience, potentially at a lower cost, 
and  presents  a  viable  alternative  to  ownership.  Moreover,  it  supports  entrepreneurship  and 
reduces  barriers  for  individuals  to  becoming  economically  active,  thus  helping  the 
(re)integration of citizens into the labour market.  

Several studies show that participation levels in the collaborative economy are already high in 
some sectors and have the potential to increase even further across many different sectors of 
the economy11. Current estimates indicate that 68 % of adults globally are willing to share or 
rent goods for money12. 

The collaborative economy provides important opportunities to raise growth and create jobs. 
The online platforms at its heart are expanding the market for the temporary usage of services 
and  assets  on  the  side  of  both  supply  and  demand,  whilst  the  majority  of  revenues  and 
employment  generated  are  going  to  the  individual  providers.  According  to  a  recent  study,13 
the  five  main  collaborative  economy  sectors  (peer-to-peer  finance,  online  staffing,  peer-to-
peer  accommodation,  car  sharing  and  music  video  streaming)  have  the  potential  to  increase 
global  revenues  from  around  EUR  13  billion  now  to  EUR  300  billion  by  2025.  A  third  of 
European  consumers  say  that  they  will  increasingly  participate  in  the  collaborative 
economy14.  

11 ING International Survey, 'What’s mine is yours – for a price. Rapid growth tipped for the sharing economy', 
2015. 
12 Nielsen, 'Is sharing the new buying?', 2014. 
13 
https://www.pwc.com/us/en/technology/publications/assets/pwc-consumer-intelligence-series-the-sharing-
economy.pdf 
14 ING International Survey: What’s mine is yours - for a price. Rapid growth tipped for the sharing economy. 
http://www.ezonomics.com/ing_international_survey/sharing_economy_2015  

Intelligence 

Consumer 

Economy. 

Sharing 

Series: 

2015, 

PwC 

The 

7 

 
                                                 
At the same time, the collaborative economy is having an impact on sector incumbents that 
are coming under pressure to respond to consumer expectations. Some of the expected growth 
may be at the expense of these providers, but an overall increase in economic activity can be 
expected on the back of easier access to some of the shared services and lower prices15. This 
will benefit consumers, in particular those with a low income. 

The  Commission  intends  to  help  enable  the  balanced  development  of  the  collaborative 
economy by ensuring that the regulatory environment is clear and adequate. The Commission 
will engage in an active dialogue with market operators, consumers and public authorities to 
identify needs and regulatory gaps. Where appropriate, the Commission will provide guidance 
as  regards the  application of existing EU law  to  the activities  and sectors in  which the new 
collaborative  economy  business  models  are  used.  This  guidance  will  aim  to  avoid  new 
business  models  being  hindered  by  over-restrictive  regulation,  while  at  the  same  time 
ensuring the protection of consumers and the public interest.  

2.2. 

Helping SMEs and start-ups to grow  

Policy context 

Support  for  SMEs,  especially  those  that  are  young,  innovative  and  designed  to  grow  fast 
(start-ups)16  is  rather  well  established  at  EU,  national  and  regional  level  of  economic 
activity17.  These  incentives  usually  take  the  form  of  a  financial  support  or  other  types  of 
benefits  in  kind  (e.g.  training)18.  It  can  also  involve  exempting  start-ups  from  certain 
administrative  requirements  that  lead  to  additional  costs  for  them  (e.g.  accounting 
requirements)19.  

The EU acquis has recognised that specific solutions are sometimes justified for start-ups in 
the Union's regulatory environment. For instance, EU state aid rules allow for limited in time 
(first  five  years)  aid  for  newly  created  small  enterprises,  with  higher  aid  intensities  for  the 
innovative ones20.  

There  is  a  growing  consensus  in  empirical  economic  literature  that  scale-ups,  rather  than 
small firms as a whole, are net job creators21. Small start-ups are more likely to be genuinely 
new firms as compared to larger entrants, who are more likely to be a product of a merger or 
acquisition.  It  is  also  found  that  the  large  majority  of  surviving  start-ups  do  not  grow.  The 
probability  of  exit  is  highest  when  a  firm  is  two  years  old  and  on  average  the  survival  rate 

15 For example Zervas G., Prosperio D., Byers J. 'The Rise of the Sharing Economy: Estimating the Impact of 
Airbnb on the Hotel Industry', Boston University, 2015. 
16  OECD  recognises  start-ups  as  firms  that  are  less  than  three  years  old,  see  Criscuolo,  C.,  P.  N.  Gal  and  C. 
Menon, 'The Dynamics of Employment Growth: New Evidence from 18 Countries', OECD Science, Technology 
and Industry Policy Papers, No. 14, OECD Publishing, 2014 http://dx.doi.org/10.1787/5jz417hj6hg6-en 
17  Initiatives  to  support  start-ups  at:  http://startupdelta.org/  in  the  Netherlands,  or  www.startuppoland.org  in 
Poland. 
18 Digital Agenda for Europe, Start-up Europe: https://ec.europa.eu/digital-agenda/en/about-startup-europe 
19  See 
regulation/guidelines/docs/br_toolbox_en.pdf  
20 Article 22 of the Commission Regulation (EU) N°651/2014 of 17 June 2014 declaring certain categories of aid 
compatible  with  the  internal  market  in  application  of  Articles  107  and  108  of  the  Treaty  states:  'Start-up  aid 
schemes  shall  be  compatible  with  the  internal  market  within  the  meaning  of  Article  107(3)  of  the  Treaty  and 
shall be exempted from the notification requirement of Article 108(3) of the Treaty, provided the conditions laid 
down in this Article and in Chapter I are fulfilled' and adds 'For small and innovative enterprises, the maximum 
amounts set out in paragraph 3 may be doubled'. 
21  Criscuolo,  C.,  P.  N.  Gal  and  C.  Menon,  'The  Dynamics  of  Employment  Growth:  New  Evidence  from  18 
Countries', OECD Science, Technology and Industry Policy Papers, No. 14, OECD Publishing, 2014. 

the  Better  Regulation  guidelines 

toolbox  http://ec.europa.eu/smart-

the  SME 

test 

in 

8 

 
                                                 
beyond  three  years  is  60  %22.  In  a  similar  vein,  start-ups  and  young  scale-ups 
disproportionately contribute to job creation in the USA23.  

High-growth  young  firms  play  a  critical  role  in  the  reallocation  dynamics  and  contribute 
substantially to intra-industry labour productivity growth. At least half of intra-industry labour 
productivity  growth  in  the  USA  is  attributable  to  employment  being  reallocated  from  less 
productive  to  more  productive  firms  within  the  industry  and  young  firms  contribute 
disproportionately  to  this  contribution  from  reallocation24.  According  to  recent  OECD 
research, globally most productive firms are younger than the total population of companies, 
which supports the idea that young firms possess a comparative advantage in commercialising 
radical innovations25.  

Problem and impact 

Europe  is  not  short  of  innovative  ideas,  often  created  by  SMEs  and  start-ups,  but  too  often 
innovative solutions developed in Europe are not produced and commercialised in Europe. A 
very small number of new companies account for a disproportionately large amount of wealth 
and job creation. Compared to the USA, fewer such innovative start-ups are created in the EU 
and those that see the light of day are reluctant to expand cross-border. This is a major missed 
opportunity.  

Fragmentation 

There are large fixed costs associated to cross-border expansion, also in terms of information 
costs26. SMEs are at a disadvantage compared to large firms, and even more so in the case of 
start-ups.  Their  major  problem  is  the  lack  of  knowledge,  which  leads  them  to  fear  entering 
other EU countries because they do not know which rules apply. The development of a 'Single 
Digital  Gateway',  as  announced  under  the  Digital  Single  Market  Strategy  for  Europe27,  will 
help address this information gap by further development of an online one–stop shop access 
point  to  all  Single  Market-related  information,  assistance,  advice,  problem-solving  services 
and  to  national  and  EU-wide  procedures  for  activities  covered  by  Single  Market  law.  This 
gateway  will  build  on  already  existing  national  and  EU  web  portals  like  Your  Europe. 
Regulatory fragmentation in the Single Market also ultimately cripples EU start-ups' access to 
finance.  

There are large differences across the EU when it comes to start-up average size upon entry, 
survival share and post-entry growth which suggests that innovation environments do greatly 
vary across the Union. Recent findings suggest that although a small proportion of EU large 
firms  accounts  for  a  disproportionate  share  of  aggregate  exports  outside  the  EU,  a  large 

22  Calvino,  F.,  Criscuolo,  C.,  Menon,  C.,  'Cross-Country  evidence  on  start-up  dynamics',  OECD  Science, 
Technology and Industry Working Papers, 2015/06, OECD Publishing, Paris, 2015. 
23 In a typical year, start-ups account for about 10 percent of firms and more than 20 percent of firm level gross 
job creation in the USA, see: Haltiwanger, J., R. S Jarmin, R. Kulick, J. Miranda, 'High Growth Young Firms: 
Contribution  to  Job  Growth,  Revenue  Growth  and  Productivity',  (preliminary  draft)  in:  Measuring 
Entrepreneurial Businesses: Current Knowledge and Challenges, NBER, 2014. 
24 Ibid. 
25 Andrews, D., Criscuolo C., Gal P.N., 'Frontier firms technology diffusion and public policy: micro evidence 
from OECD countries', The Future of Productivity: Main Background Papers OECD, 2015. 
26 OECD (2009), Top Barriers and Drivers to SME Internationalisation, Report by the OECD Working Party on 
SMEs ad Entrepreneurship. 
27 COM(2015) 192. 

9 

 
                                                 
number  of  EU  exporting  firms  are  small  and  medium  enterprises  (SMEs)  and  they  have  a 
non-negligible part in EU exports28. 

Europe has a relatively large share of 'static' firms that neither grow nor shrink and have lower 
productivity growth. Furthermore, only a few of Europe's largest companies are young29. The 
2015 Survey of Internationalisation of European SMEs revealed that in 2012-2014 only 23 % 
of new and young SMEs (up to seven  years old) exported within the EU and 15 % of them 
exported outside the EU and that only 2 % of new and young SMEs expanded cross-border 
through foreign direct investment30. Morevoer, the study showed that young SMEs are more 
likely to enter into technological cooperation with foreign firms, compared to older SMEs. In 
the  2014  European  Parliament  of  Enterprises,  84  %  of  SMEs  stated  that  the  Single  Market 
was not  sufficiently integrated and was not  allowing their company to  operate and compete 
freely31.  

Barriers to cross-border expansion 

Start-ups  and  SMEs  find  it  difficult  to  identify  and  meet  the  regulatory  requirements  when 
trading across borders. Amongst others, SMEs and start-ups complain about a heavy burden 
that a set of VAT registration and reporting obligations puts on them32. Compliance with the 
VAT rules inevitably becomes more complicated and burdensome when a business engages in 
online  cross-border  transactions  with  customers  located  in  other  Member  States  or  third 
countries33. Since VAT is levied in the country of the customer and in accordance with that 
country's  laws,  different  national  VAT  rules  will  apply  and  different  tax  authorities  will  be 
involved. Overall, 16 % of SMEs that are trading across the borders and 18 % of those that do 
not trade internationally perceive complicated foreign taxation regimes as a major obstacle to 
cross-border expansion34.  

As  regards  company  law,  there  persist  differences  between  Member  States’  company  laws 
and  when  founders  set  up  subsidiaries  or  new  companies  in  other  Member  States  they  face 
different  legal  or  administrative  requirements  than  in  the  Member  State  of  their  primary 
establishment.  These  differences  result  in  costs  for  companies.  Although  all  companies 
wishing  to  expand  cross-border  are  affected,  these  administrative  and  legal  burdens  are 
proportionally  much  heavier  for  SMEs,  who  often  have  smaller  financial  means  and 
organisational resources than larger companies35. Costs related to compliance with legislation 
and legal advice related to set-up were mentioned by almost 62 % of companies and business 

28 Cernat, L, A Norman-Lopez and A D T-Figueras, 'SMEs are more important than you think! Challenges and 
Opportunities for EU exporting SMEs', Chief Economist Note no. 3, DG TRADE, Brussels, 2014. 
29 Bravo-Biosca, A., 'Where is Europe’s Starbucks? Or why Europe needs a new Single Market for entrepreneurs 
to save the Euro, close the north-south divide and drive long term economic growth', quoting Growth Dynamics, 
a  report  by  Nesta  and  FORA  that  maps  the  distribution  of  business  growth  in  Europe  and  the  USA,  and 
Bruegel’s Working Paper 2008/03, which shows that only 2 per cent of the European companies in the world’s 
largest 500 firms by market capitalization were founded after 1975, compared to 14 per cent in the USA. 
30 European Commission, 'Internationalisation of SMEs', Flash Eurobarometer 421, 2015. 
31 http://www.parliament-of-enterprises.eu/upload/45_EPEresults_16Oct14_5446157c3e2b1.pdf  
32 Around 75-80 % of respondents mentioned the change in VAT regulations which came into effect in January 
2015 as being a significant (or indeed the most significant) inhibitor to cross-border activities. 'Startups and the 
Digital Single Market, Final Report', NESTA, tech.eu and The Lisbon Council, 2015. 
33 European Commission, Commission Staff Working Document ‘A Digital Single Market Strategy  – Analysis 
and evidence’ SWD(2015) 100, pp. 31-33. 
34  European  Commission,  'Internationalisation  of  SMEs',  Flash  Eurobarometer  421,  European  Commission, 
2015. 
35  European  Commission,  Commission  Staff  Working  Document  'Impact  Assessment  Accompanying  the 
document  Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  on  single-member  private 
limited liability companies', SWD(2014) 124. 

10 

 
                                                 
federations  in  the  2013  on-line  consultation  as  one  of  the  biggest  'company  law  obstacles' 
preventing companies from expanding their activities abroad36. In addition, existing rules in 
company law do not sufficiently integrate the benefits of digital technology37. 

There is also insufficient legal clarity as regards carrying out cross-border operations, such as 
cross-border divisions, where there is no EU legal framework in place, but also cross-border 
mergers, where stakeholders called for improvements in the current EU framework as regards 
a number of procedural as well as substantive rules38.  

It  appears  that  the  ex-ante  perception  of  barriers  to  cross-border  expansion  is  often  much 
greater than the actual assessment of those barriers once a firm has attempted to scale up. In a 
recent Digital Single Market survey, the percent of firms fearing barriers to operate in another 
Member  State  (e.g.  VAT  rules,  consumer  protection  laws  or  delivery  services)  was  almost 
twice  as  high  compared  to  the  firms  that  actually  had  tried  operating  in  another  Member 
State39.  These  results  were  confirmed 
the  barriers  for 
in 
internationalisation for SMEs40. This shows that small firms without international experience 
lack confidence and sufficient information to enter foreign markets and to deal with foreign 
regulations.  

the  recent  survey  on 

Access to finance 

EU start-ups face particular challenges in obtaining capital for their launch and initial phases, 
limiting  their  investment  opportunities,  expansion  potential  and  innovation.  Similarly,  start-
ups who succeed in growing leverage on average in Europe much less funding in later stages 
of  growth  than  their  American  counterparts.  In  addition,  regulatory  constraints  in  some 
Member States limit the overall supply of venture capital financing for innovative companies, 
limiting their growth prospects. 

on 

on 

the 

and 

and 

2013 

2015 

study 

public 

directive 

divisions 

consultation 

cross-border  mergers 

cross-border  mergers 

36  Results  of  the  2013  on-line  consultation  -  http://ec.europa.eu/internal_market/consultations/2013/single-
member-privatecompanies/ 
37 European Commission, Commission Staff Working Document ‘A Digital Single Market Strategy  – Analysis 
and evidence’ SWD(2015) 100, pp. 75-78. 
38  European  Commission, 
evaluation 
(http://ec.europa.eu/internal_market/company/docs/mergers/131007_study-cross-border-merger-
directive_en.pdf) 
(http://ec.europa.eu/internal_market/consultations/2014/cross-border-mergers-divisions/index_en.htm) 
39 At least one third of companies that sell, used to sell, or tried to sell online to other EU countries say that “not 
knowing  the  rules  that  need  to  be  followed  in  another  country”  is  a  problem  (37  %),  and  for  15  %  of  these 
companies this is a major one. Companies that are not currently selling online stress that “not knowing the rules 
to  be  followed”  would  be  a  problem  (54  %),  with  29  %  of  them  having  the  opinion  this  would  be  a  major 
problem.  Further,  companies engaged  in online  selling  perceive  delivery  costs  (27  %), expansive  cross-border 
dispute  resolution  (21  %)  and  complicated  foreign  taxation  regimes  (15  %)  as  major  barrier  to  cross-border 
expansion. These barriers are even perceived to be more important by SMEs that do not trade cross-border. They 
mentioned  that  delivery  costs  (28 %)  and  costly cross-border dispute resolution (32  %)  are  major  obstacles  to 
enter foreign markets. Companies engaged in online activities, Flash Eurobarometer 413, European Commission, 
http://ec.europa.eu/public_opinion/flash/fl_413_en.pdf 
40 24 % of SMEs that currently/previously export/exported say that “too complicated administrative procedures” 
are a major problem, compared to 34 % of SMEs that do not export. Further, companies engaged in exporting 
perceive  delivery  costs  (21  %),  expansive  cross-border  dispute  resolution  (20  %)  and  complicated  foreign 
taxation regimes (16 %) as major barrier to cross-border expansion. These barriers are even perceived to be more 
important  by  SMEs  that  do  not  trade  cross-border.  They  mentioned  that  and  costly  cross-border  dispute 
resolution  (27  %),  higher  delivery  costs  (22  %)  and  complicated  foreign  taxation  regimes  (18  %)  are  major 
obstacles  to  enter  foreign  markets.  Internationalisation  of  SMEs  (2015),  Flash  Eurobarometer  421,  European 
Commission. 

11 

 
                                                 
Venture  capital  investment (as a percentage of  GDP) remains low despite the policy efforts 
(e.g. tax incentives, supportive legal regimes, etc.) from EU Member States and the EU. This 
may stem, inter alia, from idiosyncratic regulatory regimes in the EU as regards exit routes 
for  venture  capital,  i.e.  initial  public  offerings  (IPOs)  and  merger  and  acquisitions  (M&As) 
and  thus  smaller  size  of  individual  financial  markets.  Furthermore,  third-country  venture 
capitalists  (such  as  those  from  the  United  States)  seem  to  perceive  European  regulations  as 
difficult to navigate and manage on the one hand, and markets and policies fragmented on the 
other,  limiting  their  willingness  to  fund  European  projects.  Moreover,  individual  private 
venture  capital  funds  in  the  EU  refrain  from  investing  in  very  young  small  seed-stage 
companies, in contrast to the situation in the USA.  

Recent research suggests that higher public equity investments in start-ups are associated with 
a  lower  incidence  of  write-offs  and  a  longer  duration  for  the  investments41.  There  are, 
however, some limits to public investors’ engagement. Evidence suggests that venture capital 
backed firms have a higher probability of successful exit though IPOs and acquisitions if the 
public sector is involved, but its involvement is limited and subject to control of private funds 
managers42.  This  strengthens  the  view  that  the  public  intervention  must  be  large  enough  to 
make  a  difference,  but  not  too  large  in  order  not  to  twist  the  objectives  of  the  VC-backed 
firms towards unprofitable ones. 
In  addition,  insolvency  regimes  are  important  throughout  the  life  cycle  of  a  company43. 
Certain aspects of national insolvency frameworks hinder a smooth closure of old and setting 
up of a new company. In particular, in several Member States it takes many years for honest 
entrepreneurs who undergo bankruptcy before they can be discharged of their old debts and 
be  able  to  return  to  business  activities.  The  same  applies  to  single  businesspersons  who  are 
kept out of the economy for long periods of time as well as to honest directors who did not 
succeed in one venture and who are being disqualified from exercise of their functions.  

The long discharge periods may stigmatise failure, discourage entrepreneurship, with negative 
effects  for  employment  rates,  growth  and  innovation,  while  shorter  discharge  periods  could 
have a positive impact on the level of entrepreneurship, including the self-employment rates44. 
Therefore,  it  is  important  to  have  proportionate  'second  chance'  provisions  in  the  EU 
legislation  to  reduce  the  currently  excessive  time  periods  laid  down  in  national  legislations 
preventing honest but failed entrepreneurs to restart the economic activity. 

Regulatory barriers to innovation 

Regulatory  barriers  specifically  related  to  innovation  constitute  another  hindrance  to  the 
growth of innovative start-ups and SMEs. Empirical studies on the impacts of regulations on 
innovation present a rather heterogeneous, and often ambivalent, picture regarding the area of 

41 Buzzacchi, L., Scellato G., Ughetto E., 'The investment strategies of publicly sponsored venture capital funds', 
Journal of Banking & Finance 37, pp. 707–716, 2013. 
42  Brander,  J.A.,  Du  Q.,  Hellmann  T.F.,  'The  effects  of  government-sponsored  venture  capital  international 
evidence', NBER 16521, 2010. 
43 Today in Europe around 40 % of enterprises do not survive the first three years of their existence; an average 
of 200,000 firms are going bankrupt across the EU each year, resulting in direct job losses of 1.7 million every 
year.  Around  a  quarter  of  these  bankruptcies  have  a  cross-border  element.  See:  European  Commission,  Staff 
Working Document accompanying the Commission Recommendation on a New Approach to Business Failure 
and Insolvency, SWD(2014) 62. 
44 'A Second Chance for Entrepreneurs, Prevention of Bankruptcy, Simplification of Bankruptcy Procedures and 
Support  for  a  Fresh  Start',  Final  Report  of  the  Expert  Group  for  Directorate  General  Enterprise  and  Industry, 
2011, p. 10 (with reference to Armour, J. and Cumming D., 'Bankruptcy Law and Entrepreneurship', University 
of Cambridge Centre for Business Research Working Paper No. 300, 2005). 

12 

 
                                                 
regulation, types of companies, sectors, and types of innovation and the time horizon of the 
impacts  incurred45.  There  may  exist46:  (i)  barriers  such  as  outdated  or  blocking  legislation 
where  regulations  are  the  obstacle  for  R&I  actions,  or  too  frequent  changes  in  standards 
which may also limit the incentive for investment if a technology is relatively recent; (ii) non-
supportive  frameworks  when  the  regulatory  environment  is  not  open  to  or  not  supportive 
enough  for  R&I  actions;  (iii)  problems  with  the  implementation  of  EU  legislation  across 
Member  States  and  (iv)  gaps  when  no  EU  legislation  exists  in  a  given  field.  Innovation, 
particularly  breakthrough  innovation,  is  a  long  process  requiring  considerable  investment. 
Companies  will  not  invest  if  the  situation  is  perceived  as  being  too  risky  either  because 
existing  regulations  prevent  innovation,  or  because  the  legislative  framework  is  not 
sufficiently clear, predictable or stable. 

Bringing  innovation  to  the  market  and  large-scale  implementation  of  new  solutions  can  be 
hindered  not  only  by  lack  of  funding,  but  also  because  of  confusion  about  required 
authorisations,  ambiguous  regulation,  and  a 
testing  and 
demonstrating innovative products, processes and/or services in real world conditions47. The 
existing  evidence  is  strongly  in  favour  of  lead  markets  and  of  the  creation  of  a  favourable 
environment for fast-growing firms in innovative markets48.  

lack  of  opportunities  for 

2.3.  Making the market without borders for services a practical reality 

2.3.1.  A 'services passport' for companies 

Policy context 

Business services constitute one of the largest services sectors in the EU contributing 11.7 % 
to EU GDP and 12.6 % to overall employment49. However, a number of key business services 
sectors  suffer  from  limited  cross-border  trade  and  investment  in  the  Single  Market.  In 
addition, despite its increased economic significance in terms of size the productivity of the 
sector is low, in particular compared to the USA50. The sector is not only important in its own 
right but has important links to other sectors of the economy. As the manufacturing industry is 
an important consumer of business services, increased competition and productivity gains in 
business services would entail important benefits for the manufacturing industry as well51.  

The  EU  construction  sector  represents  5.9  %  of  EU  GDP  and  6.6  %  of  EU  total 
employment52.  Construction  is  one  of  the  most  regulated  services  sectors  in  Europe  and  its 
recovery is proving to be slow and difficult. Labour productivity in construction has evolved 
negatively over the last decade. In addition, the EU construction market is characterised by a 

45 Blind K., 'The impact of regulation on innovation', NESTA working paper, 2012. 
46 Pelkmans, J. and Renda, A., 'Does EU regulation hinder or stimulate innovation?', CEPS Special Report No. 
96, November 2014. 
47 To remove such barriers the Government of the Netherlands launched the Green Deal programme in 2011 as 
part  of  their  Sustainability  Agenda.  The  Green  Deals  are  agreements  between  various  parties  (including 
businesses,  social  organisations,  and  lower-tier  government  bodies)  that  focus  primarily  on  removing  non-
financial  obstacles,  such  as  legislation  and licensing.  The aim  is to  boost  solutions  that  are both  economically 
viable and environmentally sustainable and hence to stimulate jobs and growth. 
48 'Report of the High-level Panel on the Measurement of Innovation chaired by Prof. Andreu Mas-Colell', 2010.  
49 Eurostat, National Accounts detailed breakdown, 2011. 
50 ECORYS, 'Study on business-related services', 2012. 
51  For  example  Fernández  Corugedo  E.  and  Pérez  Ruiz  E.  'The  EU  Services  Directive:  Gains  from  Further 
Liberalization',  IMF  Working  Paper  WP/14/113,  2014;  Arentz  et  al.,  'Services  Liberalisation  in  Germany  - 
Overview and the Potential of Deregulation', 2015. 
52 Eurostat, National Accounts detailed breakdown, 2012. 

13 

 
                                                 
low  level  of  integration,  both  in  terms  of  temporary  cross-border  service  provision  and  in 
terms of establishment in other Member States. 

In  both  business  and  construction  services,  SMEs  are  often  obliged  to  work  through  local 
partners  when  offering  their  services  in  another  Member  State  to  be  able  to  comply  with 
certain  rules  of  the  country  where  the  service  is  provided.  As  a  result,  competition  remains 
limited. 
The  2015  update53  of  the  2012  study54  on  the  economic  impact  of  the  Services  Directive 
shows that construction and some key business services are still among the sectors with the 
largest number of barriers in the EU. 

Figure 1 - The number of maintained restrictions in the sectors covered by the Services Directive in all the 
EU Member States in 2014 

Construction related sectors*
Legal services
Architects
Large Retail ("grande surface")
Small Retail shops
Accountants
Tax advisers
Travel agency
Engineers
Real estate agents
Tourist guide
Restaurants
Hotels

0

50

100

*  Includes:  construction/building  companies;  certification  services  in  the 
area of construction; crafts businesses in construction sector. 

Source: Commission assessment, 2015 

Given the negative impact of existing barriers in the provision of services on the economy, the 
European  Council  recommended  to  eight  Member  States,  within  the  context  of  the  2015 
European Semester, to improve the functioning of their service markets. 

Problem and impact 

A 2015 Commission assessment of restrictions in the business services sector stemming from 
a set of regulatory and administrative barriers in four key professions shows a diverse picture 
across Member States and professions55. Whereas some Member States show relatively high 
levels of restrictiveness in each of these sectors, others impose much fewer restrictions. 

53 For further details on this update see: 
http://ec.europa.eu/DocsRoom/documents/13327/attachments/1/translations/en/renditions/native  
54  Monteagudo  J.,  Rutkowski  A.  and  Lorenzani  D.  'The  economic  impact  of  the  Services  Directive:  A  first 
assessment following implementation', European Commission economic paper 456, 2012. 
55 
on 
is 
http://ec.europa.eu/DocsRoom/documents/13328/attachments/1/translations/en/renditions/native.  It  covers  the 
following  regulatory  barriers:  reserved  activities,  tariffs,  restrictions  on  advertising,  compulsory  chamber 
membership, restrictions on corporate form, insurance obligations and authorisation requirements. In addition, it 

information 

economic 

available 

analysis 

Further 

this 

on 

14 

 
 
                                                 
 
Figure 2 - Overall restrictiveness scores per Member State (Business services) 

LU
AT
MT
DE
IT
CY
PT
EL
HR
BE
CZ
HU
RO
PL
SI
FR
ES
SK
BG
LV
LT
EE
IE
DK
NL
FI
UK
SE

Accountants

Architects

Engineers

Lawyers

0

1

2

3

4

5

6

Source: Commission assessment, 2015 

As regards construction services, companies in this sector have a high potential for mobility 
due to the nature of the services they provide: the construction itself generally takes place at 
its  final  destination,  and  many  other  specialised  services  that  contribute  to  it  are  also 
dispatched on site more or less regularly. Many construction companies consider international 
mobility an important factor for the success of their organisation, especially in terms of short-
term mobility56. 

However, barriers in several Member States deter companies from providing their services in 
other  Member  States.  A  forthcoming  study  commissioned  by  the  Commission  services 
concludes  that  the  conditions  imposed  on  construction  service  providers  for  accessing  the 

also  captures  the  performance  of  the  Points  of  Single  Contact  in  the  different  Member  States.  Higher  scores 
indicate higher restrictiveness. 
56 Montgomery, E., 'International Mobility in the Engineering & Construction Industry, Analysis and insight on 
trends and best practices', PricewaterhouseCoopers, 2008. 

15 

 
 
                                                                                                                                                         
market  (both  for  temporary  cross-border  provision  and  for  secondary  establishment)  vary 
significantly in terms of restrictiveness among the Member States covered57. 

Figure 3 - Overall restrictiveness scores per Member State (Construction) 

DK
BG
PT
IT
PL
ES
FR
EL
SI
CZ
DE
FI
NL
UK

0

1

2

3

4

5

6

Source: Ecorys, forthcoming 

This  section  will  look  in  more  detail  at  some  of  the  barriers  for  business  services  and 
construction, of which the assessment is summarised in the above figures. 

Authorisations, registrations and notifications 

Authorisation schemes are procedures that require the service provider to obtain a formal or 
implied  decision  by  a  competent  authority  to  access  or  exercise  a  service  activity.  In  the 
context  of  an  authorisation  scheme,  a  service  provider  has  to  provide  information  and 
certificates to the competent authority and cannot start the service provision until a decision 
on its application  has  been taken (formally  or  tacitly).  Authorisations are not  prohibited per 
se, but they can be maintained only if they are non-discriminatory, justified by an overriding 
reason of general interest and proportionate (Article 9 of the Services Directive). Furthermore, 
a number of rules and principles also apply to the scope, validity, procedure and conditions 
required  for  the  granting  of  the  authorisation  (Articles  10  to  13  of  the  Services  Directive). 
Authorisation  schemes  can  only  be  applied  by  the  host  Member  State  to  cross-border 
providers of temporary or occasional services when the scheme is justified and proportionate 
to protect public policy, public security, public health or the environment (Article 16 of the 
Services Directive). 

Despite a considerable reduction in the number of authorisation and registration requirements 
following  the  entry  into  force  of  the  Services  Directive,  numerous  requirements  remain  in 
place across many Member States. They are particularly burdensome where service providers 
attempt  to  offer  their services  in  another  Member  State to  the  one  where  they are  primarily 
established. In cases of secondary establishment, cross-border providers are sometimes asked 
to  show  that  they  comply  with  requirements  very  similar  to  those  applied  to  them  in  their 
Member  State  of  primary  establishment.  Temporary  cross-border  service  providers  are 

57 Bulgaria, the Czech Republic, Denmark, Germany (North Rhine-Westphalia), Greece, Finland, France, Italy 
(Milan), Netherlands, Poland, Portugal, Slovenia, Spain (Madrid) and the UK (England). 

16 

 
 
                                                 
sometimes  asked  to  comply  with  authorisations  in  the  country  of  destination  that  are  not 
clearly  justified  under  Article  16  of  the  Services  Directive,  or  they  are  asked  to  show 
compliance  with  conditions  that  are  the  same  or  very  similar  to  the  ones  applicable  to  the 
authorisation obtained in their country of establishment. 

Authorisation schemes are in some cases further complicated by the fact that the authorisation 
is  not  valid  for  the  entire  territory  of  a  Member  State  or  has  a  limited  validity  period.  In 
addition,  procedures  are  in  many  cases  overly  burdensome  due  to  requirements  to  provide 
numerous documents – often translated and at times even certified or authenticated – and the 
absence of tacit approval systems meaning service providers must await explicit permissions 
before being allowed to offer a service. 

According  to  the  2015  Commission  assessment  of  selected  business  services,  authorisation 
requirements apply in seven Member States for legal persons who provide civil engineering 
services,  in  six  Member  States  for  accounting  services  and  in  eight  Member  States  for 
architectural services. In addition, registration at the professional chamber is also sometimes 
required for the provision of the service by certain types of legal persons. Such requirements 
exist  for  architectural  services  in  nine  Member  States,  engineering  in  seven  Member  States 
and accounting in eight Member States. 

On the other hand, the study commissioned by the Commission services on the construction 
sector  found  horizontal  authorisation  schemes  required  to  allow  service  providers  to  access 
the  construction  market  –  in  six58  out  of  the  fourteen  Member  States  covered  by  the  study. 
These authorisation schemes are for example related to technical and professional capacity or 
quality management certifications and apply both to temporary cross-border provision as well 
as establishment.  

For both business services and construction, a substantial number of documents are required 
in certified or authenticated form, translated and sometimes only accepted if issued in the host 
Member States, imposing significant administrative burden. Documents of equivalent purpose 
are often not accepted. Full electronic application handling is often not available. 

Procedures  that  only  require  service  providers  to  file  a  notification  or  declaration  with  the 
competent  authority  are  not  considered  as  authorisation  schemes.  They  are  usually  less 
burdensome  than  authorisation  schemes  and  allow  for  the  immediate  start  of  the  service 
provision. However, even notification requirements can render the provision of a service more 
difficult, especially if they imply the submission of an important amount of documentation. 

Feedback obtained from stakeholders during workshops held throughout the EU and through 
an  online  questionnaire59  has  confirmed  the  problems  for  service  providers  stemming  from 
multiple  authorisations,  registration  or  prior  notification  requirements.  Responses  to  the  on-
line questionnaire showed that 79 % companies have encountered problems with registration, 
authorisations  and  licenses  when  providing  cross-border  services  (temporarily  or  through 
secondary  establishment).  As  such,  requirements  can  be  complicated,  lengthy  and  costly  to 
comply with, deterring service providers from going cross-border and forming an obstacle to 
greater cross-border trade and investment, particularly by SMEs. 

58 Bulgaria, Denmark, Greece, Italy, Portugal and Spain. 
59 In cooperation with the Member States, the Commission in 2014 organised 9 workshops across Europe to hear 
from  stakeholders  the  barriers  they  faced  in  the  services  Single  Market.  Over  300  business  and  business 
organisations participated in the events. In addition, the Commission conducted two questionnaires on barriers to 
the Single Market in services. Together 293 answers were submitted by stakeholders, mostly SMEs (81 %). 

17 

 
                                                 
Finally, the temporary posting of workers by companies from one Member State to perform a 
service  in  another  Member  State  has  become  an  important  feature  of  the  Single  Market  for 
services. In 2013, 1.74 million posted workers were registered across the Single Market (an 
increase of 13 % compared to 2012 and 27 % compared to 2010), out of which 8 % were self-
employed.  Despite  this  rapid  growth,  the  overall  share  of  posted  workers  in  the  total 
workforce remains low at about 0.6 %60. Even in construction, which features over 40 % of 
all posted workers in the EU, these make up no more than 2-4 % of the overall workforce. 

Feedback  from  service  providers  shows  that  companies  need  to  comply  with  burdensome 
formalities  when  posting  workers.  More  than  30  %  of  companies  providing  services  cross-
border which responded to the Commission questionnaire reported that existing rules on the 
posting  of  workers  constituted  a  barrier.  The  problems  related  to  posting  of  workers  were 
raised  principally  by  companies  active  in  the  construction  sector,  but  also  frequently  by 
business services companies. Stakeholders reported burdensome administrative requirements 
for  the  posted  workers  related  to  the  necessary  paperwork,  registration  obligations  and  fees 
charged  in  the  context  of  these  procedures.  In  many  cases  it  was  not  clear  for  companies 
whether their workers would be covered by the Posted Workers Directive61 and in particular 
its minimum wage rules.  

The  following  figures  summarise  the  restrictiveness  of  authorisation  and  notification 
requirements  in  business  services  and  construction  across  Member  States  both  when 
providing  services  cross-border  on  a  temporary  basis  and  in  the  case  of  secondary 
establishment. 

60 Pacolet, J. and De Wispelaere, F., 'Posting of Workers. Report on A1 portable documents issued in 2012 and 
2013', European Commission, 2014. 
61  Directive  96/71/EC  of  the  European  Parliament  and  of  the  Council  of  16  December  1996  concerning  the 
posting of workers in the framework of the provision of services. 

18 

 
 
 
                                                 
Figure 4 - Restrictiveness scores authorisation and notification requirements (Business services) 

LU
AT
SI
CY
MT
BE
CZ
HU
FR
EL
DE
HR
IT
RO
ES
LV
PL
PT
BG
SK
IE
DK
UK
LT
EE
NL
FI
SE

Accountants

Architects

Engineers

Lawyers

0

2

4

6

Source: Commission assessment, 2015 
Figure 5 - Restrictiveness scores authorisation and notification requirements (Construction) 

DK
BG
PT
IT
PL
ES
FR
EL
SI
CZ
DE
FI
NL
UK

Horizontal
authorisation
schemes

Building permits

0

1

2

3

4

5

6

Source: Ecorys, forthcoming 

19 

 
 
 
Legal form, shareholding, management and multidisciplinary restrictions 

Important  restrictions  are  found  for  companies  providing  professional  services  in  Member 
States  as  regards  the  legal  form  of  service  providers,  their  shareholding  structure,  the 
allocation  of  voting  rights  and  management  positions,  and  as  regards  multi-disciplinary 
restrictions62.  

Legal  form  restrictions  allow  for  the  provision  of  certain  services  by  partnerships  and 
sometimes by limited liability companies only. Other company types, including public limited 
liability  companies,  are  sometimes  not  allowed.  Sometimes  company  forms  incorporated  in 
another Member State are not recognized for this purpose. 

Requirements  for  shareholding  and  voting  rights  to  be  held  by  qualified  professionals  often 
bar legal persons from holding shares and sometimes go beyond imposing a simple majority. 
But  even  if  requirements  impose  a  simple  majority  to  be  in  the  hands  of  professionals  or 
companies  controlled  by  professionals,  national  laws  still  do  not  allow  companies  coming 
from  other  Member  States  which  do  not  comply  with  such  requirements  to  enter  these 
markets  in  whatever  way.  In  some  cases  professionals  holding  shares  or  voting  rights  even 
need to be established in the host Member State.  

Requirements imposing management positions to be held by professionals are also common, 
preventing companies coming from Member States without such requirements from opening a 
secondary establishment in that market or providing temporary cross-border services there. 

Finally,  multidisciplinary  restrictions  forbidding  joint  exercise  of  certain  professional 
activities  in  combination  may  also  prevent  companies  from  other  Member  States  from 
opening a secondary establishment or providing temporary cross-border services. 

All these requirements can be maintained within the boundaries of Articles 14, 15, 16 and 25 
of the Services Directive. Although some of these rules are meant to protect the independence 
of  the  professionals,  they  may  also  significantly  reduce  the  scope  for  competition,  hamper 
business  development  and  innovation,  including  the  possibility  for  domestic  companies  to 
grow,  as  joint  practice  of  certain  professional  activities  may  not  be  possible  and  access  to 
capital by outside investors is substantially complicated. As a result, small service providers 
find it difficult to grow into larger, more competitive and more productive companies.  

These requirements are serious obstacles for the establishment of service providers from other 
Member  States  and  their  cross-border  services  provision,  because  such  restrictions  might 
oblige  them  to  change  their  legal  form,  structure  or  business  model.  They  may  require 
companies  established  in  another  Member  State  to  reincorporate  and/or  restructure  their 
corporation,  as  set-up  in  the  Member  State  of  primary  establishment.  Requirements  form  a 
barrier  for providers from all  Member States regardless of restrictions in the home Member 
State, because Member States impose differing requirements. 

62 See also European Commission Staff Working Document on the outcome of the peer review on legal form, 
shareholding and tariff requirements under the Services Directive accompanying the document Communication 
from  the  Commission  to  the  European  Parliament,  the  Council  and  the  European  Economic  and  Social 
Committee on Evaluating national regulations on access to profession, SWD(2013) 402, 2 October 2013. 

20 

 
 
 
 
                                                 
Figure 6 - Restrictiveness scores legal form, shareholding, management & multidisciplinary restrictions  
(Business services)  

MT
LU
AT
CY
CZ
BE
SK
EL
BG
IT
SI
RO
HU
PT
PL
LV
LT
IE
FR
FI
EE
DK
HR
NL
ES
DE
UK
SE

Accountants

Architects

Engineers

Lawyers

0

1

2

3

4

5

6

Source: Commission assessment, 2015 

The  2015  Commission  assessment  of  legal  form  and  shareholding  requirements  and 
multidisciplinary  and  voting  rights  restrictions  showed  that  legal  form,  shareholding, 
management  and  multi-disciplinary  restrictions  exist  in  about  half  the  Member  States  as 
regards  architects,  civil  engineers  or  accountants.  The  most  excessive  requirements  are 
currently the object of infringement proceedings by the Commission. 

Legal form requirements exist in four Member States for architects and civil engineers and in 
one Member State for accountants. 

Shareholding  and  voting  rights  requirements  are  widespread.  Requirements  on  shareholding 
and voting rights for architects exist in twelve Member States. These might affect 100 % of 
the  shareholders  (and  voting  rights),  the  majority  of  the  shareholders  (and  voting  rights)  or 
two thirds of the voting rights. For civil engineers, such requirements exist in nine Member 
States  and,  similarly  to  architects,  they  affect  100  %,  the  majority  or  two  thirds  of  the 
shareholders and/or voting rights. Finally, six Member States have in place shareholding and 
voting rights requirements for accountants. They affect the majority of the shareholders (and 
voting rights), two thirds of the voting rights or the majority of voting rights. 

21 

 
 
Restrictions  on  the  joint  exercise  of  the  profession  are  found  in  nine  Member  States  for 
architects, eight Member States for civil engineers and four for accountants. The restrictions 
in question might be either a complete ban on the joint exercise with any other profession, a 
prohibition of the joint exercise among these professions (joint exercise of architectural and 
engineering  services,  for  example)  or  joint  exercise  of  these  three  professions  with  other 
service activities. 

Conditions for access to construction services 

The forthcoming study commissioned by the Commission services on construction has found 
stringent  requirements  in  several  Member  States  for  accessing  the  construction  services 
market  (both  for  established  service  providers  operating  permanently  in  the  market  and 
sometimes  also  for  temporary  cross-border  provision).  The  way  in  which  compliance  with 
them  can  be  demonstrated  presents  a  barrier  for  companies  from  other  Member  States. 
Requirements that can prove burdensome for service providers are: 

  Technical  and  professional  capacity  conditions  often  require  reorganisation  and 
adaptation of business models, including through hiring local professionals or teaming 
up  with  local  partners.  These  sometimes  oblige  service  providers  to  hold  a  certain 
degree of experience, hire a certain number of qualified personnel or even have certain 
equipment available irrespective of concrete works to be undertaken. 

  Organisational requirements to  fulfil health and  safety  standards63 (such as  imposing 
provision  of  either  internal  or  external  health  and  safety  services  under  divergent 
conditions  across  Member  States)  may  require  reorganisation  at  branch  level  for 
companies  primarily  established  in  another  Member  State  or,  more  frequently,  the 
hiring  of  a  local  (external)  service  provider  to  comply  with  the  requirement.  These 
requirements  do  not  relate  to  health  and  safety  standards  that  a  company  should 
respect  on  the  ground,  but  how  a  construction  company  is  structured  to  ensure 
compliance. 

  Organisational  (mandatory)  certification  schemes  impose  complex  requirements  on 
how a business is structured (e.g. as regards quality management systems) under strict 
and detailed national standards which differ significantly across  Member States. The 
result  of  this  divergence  is  that  sometimes  mutual  recognition  becomes  difficult  in 
practice, requiring businesses to set up local structures they would not otherwise need 
and which then must undergo multiple and expensive certification procedures. 

  Economic  or  financial  capacity  requirements  oblige  businesses  to  obtain  specific 
take  account  of 
financial  guarantees  and  may  sometimes  unjustifiably  not 
requirements  complied  with  in  the  Member  State  of  primary  establishment  (such  as 
previously obtained guarantees or even equity capital of the parent company that could 
also cover the activity in the new Member State). 

These  conditions  are  often  the  object  of  horizontal  authorisation  schemes.  However,  in 
countries  which  do  not  impose  such  controls  on  construction  service  providers,  they  are 
sometimes conditions for issuing building permits.  

63  These  requirements  stem  from  provisions  implementing  the  Framework  Directive  for  Health  and  Safety, 
Directive 89/391/EEC. 

22 

 
 
 
                                                 
Table 1 - Conditions for access to construction services 

Type of restriction 

BG  CZ  DK  DE 

EL 

FI 

FR 

IT 

NL  PL 

PT 

SL 

ES  UK 

Technical and 
professional 
capacity  

Certification 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

X 

Economic/ financial 
capacity 

X 

Good repute 

X  

X 

X 

X 

X  

Source: Ecorys, Commission assessment, forthcoming 

Mandatory professional indemnity insurance 

Insurance  obligations  are  usually  imposed  by  national  legislation  in  order  to  ensure  the 
possibility  of  redress  for  claims  against  service  providers.  Member  States  take  a  very 
heterogeneous  approach  as  regards  insurance  obligations  and  access  to  insurance  for 
provision  of  services.  An  insurance  obligation  can  be  imposed  by  way  of  legislation  or  for 
professional services by the internal rules of professional associations. 

Different approaches are taken by different Member States for the same profession or by the 
same Member State for different professions. In some cases professional associations organise 
collective  insurance  cover,  while  in  others  the  service  provider  has  to  contract  individual 
cover. These divergences are leading to legal uncertainty from the perspective of the service 
providers and represent an important barrier to cross-border activities. Insurance requirements 
for construction service providers64 also vary greatly across Member States, rendering mutual 
recognition inapplicable. 

Many  SMEs  and  professionals  find  it  hard  to  obtain  insurance  cover  for  cross-border 
activities since the market focuses on domestic needs and solutions are only available where 
there  are  economies  of  scale  (e.g.  for  major  companies  that  need  global  insurance  cover). 
Even  when  service  providers  are  required  by  law  to  be  insured,  there  is  usually  no 
corresponding obligation for the insurance industry to offer insurance coverage.  

The  Services  Directive  foresees  an  equivalence  rule  for  insurance  policies  issued  in  other 
Member States (as per Article 23 of the Services Directive). Nevertheless, while this rule as 
such was transposed in national law, in most cases Member States did not offer practical tools 
for  ensuring  that  such  equivalence  could  work  in  daily  cross-border  context.  Thus,  no 
approach  exists  on  the  comparability  and  equivalence  assessment  of  insurance  cover  from 
other Member States.  

In  addition,  the  lack  of  transparency  regarding  insurance  policies  for  the  service  providers 
concerned and regarding information about the recipients of services also creates difficulties 
in the Single Market for services. For example, in the absence of clear details regarding the 

64 In all Member States except Greece (it is de facto mandatory in the UK). 

23 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
territorial  scope  or  temporal  cover  of  insurance  policies,  competent  authorities  are  not  in  a 
position to decide about the possible equivalence of such policies. Nor can service providers 
judge if their insurance covers them going abroad. 

Finally, lack of clarity on the geographical limitations and on the period covered by existing 
insurance policies create significant risks for the client, as well as for the service provider who 
is  under  an  obligation  to  inform  the  client  about  his  insurance  coverage  and  who  may 
(wrongly)  believe  that  the  existing  insurance  policy  cover  extends  beyond  national  borders 
and is valid during a certain period. It also creates the risk of contracting double insurance. 

Figure 7 - Restrictiveness scores mandatory professional indemnity insurance (Business services) 

LT
PL
PT
IT
DE
FR
BE
SI
MT
LU
IE
HR
ES
CZ
CY
BG
AT
LV
DK
SK
FI
UK
RO
NL
EE
HU
SE
EL

Accountants

Architects

Engineers

Lawyers

0

2

4

6

Source: Commission assessment, 2015 

The above summarises the restrictiveness of professional indemnity insurance requirements in 
business services across Member States. 

Impact 

The  EU  construction  sector  is  characterised  by  very  low  integration  across  Member  States, 
both  in  terms  of  temporary  cross-border  service  provision  and  secondary  establishment. 
Regarding  temporary  cross-border  service  provision,  the  level  of  intra-EU  imports  and 
exports in construction is low. The figure below gives an indication of temporary cross-border 
trade  intensity.  It  shows  for  different  services  sectors  the  average  of  intra-EU  imports  and 
exports  compared to the total size of the sector in  terms of  turnover. This  indicates that  the 

24 

 
 
construction sector has significantly lower levels of intra-EU imports and exports compared to 
other services sectors. 

Figure 8 - Indicator of cross-border trade intensity 

Management consultancy

Computer services

Advertising and market research

20,3% 

14,2% 

11,8% 

Architect services

Engineering services

Accounting services

4,6% 

4,6% 

4,5% 

Legal services

3,1% 

Construction

0,7% 

0%

5%

10%

15%

20%

25%

Source: Eurostat (2012), Commission assessment 

This picture is also confirmed when asking SMEs active in the construction sector about their 
export  participation.  For  example,  an  EU  survey  on  internationalisation  of  SMEs65  showed 
that only 7 % of EU SMEs active in the construction sector export their services compared to 
19 % in business services, 25 % in retail and 56 % in manufacturing. Another example is the 
UK 2014 Small Business survey66 which shows that only 4 % of UK construction SMEs sell 
services outside of the UK compared to 25 % in business services and 45 % in manufacturing.  

The  levels  of  secondary  establishment  in  the  construction  sector  are  also  low.  The  figure 
below  gives  an  indication  of  the  intensity  of  secondary  establishment  in  different  services 
sectors and the manufacturing sector. It shows the proportion of total EU value added which 
is  generated  by  intra-EU  foreign  affiliates.  Here  again  construction  is  shown  as  lagging 
significantly behind other sectors. 

Figure 9 - Indicator of secondary establishment intensity 

Manufacturing

Administrative and support service activities

Retail

17% 

14% 

13% 

Professional, scientific and technical activities

8% 

Construction

5% 

0%

5%

10%

15%

20%

Source: Eurostat (2012), Commission assessment 

65 European Commission, 'Internationalisation of European SMEs', 2010. 
66 BIS, 'Small Business Survey 2014: SME employers', 2015. 

25 

 
 
 
                                                 
A 2015 European Commission assessment of the economic impact of selected barriers in four 
business  services  sectors  confirmed  significant  economic  impact  regarding  intensity  of 
competition, sector profitability and efficiency of resource allocation67. 

Concerning the impact of regulatory barriers in business services on competition, the figure 
below shows the share of companies newly establishing in a market (relative to all firms in a 
market, ‘birth rate’) for Member States with more restrictive versus those with less restrictive 
barrier levels68. It illustrates that Member States with more restrictive barrier levels have on 
average a lower number of new service providers entering their markets in each of the four 
sectors analysed.  

As  a  result,  competition  is  lower  in  these  Member  States  and  market  dynamics  are 
constrained. Indeed, Member States with more restrictive barrier levels have on average also a 
lower combined share of companies entering and exiting the market (‘churn rate’) in each of 
the four sectors analysed69. 

Figure 10 - Average birth rates for high vs. low restrictive Member States 

l

a
g
e
L

r
e
e
n
g
n
E

i

t
c
e
t
i
h
c
r
A

t
n
a
t
n
c
A

High barrier

Low barrier

High barrier

Low barrier

High barrier

Low barrier

High barrier

Low barrier

6,3% 

8,8% 

7,7% 

9,1% 

6,1% 

5,3% 

8,3% 

7,9% 

0%

2%

4%

6%

8%

10%

Source: Eurostat, Commission assessment 

67  The  assessment  used  econometric  analysis  to  estimate  the  impact  of  the  following  barriers  in  the  sectors  of 
architects,  civil  engineers,  accountants:  reserved  activities,  tariffs,  restrictions  on  advertising,  compulsory 
chamber  membership,  restrictions  on  corporate  form,  insurance  obligations,  authorisation  requirements  and 
performance of the Points of Single Contact. 
68  The  graph  compares  the  (simple)  average  of  birth  rates  (average  2010-2012)  for  the  10  most  versus  the  10 
least restrictive Member States in each sector. Greece and Croatia are excluded from the analysis given no or low 
data availability. 
69 The graph compares the (simple) average of churn rates (average 2009-2011) for the 10 most versus the 10 
least restrictive Member States in each sector. Greece and Croatia are excluded from the analysis given no or low 
data availability. One outlier has been removed from the analysis (Romania – legal). 

26 

 
 
 
 
                                                 
Figure 11 - Average churn rates for high vs. low restrictive Member States 

l

a
g
e
L

r
e
e
n
g
n
E

i

t
c
e
t
i
h
c
r
A

t
n
a
t
n
c
A

High barrier

Low barrier

High barrier

Low barrier

High barrier

Low barrier

High barrier

Low barrier

10,6% 

14,9% 

14,9% 

17,3% 

17,1% 

11,8% 

11,3% 

14,7% 

0%

5%

10%

15%

20%

Source: Eurostat, Commission assessment 

High market birth and churn rates are associated with high levels of overall competition (with 
both  domestic  and  foreign  entrants)  as  more  productive  companies  replace  less  productive 
ones, increasing the overall competitiveness of a sector.  

A  quantification  of  the  relationship  between  barrier  levels  and  birth  rates  can  be  assessed 
through a regression analysis70. To this end, an econometric model is created with birth rate as 
a  dependent  variable  and  barrier  level  as  an  explanatory  variable.  Average  firm  size  in  a 
sector is used as a control variable to approximate the possible impact on birth rates caused by 
the  presence  of  additional  possible  entry  barriers  created  by  large  incumbents.  Two  sets  of 
dummies (fixed effects for sectors and for countries) also enter the equation. 

Table 2 - Results of regression analysis barrier levels – birth rates 

Barrier level 

Average firm size 

R2 
Adjusted R2 
F 

−0.658*** 
(0.003) 
−0.103 
(0.395) 
0.976 
0.966 

91.1 
(0.000) 

Source: Eurostat, Commission assessment 
The results of this regression analysis confirm a negative and statistically significant71 relation 
between barrier levels and birth rates. In other words, Member States can increase the number 
of new service providers entering into their markets by reducing barrier levels. 

70 The regression analysis covers the four business services sectors analysed and 28 Member States. Average of 
2010-2012 birth rates per Member State and sector were used. 
71 Weighted OLS regression (with the size of a sector in each country, in terms of employment, as a weight) with 
two-dimensional  fixed  effects  (country  dummies  and  sector  dummies,  included  but  not  reported  in  the  table). 

27 

 
 
                                                 
 
On this basis, the potential impact of reducing barrier levels on birth rates can be estimated. 
Two alternative 'reform' scenarios are considered: 

  A 'central scenario' in which barrier levels are assumed to be reduced to the average level 

across all EU Member States in a given sector; 

  An 'ambitious scenario' in which barrier levels are assumed to be reduced to the average 
of  the  'top  5'  EU  Member  States,  where  the  top  5  represents  the  five  countries  with  the 
lowest barriers in a given sector. 

The results of these two scenarios for each of the four business services sectors analysed are 
shown in the figure below. Under the central scenario relative births intensity could increase 
by  2.7  %  to  6.5  %72  (EU  weighted  average),  depending  on the  sector  concerned.  Under  the 
ambitious scenario birth rates could increase by 10 % to 18.3 %73 (EU weighted average). 

Figure 12 - Estimated relative impact of reduced barriers on births intensity  

Legal

Engineer

Architect

Accountant

12,8% 

10,0% 

3,3% 

2,7% 

Ambitous

18,3% 

Central

4,6% 

6,5% 

14,6% 

0%

5%

10%

15%

20%

Source: Eurostat, Commission assessment 

Concerning the impact of regulatory barriers in business services on profitability, the figure 
below  shows  average  profit  rates74  for  Member  States  with  more  restrictive  versus  less 
restrictive barrier levels75. It shows that Member States with more restrictive barriers have on 
average higher profit rates in each of the four business services sectors analysed. This is also 
indicative  of  the  fact  that  consumers  in  those  Member  States  are  paying  higher  prices  for 
these services than consumers in Member States with lower barriers.  

based on 102 observations. The p-values are in the parentheses. The barrier level is statistically significant (at p-
value well below 1 %) and the model has a large explanatory power (high R-squared and F-statistic). 
72  This  corresponds  to  the  increase  of  the  birth  rate  by  between  0.24  of  a  percentage  point  and  0.43  of  a 
percentage point. The impact in per cent is calculated as a relative increase in the birth rate. 
73 The corresponding increase of the birth rate: between 0.88 percentage point and 1.41 percentage points. 
74 Approximated by gross operating surplus/turnover. 
75 The graph compares the (simple) average profit rates (average 2010-2012) for the 10 most versus the 10 least 
restrictive Member States in each sector. Some data is missing for the Czech Republic. 

28 

 
 
 
 
                                                                                                                                                         
Figure 13 - Average profit rates for high vs. low restrictive Member States 

l

a
g
e
L

r
e
e
n
g
n
E

i

t
c
e
t
i
h
c
r
A

t
n
a
t
n
c
A

High barrier

Low barrier

High barrier

41,4% 

30,9% 

19,9% 

Low barrier

12,2% 

High barrier

Low barrier

High barrier

Low barrier

28,6% 

15,8% 

24,0% 

22,4% 

0%

10%

20%

30%

40%

50%

Source: Eurostat, Commission assessment 

Combining  the  results  of  the  above  econometric  analysis  on  the  link  between  barrier  levels 
and birth rates with a recent Commission study quantifying the impact of birth rates on profit 
rates in the four sectors analysed76, the relationship between barrier levels and profit rates can 
be estimated. The underlying reasoning for this is that changes in barrier levels affect business 
dynamics and, through it, the profit rates of the sector. 

Figure 14 - Link barrier levels and profit rates 

Barrier 
indicator 

Birth rate 

Profit 
rates 

This  two-step  approach  (illustrated  in  the  graph  above)  allows  us  to  estimate  the  potential 
impact of reducing barrier levels on profit rates. For this, two alternative reform scenarios are 
again  considered,  the  central  scenario  and  the  ambitious  scenario  illustrated  above.  In  the 
central scenario, profitability in the sectors analysed could be reduced by 3.5 % to 10.9 %77 
(EU weighted average) depending on the sector concerned. In a more ambitious scenario, they 
could decrease by 13.7 % to 34.2 %78 (EU weighted average).  

76 Canton E., Ciriaci D., and Solera I., 'The Economic Impact of Professional Services Liberalisation', European 
Economy, Economic Papers 533, 2014. 
77 This corresponds to the decrease of the profit rate by between 1.6 percentage point and 3.0 percentage points. 
The impact in per cent is calculated as a relative decrease in the profit rate. 
78 The corresponding decrease of the profit rate: between 6.1 percentage points and 6.2 percentage points. 

29 

 
 
 
 
 
                                                 
Figure 15 - Estimated relative impact of reduced barriers on profitability 

-13,7% 

Legal

-3,5% 

-34,2% 

-30,7% 

-9,3% 

-7,7% 

-24,5% 

-10,9% 

-40% -30% -20% -10%

0%

Ambitous

Central

Engineer

Architect

Accountant

Source: Eurostat, Commission assessment 

As  regards  the  impact  of  regulatory  barriers  to  business  services  on  productivity,  allocative 
efficiency  reflects  the  extent  to  which  productive  factors  are  allocated  towards  their  most 
efficient  use (based  on the  market shares  of  more versus less productive firms)  and thereby 
constitutes a key measurement of the productivity and competitiveness of a given economic 
sector.  The  four  sectors  assessed  are  characterised  by  low  and  even  negative  levels  of 
allocative efficiency in most Member States.  

Figure 16 - Relation allocative efficiency index and barrier levels 

x
e
d
n

i
y
c
n
e
i
c
i
f
f
e
e
v
i
t
a
c
o

l
l

A

20%

10%

0%

-10%

-20%

-30%

-40%

-50%

0

1

2

3

Barrier level 

4

5

Source: Eurostat, Commission assessment 
The figure above shows the relationship between the allocative efficiency index79 and barrier 
levels80. This indicates that Member States with higher barrier levels have a less efficient flow 

79 This index is calculated on the basis of labour productivity and market shares statistics, capturing the extent to 
which  more  productive  firms  have  higher  market  shares.  The  potential  increases  are  expressed  in  percentage 

30 

 
 
 
                                                 
 
 
 
 
of resources to their most productive use, which has a negative impact on overall productivity 
in these sectors. 

Combining the results of the econometric analysis on the link between barrier levels and birth 
rates with the above-mentioned recent Commission study also quantifying the impact of birth 
rates  on  allocative  efficiency  in  the  four  business  services  sectors  analysed,  we  are  able  to 
estimate  the  relationship  between  barrier  levels  and  allocative  efficiency.  The  underlying 
reasoning for this is that changes in barrier levels affect business dynamics and, through it, the 
allocative efficiency of the sector (see graph below). 

Figure 17 - Link barrier levels and allocative efficiency 

Barrier 
indicator 

Birth rate 

Allocative 
efficiency 

This two-step approach allows estimation of the potential impact of reducing barrier levels on 
allocative efficiency, again using the same two alternative 'reform' scenarios as above. In the 
'central scenario' the allocative efficiency index in the sectors analysed could be increased by 
2.0 to 3.7 percentage points (EU weighted average) depending on the sector concerned. In a 
more ambitious scenario, they could increase by 7.7 to 12.4 percentage points. 

Figure 18 - Estimated impact of reduced barriers on allocative efficiency (percentage points) 

Legal

Engineer

Architect

Accountant

0

2,0 

2,1 

3,1 

3,7 

5

7,7 

7,8 

8,4 

12,4 

Ambitous

Central

10

15

Conclusion 

Source: Eurostat, Commission assessment 

Conditions  imposed  on  service  providers  to  access  the  market  in  a  number  of  key  business 
services sectors and the construction sector vary significantly across Member States in terms 
of restrictiveness. This makes it difficult and in some cases even impossible for companies, in 
particular SMEs, to provide services in other Member States.  

points  given  that  in  several  cases  this  index  has  a  negative  value.  For  additional  details  on  the  Allocative 
Efficiency index see European Commission, 'Product Market Review 2013: financing the real economy', 2013. 
80 The graph shows average allocative efficiency (AE) indices for the accounting and legal sector and for those 
Member States where this data is available. There is no disaggregated data available on AE for the architect and 
engineer sectors. 

31 

 
 
 
                                                                                                                                                         
Evidence shows that the EU construction sector is indeed characterised by very low levels of 
integration across  Member States both  in  terms of temporary  cross-border service provision 
and  secondary  establishment.  Removing  barriers  would  increase  cross-border  activities  and 
contribute to more competition in the construction market.  

In  addition,  the  analysis  undertaken  confirms  that  reducing  barrier  levels  in  the  business 
services sectors assessed would generate more intensive competition as a result of more firms 
entering the market. It would also lead to benefits for consumers in terms of lower prices as a 
result of reduced profit rates. Finally, the analysis confirmed that lower barriers would lead to 
more performant sectors characterised by a stronger allocative efficiency. 

2.3.2.  Modernising regulation of professions 

Policy context 

Regulated  professions  are  professions,  access  to  which  or  pursuit  of  which,  is  conditional 
upon the possession of specific professional qualifications or for which the use of a specific 
title is protected. As a consequence, a large number of professional activities are reserved for 
professionals meeting these requirements so as to reduce the information asymmetry between 
service providers and consumers and to protect the public from unqualified practitioners. The 
exercise of economic activities can also be linked to other requirements81, such as mandatory 
membership 
legal  form  and 
shareholding requirements etc.  

in  professional  organisations, 

insurance  requirements, 

Differences  in  regulatory  approaches  within  one  and  the  same  profession  or  differences  in 
organising  professions  can  be  significant  across  Member  States.  They  reflect  the  fact  that 
Member  States  are  entitled  to  establish  safeguards  to  protect  certain  overriding  reasons  of 
public interest, in line with the case-law of the Court of Justice of the European Union, and 
diverging views as to whether such protection is necessary and how it is to be achieved.  

While professional licensing may indeed remedy the inefficiencies derived from asymmetric 
information and provide incentives to invest in skills, it may also limit employment, increase 
prices, and weaken competition. The tension between these two conflicting views has shaped 
the debate on the desirability and proportionality of regulation of professions. In times of high 
unemployment,  fiscal  austerity,  and  economic  recession,  the  impact  of  labour  market 
regulation on the creation of new jobs, wages, labour mobility, and economic performance is 
of  central  importance  for  the  policy  debate  in  Europe.  Indeed,  given  the  first  results  of  the 
peer  review  of  regulation  of  professions  in  the  EU  (‘mutual  evaluation’)82,  the  effects  of 
reforms  carried  out  by  a  number  of  Member  States  and  the  new  market  developments 
reducing  the  information  asymmetry  between  professionals  and  consumers  (which  is  the 
fundamental  justification  for  regulation  of  professions),  there  is  scope  for  reviewing  and 
adapting regulation to the evolving market situation.  

Over  5  000  professions  are  regulated  across  the  EU,  with  on  average  186  regulated 
professions  per  Member  State.  There  are,  however,  important  disparities  between  countries 
(from  72  regulated  professions  in  Lithuania  to  409  in  Hungary),  as  reported  in  the  EU 
Regulated Professions Database83. The health and social services sector accounts for 42 % of 

81  See  point  3.2.1  of  European  Commission  'Communication  on  Evaluating  national  regulations  on  access  to 
professions', 2013. 
82 http://ec.europa.eu/growth/single-market/services/free-movement-professionals/transparency-mutual-
recognition/index_en.htm 
83 The statistics are based on the information available in the database in September 2015. It must be noted that 
the definitions of most regulated professions are not harmonised at EU level and that the Member States define 

32 

 
                                                 
 
all regulated professions followed by business services (15 %), public services and education 
(9 %), transport (8.5 %) and construction (6 %). The mutual evaluation exercise conducted on 
the basis of the new Article 59 of the Professional Qualifications Directive84 in all Member 
States between 2014 and 2015 highlighted that many professions which should be considered 
as regulated were not notified as such.  

The number of regulated professions is not in itself an indicator of regulatory intensity. The 
type of regulation determines how restrictive conditions are to access the professions, and it 
can range from no regulation or title protection to reserving certain activities exclusively to (a 
group of) professionals holding specific qualifications. Regulation by way of title protection 
limits the use of the professional title to those holding the required qualifications but does not 
prevent other professionals from exercising the activities without holding the title. This form 
of  regulation  applies  to  12  %  of  all  regulated  professions  according  to  the  EU  Regulated 
Professions Database. Regulation limiting access to certain activities to those holding specific 
professional  qualifications,  referred  to  as  reserved  activities,  is  the  most  common  form  of 
regulation  across  the  EU  (55  %).  The  stricter  form  of  regulation  which  combines  both 
reserves of activities and title protection applies to 5 % of all regulated professions85. 
According  to  a  very  recent  survey  representative  of  the  active  population  in  the  EU86 
contracted in 2014 by the Commission and carried out in April 2105 by TNS Opinion in the 
28  Member  States,  at  least  21  %  of  the  labour  force  in  the  EU  (50  million  people)  can  be 
considered as working in a regulated profession87. This is the first ever survey measuring the 
prevalence  of  occupational  regulation  at  European  level  using  the  same  questionnaire  and 
methodology across all EU countries. The results show that at national level, the proportion of 
people working in regulated professions ranges from 15 % in Sweden and Denmark to 33 % 
in Germany.  

The  European  Council  has  repeatedly  stressed  the  importance  of  making  progress  on 
enhancing  the  mutual  recognition  of  professional  qualifications,  reducing  the  number  of 
regulated  professions  and  removing  unjustified  regulatory  barriers.  It  has  also  called  for  on 
Member  States  to  'identify  the  remaining  barriers  to  access  to  professions,  assess  the 
cumulative  effect  of  all  restrictions  imposed  on  the  same  profession’  and  recently  urged 
Member States to present concrete follow-up measures for structural reform88.  

from 

extracted 

Information 

the way they notify professions into the Database. The numbers of professions are hence not directly comparable 
across the countries. 
84 Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition 
of professional qualifications as recently amended by Directive 2013/55/EU. 
85 
professions: 
http://ec.europa.eu/internal_market/qualifications/regprof/index.cfm?action=homepage  .  No  information  was 
submitted by Member States for 26 % of all regulated professions and another form of regulation was in place in 
2 % of the professions present in the database of regulated professions. 
86  TNS  Opinion,  'Measuring  the  prevalence  of  occupational  regulation:  ad-hoc  survey  for  the  European 
Commission', 2015 forthcoming. 
87 Respondents were asked whether they needed to have a professional certification, a licence or to have taken an 
exam in order to practice legally the profession. Those surveyed were either in employment or actively searching 
for an employment. 
88 Council Conclusions of March 2012, October 2013, March 2015. 

regulated 

database 

the 

of 

33 

 
 
 
                                                                                                                                                         
Figure 19 – Share of regulated professions in total labour force, 2015 

35%

30%

25%

20%

15%

10%

5%

0%

K
D

E
S

T
P

V
L

R
F

I

E F
B

S
E

T
M

T
L

Y
C

T S

I

I

E
E

K
U

L
E

G
B

L
P

U
L

O
R

8
2
U
E

T
A

L
N

U
H

Z
C

K
S

E
I

R
H

E
D

Source: TNS Opinion for the European Commission, 'Measuring the prevalence of occupational regulation', 
2015, forthcoming 

Problem and impact  

Studies consistently show that if regulation is not appropriately designed and implemented, it 
may create market restrictions, limit consumer choice, raise prices and reduce the number of 
people  being  able  to  enter  the  market89.  Regulating  professions  can  also  have  a  negative 
impact  on  the  mobility  of  professionals  between  jobs  as  it  prevents  them  from  reacting 
quickly to labour market opportunities90.  

The first tangible results of the mutual evaluation exercise confirmed the regulatory diversity 
between  the  Member  States  and  that  regulatory  approaches  regarding  the  same  or  similar 
professions  often  differ  fundamentally  (no  regulation  vs.  very  stringent  regulation,  e.g. 
engineers, hairdressers91).  

For example in several Member States  certain activities such as  drawing plans or  designing 
projects are reserved to professionals holding a civil engineering professional qualification92. 
In others only the title is protected93 and in a third group of countries which do not regulate 
the  professions,  exercise  of  the  activity  is  possible  without  having  to  prove  professional 
qualifications  but  safeguards  of  general  interest  are  laid  down  in  rules  concerning  the 
execution  of  the  works  or  in  consumer  protection  laws94.  In  the  case  of  reserved  activities, 
these  often  vary  in  scope  from  one  country  to  another  which  makes  it  complicated  for 
professionals  to  exercise  their  activity  cross-border  or  establish  in  another  Member  State. 
When  relocating  to  another  Member  State  to  provide  services  temporarily  or  to  establish 
permanently,  professionals  might  be  required  to  have  their  professional  qualifications 

89 Canton E., Ciriaci D., and Solera I., 'The Economic Impact of Professional Services Liberalisation', European 
Economy, Economic Papers 533, 2014 and Kleiner, 'Licensing Occupations: Ensuring Quality or Restricting 
Competition?', Upjohn Institute Press, 2006. 
90 Prantl and Spitz-Oener, 'How does entry regulation influence entry to self-employment and occupational 
mobility?', Economics of Transition , 2009. 
91 For details on certain professions discussed in depth during the mutual evaluation process in 2014 and 2015 
please see sectoral reports: http://ec.europa.eu/growth/single-market/services/free-movement-
professionals/transparency-mutual-recognition/index_en.htm  
92 E.g. Austria, Poland, Portugal. 
93 E.g. Belgium, France, Germany, Ireland and the United Kingdom: this means access to the profession is not 
restricted, but providers need to hold the necessary qualification if they want to use the title. 
94 E.g. the Netherlands, Sweden. 

34 

 
 
                                                 
recognised  in  the  host  Member  State.  The  Professional  Qualifications  Directive  provides  a 
comprehensive legal framework for such recognition of qualifications. 
The  evaluation95  of  the  Professional  Qualifications  Directive  carried  out  in  2011  provided 
information  on  the  difficulties  of  its  daily  application  by  professionals  and  competent 
authorities. The findings of the evaluation were also echoed in the impact assessment on the 
revision of the Directive96. 

In  the  two  questionnaires  conducted  by  the  Commission  in  2014  on  barriers  to  the  Single 
Market in services, where 293 answers were submitted by mostly SMEs, problems with the 
recognition of professional qualifications were reported by 41 % of companies97. Many found 
the  recognition  procedures  to  be  lengthy  and  costly98.  Other  difficulties  reported  stemmed 
from  the  lack  of  an  EU-wide  harmonised  definition  of  regulated  professions  and  of 
educational  training  requirements.  Companies  also  reported  problems  concerning  the 
recognition  of  qualifications  in  specific  sectors (e.g.  construction  together  with  engineering, 
IT,  consultancy  and  legal  services)  and  particular  difficulties  encountered  in  decentralised 
Member States where professional qualifications requirements can differ between regions. 

The mutual evaluation process also brought to light that the justification and proportionality 
of the national regulations are not always properly assessed. Justification and proportionality 
considerations  differ  for  the  same  activity,  with  some  Member  States  relying  on  the 
functioning of the market and general legislation (such as consumer protection), while others 
argue  for  stringent  professional  regulation.  The  observed  differences  in  the  ways  countries 
regulate the same or similar professions show that there is room for considering alternatives 
beyond  the  cross-border  context;  evidence  consistently  shows  that  performance  of  national 
markets  is  adversely  affected  by  too  stringent  access  requirements  which  shift  resources  to 
less effective use99, limit consumer choice, raise prices and reduce the number of people being 
able to enter the market100. 

The effects of recent reforms of regulation of professions  

Improving access to professions, in particular through a more proportionate and transparent 
regulatory  environment  in  Member  States,  would  facilitate  the  mobility  of  qualified 
professionals in the Single Market and the cross-border provision of professional services. As 
confirmed  by  empirical  studies,  modernising  the  regulation  of  professions  tends  to  have  a 
positive impact on employment, entrepreneurship, consumer choice and the affordability of 
services.  

95 European Commission, 'Evaluation of the Professional Qualifications Directive', 2011. 
96  European  Commission,  'Impact  assessment  accompanying  document  to  the  proposal  for  a  directive  of  the 
European  Parliament  and  of  the  Council  amending  Directive  2005/36/EC  on  the  recognition  of  professional 
qualifications  and  Regulation  on  administrative  cooperation  through  the  Internal  Market  Information  System', 
SEC(2011) 1558. 
97  The  Commission  invited  stakeholders  to  respond  to  an  open  online  questionnaire  on  barriers  to  the  Single 
Market  in  services  between  July  2014  and  January  2015.  In  total  293  responses  were  submitted,  81  %  of 
responses coming from SMEs. 
98  The  quarterly  Your  Europe  Advice  feedback  reports  demonstrate  that  there  are  some  significant  remaining 
barriers,  notably  the  high  fees  for  the  recognition  procedures,  regarding  the  national  procedures  on  the 
recognition  of  professional  qualifications  which  were  not  directly  addressed  by  the  latest  revision  of  the 
Professional Qualifications Directive in 2013. 
99 Canton E., Ciriaci D., and Solera I., 'The Economic Impact of Professional Services Liberalisation', European 
Economy, Economic Papers 533, 2014. 
100 
professionals/index_en.htm 

http://ec.europa.eu/growth/single-market/services/free-movement-

Commission, 

European 

2014, 

35 

 
                                                 
Building on empirical evidence and on the information provided by the EU Member States 
during the process of mutual evaluation, the Commission will propose measures to improve 
access to professions at EU and national level.  

In  2014,  the  Commission  launched  a  series  of  targeted  studies  to  measure  the  economic 
impact of reforms on regulated professions. These studies analysed reforms in Germany, the 
UK, Greece and Italy.  

Reforms of the craft sector in Germany 

Germany is one of the Member States in which a specific qualification (Meister) was required 
in  order  to  engage  in  self-employment  for  some  craft  professions.  This  requirement  was 
removed  for  53  of  94  occupations  in  craftsmanship  in  an  amendment  to  the  German  Trade 
and Crafts Code in 2004. For the other 41 occupations the requirement was partly reduced.  

Results tend to demonstrate that the reforms undertaken have led to a further opening of the 
market101. Following the reform of 2004, for those craft professions which were deregulated 
there was a doubling in the number of new entrants in these professions and a net increase in 
the number of self-employed in the sector, while no evidence was found that exit rates were 
affected significantly (they did increase, but less than entry rates). Importantly, more than five 
years after the reform more self-employment than before the reform is observable (see figure 
below).  These  results  are  robust  with  respect  to  variations  of  the  definition  of  the  period 
before and after the reform. The influence of other policies, such as subsidies for unemployed 
people trying to set up a business, or the 2004 and 2007 EU enlargements, are accounted for. 

101 Rostam-Afschar D., ‘Regulatory Effects of the Amendment to the HwO in 2004 in German Craftsmanship’, 
Free University Berlin and German Institute for Economic Research (DIW Berlin), a study commissioned by the 
European 
http://ec.europa.eu/growth/single-market/services/free-movement-
professionals/index_en.htm 

Commission, 

2015, 

36 

 
 
 
                                                 
Figure 20 - Craftsmanship and entrepreneurship policies: total, unsubsidized (without SPP), and German 
self-employed craftsmanship in thousands102 

Source: Rostam-Afschar D., ‘Regulatory Effects of the Amendment to the HwO in 2004 in German 
Craftsmanship’, 2015, German micro census and author's calculations 

Overall employment did not react much to the reform because most of the new businesses are 
one-person-businesses  founded  partly  by  former  employees.  These  one-person-businesses 
may be expected to grow in the future. Another direct consequence of the larger number of 
one-person-businesses is that the share of businesses providing training receded. However the 
study  demonstrates  that  training  activity  was  only  reduced  slightly  due  to  the  reform  and 
explains that the reasons for the decline in the number of apprentices in craftsmanship may in 
particular be linked to an increasing number of people choosing to study at universities.  

Reforms in Greece 

In  Greece,  a  major  reform  started  in  2010  and  lifted  restrictions  on  entry  and  conduct 
regulations in a large number of professions across several economic sectors103. Results show 
that  the  reform  has  led  to  lower  prices  for  consumers  of  services  provided  by  real  estate 
agents, 
and 
physiotherapist/physiotherapy  centre  services104.  Figure  21  shows  that  the  prices  of  services 
did  adjust  to  the  recession,  but  there  was  a  variation  on  the  speed  and  level  of  adjustment 
according to the regulation regime, with prices in the regulated professions appearing to have 
been  more  flexible.  The  study  concludes  that  this  could  have  been  because  in  these 

professions, 

accounting 

consulting 

services 

legal 

and 

tax 

in 

102  Self-Employed  Craftsmen:  total  number  of  self-employed  craft  businesses.  German  Self-Employed 
Craftsmen: total number of self-employed craft businesses having indicated German citizenship. SE-Craftsmen 
without SPP: self-employed who indicate not having received public payments (SSP). 
103 The professions analysed in the study were chosen according to the data availability and the date where the 
law  entered  into  force,  i.e.:  lawyers-law  firms,  notaries-notary  firms,  auditors-chartered  accountants, 
accountants-tax consultants, dentists-dental practices, physiotherapists-physiotherapy centres, taxi drivers-taxis, 
shipping agents, tourist guides, chartered valuers and real estate agents. 
104  Athanassiou  E.,  Kanellopoulos  N.,  Karagiannis  R.,Kotsi  A.,  ‘The  effects  of  liberalisation  of  professional 
requirements in Greece’, Centre for Planning and Economic Research (KEPE), Athens, a study commissioned 
by 
the  European  Commission,  2015,  http://ec.europa.eu/growth/single-market/services/free-movement-
professionals/index_en.htm 

37 

 
 
                                                 
professions  there  were  greater  margins  for  price  reductions  as  initial  prices  were  usually 
higher. 

Figure 21 – Evolution of consumer price index for the services and the regulated and not regulated 
professions, 2009Q1-2014Q2 

Source: Athanassiou E., Kanellopoulos N., Karagiannis R.,Kotsi A., ‘The effects of liberalisation of professional 
requirements in Greece’, 2015, ELSTAT, authors’ calculations 

Empirical data indicate significant positive employment effects for the professions of notaries, 
auditors, tourist guides and chartered valuers. With respect to service quality, there are some 
indications of possible positive effects of the reforms in the legal and accounting services, taxi 
services,  charter  valuer  services  and  real  estate  services.  In  the  case  of  tourist  guides,  no 
evidence  of  a  change  in  service  quality  as  a  result  of  the  reforms  could  be  empirically 
demonstrated.  

Reforms of nursery school profession in the United Kingdom 
The UK case  study105 looked  at the  economic impact of the introduction  of licensing in the 
case  of  nursery  school  workers  (The  Childcare  Act  2006)  and  security  occupations  (Private 
Security Act 2001). In the case of nursery school workers the study found that, in line with 
the economic theory, introducing licensing (restricting access to this profession) resulted in a 
significant negative impact on employment but also brought a significant positive impact on 
skill levels and an overall significant positive impact on quality. In the case of regulation of 
security  workers,  results  show  a  significant  positive  effect  on  wages  and  quality  but  no 
significant impact on employment or skills. Given that for security guards increased quality 
was achieved through requiring a clean criminal record the authors suggest that depending on 

105  Koumenta  M.,  Amy  Humphris  A.,’The  Effects  of  Occupational  Licensing  on  Employment,  Skills  and 
Quality:  A  Case  Study  of  Two  Occupations  in  the  UK’,  Queen  Mary  University  of  London,  a  study 
commissioned  by  the  European  Commission,  2015,  http://ec.europa.eu/growth/single-market/services/free-
movement-professionals/index_en.htm  

38 

981001021041061082009q12010q12011q12012q12013q12014q1QuarterNot regulatedRegulatedCPI Services 
 
                                                 
the  profession,  a  high  level  of  quality  can  be  ensured  by  regulation  of  other  aspects  than 
qualifications. 

Reforms of pharmacist profession in Italy 
The  case  study  on  Italy106  finds  some  impact  of  the  2006  reform  on  the  market  for 
pharmacists  with  new  entrants  in  OTC  (over-the-counter)  market,  increasing  demand  for 
pharmacists leading to higher earnings of young pharmacists and higher overall employment.  

Evidence on effects of reforms discussed with stakeholders  

Some  of  these  results  were  presented  and  discussed  at  two  seminars  organised  by  the 
Commission  in  2014 in the framework  of the Single Market  Forum107. The objective of the 
events was also to consult stakeholders on the mutual evaluation of regulated professions and 
to  exchange  experience  between  Member  States  on  the  liberalisation  reforms  ongoing  and 
completed. Discussions touched amongst others on economic aspects of the 2003/04 reform 
in  Germany  where  evidence  shows  that  the  reform  encouraged  new  entries  in  those 
professions where entry requirements were relaxed whilst exit rates remained about constant. 
Views from other EU countries were also presented, amongst others from tax advisors in the 
Netherlands, a profession which is not regulated and has not seen a decline in quality of the 
services provided, from the UK government which deregulated legal services, from the Polish 
government  which  is  currently  implementing  the  last  phase  of  an  ambitious  reform  of 
regulated  professions,  the  broader  effects  of  which  remain  to  be  assessed  but  effects  on 
employment  can  already  be  seen108  (legal  services:  access  to  bar  relaxed,  the  number  of 
lawyers  and  solicitors  doubled  between  2010  and  2014)  and  from  the  French  government 
which has recently initiated reforms of a number of professions. The importance of the mutual 
evaluation as one of  the priorities in the area  of the Single Market to  contribute to  increase 
employment, especially of young people, was emphasised and Poland was used as one of the 
examples for other Member States to show that reforms can effectively be pursued and that 
they already show positive effects on employment. 

2.4. 

Addressing restrictions in the retail sector  

Policy context 

Retail and wholesale services, also known as distributive trades, represent 9.6 % of the EU's 
value added and  accounted  for 13.1 %  of the EU's total employment in  2012. The  sector is 
particularly  important  for  youth  employment  with  13.7  %  of  employees  in  the  15-24  age 
range.  More  than  6  million  companies,  i.e.  29  %  of  all  EU  undertakings  are  active  in  this 
sector. In 2011, the retail sector alone109: 

-  Employed 18.6 million people (8.3 % of the EU workforce) – more than the construction 
sector and three times  as  many as  financial  services  or  information and communication 
activities; 

-  Generated  EUR  2.592  billion  of  turnover  (10.9  %  of  the  total  for  the  non-financial 

business economy); 

Alberto 

College, 

106 Pagliero M., ‘The effects of recent reforms liberalising regulated professions in Italy’, University of Turin and 
Carlo 
2015, 
http://ec.europa.eu/growth/single-market/services/free-movement-professionals/index_en.htm 
107 http://ec.europa.eu/internal_market/forum/2014/events/professional-qualifications/index_en.htm  
108 Kleiner M., ‘Reforming Occupational Licensing Policies’, Humphrey School of Public Affairs, University of 
Minnesota, Discussion Paper 2015 – 1, Hamilton Project, 2015 January. 
109 University of Oxford,‘Retail &Wholesale: Key sectors for the European economy’, 2014. 

Commission, 

contracted 

European 

study 

the 

by 

a 

39 

 
                                                 
-  Generated EUR 453 billion of value added (4.3 % of total EU value added); 

-  Accounted for 3.6 million businesses. 

European retailers are also leading international players: five of the top ten global retailers are 
from the EU. In addition, the retail sector is strongly integrated into the EU economy and has 
strong links with other economic sectors.  

Retail  therefore  has  an  essential  role  to  play  in  stimulating  growth  and  job  creation  in  the 
European  economy.  The  efficiency  in  this  sector  has  implications  for  competitiveness, 
innovation and price trends. The European Council pointed out the existence of barriers to the 
functioning  of  the  retail  sector  by  recommending  that  some  Member  States  improve  the 
functioning of the retail sector during the 2015 European Semester exercise. 

Problem and impact 

The  continued  low  integration  of  the  retail  sector  in  the  Single  Market  creates  important 
economic  costs  and  leaves  untapped  economic  potential.  Several  economic  indicators  show 
that there is significant scope for improving the functioning of the European retail sector: 

  High  prices  for  retail  services  cause  unnecessarily  high  costs  for  consumers  and 
businesses. An analysis of prices in retail outlets across product categories in thirteen 
Member States has shown that the concentration of retail at the regional level is linked 
to  higher  levels  of  prices  for  the  consumers,  after  taking  into  account  the  impact  of 
other structural and economic factors that affect prices110. Mark-ups have increased in 
six Member States between 1996 and 2013111, which may indicate lower competitive 
pressure allowing firms to sell at higher prices; 

 

Innovation in products offered to the final consumer has decreased and this evolution 
is  only  partly  explained  by  the  economic  environment  prevailing  in  many  Member 
States  since  2008.  Structural  elements  (such  as  types  and  sizes  of  shops,  and 
competition in wholesale and retail) appear to contribute significantly to the evolution 
of  innovation  and  product  choice.  In  particular  the  opening  of  new  shops  is  a 
significant driver - and one of the few positive drivers together with the size of shops - 
of the introduction of innovative products. The situation is similar for product choice. 
The opening of new shops has a positive influence on the range of products offered, 
whether they are innovative or not. It is also linked to a greater variety in the size of 
products offered to consumers112; 

  Low  levels  of  labour  productivity,  coupled  with  negative  productivity  growth,  harm 
competitiveness,  growth  and  employment  in  the  sector.  From  2010  to  2012, 
productivity growth in the sector was flat in the EU, compared to a growth of 3.9 % in 
the  US113.  A  number  of  studies114  show  that  the  difference  in  retail  productivity 

110  See  European  Central  Bank  Economic  Bulletin  Issue1/2015  (page37  et  ssq),  ‘Grocery  prices  in  the  Euro 
Area’  available  at:  https://www.ecb.europa.eu/pub/pdf/ecbu/eb201501.en.pdf  See  also  European  Central  Bank 
Working paper series, N°1744/December 2014, ‘Retail market structures and consumer prices in the Euro area’ 
https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1744.en.pdf 
111  Thum-Thysen  A.  and  Canton  E.,  'Estimation  of  service  sector  mark-ups  determined  by  structural  reform 
indicators',  European  Economy  Economic  Papers  547,  2015.  Mark-ups  in  retail  have  increased  between  1996 
and 2013 in the Czech Republic, Estonia, Hungary, Ireland, Luxembourg and Slovakia. 
112 See 'The economic impact of modern retail on choice and innovation in the EU food sector' published by the 
Commission in October 2014, http://ec.europa.eu/competition/publications/KD0214955ENN.pdf 
113 Bureau of Labor Statistics, US Department of Labor, 'Productivity and costs by industry: mining, wholesale 
trade, retail trade and food services and drinking places industries', 2013; EUROSTAT data, 2012. 

40 

 
                                                 
growth  between  Europe  and  the  US  can  be  explained  by  less  restrictive  entry 
regulations, bigger investments  in  ICT  and  innovation  and  the  creation  of  new  retail 
formats in the US. These force incumbents to become more productive and trigger a 
dynamic  where  less  productive  firms  are  replaced  with  more  productive  ones.  The 
productivity  gap  is  also  evident  when  comparing  the  EU  retail  sector  with  other 
sectors  of  the  European  economy.  For  example,  at  119  %,  the  retail  sector's  wage-
adjusted  labour  productivity  is  significantly  lower  than  the  one  of  manufacturing 
(144  %)115.  Furthermore,  wage-adjusted  labour  productivity  in  retail  has  decreased 
from 126 % to 119 % between 2010 and 2012. 

Stepping up reforms to reduce regulatory barriers in the retail sector would have a number of 
positive effects. Increased competitive pressures following a reduction in barriers would lead 
to the entry and survival of more efficient and innovative firms. Consumers could enjoy lower 
prices, more variety, innovation and higher quality. This would also have positive spill-over 
effects in other sectors of the European economy. 
Recent analyses confirm that restrictive regulation is hampering competition in the sector.116 
Retailers  face  persisting  barriers  to  market  entry  created  by  certain  retail  establishment 
conditions  such  as  burdensome  and  complex  authorisation  processes  or  specific  restrictive 
requirements linked to the size and location of shops, as well as by operational restrictions.  

The improvement of conditions for establishment could help to strengthen competition in the 
retail sector and could have a positive impact on consumer choice and innovation117. 

Retail establishment 

Selecting  the  right  location  for  retail  development  and  the  timely  start  of  operations  are 
decisive for business success. As indicated in the European Retail Action Plan (ERAP)118, the 
execution depends not only on the availability of suitable real estate but also on the existence 
of commercial and spatial planning rules and procedures that do not inappropriately hamper 
competition.  

The  peer  review  on  retail  establishment  launched  in  2014,  the  information  received  from 
stakeholders as well as a supporting legal study allowed the Commission to identify barriers 
that retailers face when intending to open retail stores.  

The rules governing retail establishment vary considerably across the EU, not only at national 
level  but  also  at  regional  and  even  local  level.  Regulatory  schemes  can  focus  on  a  specific 
retail authorisation or can be found in 'planning authorisations' and in the drafting of planning 
documents. These systems can also coexist. While Member States have the power to decide 
on  the  system  which  suits  their  needs  better  and  on  the  appropriate  level  of  decision,  their 
regulatory framework should respect EU law. 

114 Maican F. and Orth M. 'A Dynamic Analysis of Entry Regulations and Productivity in Retail Trade', 2012; 
van Ark B., O’Mahony M. and Timmer M. P. 'The Productivity Gap between Europe and the US. Trends and 
causes', 2008. 
115 Eurostat, 'Structural Business Statistics', 2012. 
116  Holland  van  Giizen  Advocaten,  'Legal  study  on  retail  establishment  through  the  28  Member  States: 
Restrictions and freedom of establishment', forthcoming. 
117  ‘The  economic  impact  of  modern  retail  on  choice  and  innovation  in  the  EU  food  sector’,  EY,  Cambridge 
Econometrics Ltd., Arcadia International, 2014. 
118 European Commission, 'Communication on setting up a European Retail Action Plan', COM(2013) 36 of 31 
January 2013. 

41 

 
                                                                                                                                                         
Public policy objectives such  as environment protection, consumer protection and town and 
country planning are often put forward by Member States as reasons to justify the high level 
of  restrictions  imposed  on  retail  establishment.  When  restrictions  to  the  freedom  of 
establishment  are  justified  on  the  ground  of  such  public  policy  objectives,  they  must 
nevertheless be appropriate and proportionate to these objectives. However, the public policy 
objectives  pursued  are  not  always  clearly  expressed  and  the  appropriateness  and  the 
proportionality of the relevant regulatory framework are often not assessed.  

Member  States  impose  requirements  relating  to  the  size  of  retail  outlets  or  to  their  location 
which  may  result  in  market  entry  barriers  for  certain  store  formats  or  business  models.  For 
example,  some  Member  States  impose  a  ban  or  special  conditions  on  the  establishment  of 
certain stores depending on their size or intended location.  

Furthermore,  retail  establishment  procedures  are  often  excessively  burdensome.  Retailers 
applying for retail establishment often need to provide impact assessments (relating to traffic 
or  employment,  or  specific  retail  impact  assessments),  to  apply  for  a  large  number  of 
permits/authorisations  (planning  permit,  building  permit,  environmental  permit  and  in  some 
cases,  a  specific  retail  authorisation)  or  to  contact  several  public  entities.  Economic  data  is 
often required from retailers as part of this process. The appropriateness of the data compared 
to  the  objectives  pursued  and  the  use  of  such  data  in  practice  are  not  always  clear. 
Authorisation  procedures  may  take  years  to  go  through,  which  can  mean  that  the  planned 
establishment  is  no  longer  economically  viable.  The  Commission  attempted  to  measure  the 
level  of  restrictiveness  of  retail  establishment  regulations119  by  analysing  the  number  of 
permits required, the number of entities to be contacted and the number of market studies and 
impact  assessments  requested.  During  this  analysis  the  Commission  also  checked  for  the 
existence  of  regulations  specific  to  the  location,  for  requirements  to  provide  economic  data 
and for specific requirements linked to the size of a foreseen establishment. The figures below 
show which barriers occur most often across Member States120. 

Figure 22 - Number of countries requiring certain permits121 

All in one process

Special retail autorisation

9 

Environmental permit

Building permit

Planning permit

13 

13 

16 

10 

Source: Commission's analysis based on information from the legal study on retail establishment (HVG)122 

0

5

10

15

20

119 Methodology of the retail restrictiveness assessment: 
 http://ec.europa.eu/DocsRoom/documents/13326/attachments/1/translations/en/renditions/native 
120 Based on the regulatory situation in Member States in 2014. 
121 Some Member States require that permits are applied for separately, others have introduced integrated permits 
(a so called "all-in-one process") which can cover all permit requirements or only some of them (e.g. building 
permit may be incorporated in an all-in-one process). 

42 

 
 
                                                 
Figure 23 - Number of countries where certain impact assessments are required 

Traffic impact assessment

9 

Impact assessment related to
employment

Retail impact assessment

Other impact assessments

0

4 

5 

5

11 

10

15

Source: Commission's analysis based on information from the legal study on retail establishment (HVG)123 

Figure 24 - Number of countries with other requirements 

Requirement for economic data

13 

Regulations specific to city centre/
outside city centre

15 

0

5

10

15

20

Source: Commission's analysis based on information from the legal study on retail establishment (HVG)124 

The  level  of  restrictiveness  of  requirements  linked  to  the  size  and  location  of  retail  outlets 
varies between Member States. In the least strict Member State, retailers are required to apply 
for  an  authorisation  for  the  establishment  of  retail  outlets  above  2000  m².  For  retail  outlets 
below  this  threshold,  retailers  are  required  to  notify  the  opening  of  the  outlet.  In  the  most 
restrictive Member State, the establishment of retail outlets above 1000 m² is banned, with a 
possible  derogation  for  outlets  between  1000  and  3500  m²  and  a  total  ban  for  those  above 
3500 m². For shops below 1000 m² retailers need to apply for an authorisation. 

Operational restrictions 

In  addition  to  establishment  restrictions,  retail  businesses  face  restrictive  regulations  which 
may have a negative impact on their daily operations. Such regulations sometimes become a 
significant burden for companies, affecting their efficiency, productivity and the quality and 
price of services provided to consumers. Excessively restrictive and complex regulations can 

122  Holland  van  Giizen  Advocaten,  'Legal  study  on  retail  establishment  through  the  28  Member  States: 
Restrictions and freedom of establishment', forthcoming. 
123 Ibid. 
124 Ibid. 

43 

 
 
 
 
                                                                                                                                                         
also  make  market  entry  more  burdensome.  Because  they  often  differ  between  markets  they 
create obstacles to cross-border e-commerce sales. 

Since 1998 the OECD has regularly assessed the restrictiveness of regulations governing the 
operation of retail companies and outlets such as shop opening hours, sales of certain products 
under state monopoly, as well as rules on promotions and discounts.  

The  Commission  has  already  carried  out  an  analysis  of  the  requirements  for  retail 
establishment  to  assess  the  level  of  regulatory  restrictiveness  per  Member  State125  and  the 
economic  impact  of  such  restrictions  on  the  market  structure  and  market  dynamics  in  the 
retail sector. It will also analyse the operational restrictions that have significant effects on the 
competitiveness of the retail sector or on cross-border trade and investment.  

Impact on competition 

Impacts on competition are measured by linking the restrictiveness of retail establishment to 
market concentration, and the birth rate and churn rate of retail companies. Results indicate 
that  in  countries  with  higher  establishment  restrictions,  less  new  retail  companies  enter  the 
market.  In  countries  where  more  permits  are  required,  the  growth  of  concentration  indices 
(CR5  and  Herfindahl)  is  higher.  Concentration  also  seems  to  be  higher  in  countries  with 
regulations  concerning  the  location  of  retail  outlets  and  the  potential  involvement  of 
competitors. In addition, prices tend to be higher in countries which are more restrictive and 
have a more concentrated retail market.  

Figure 25- Correlations between the level of restrictiveness of retail establishment and churn rates of 
retail companies 

0,4

0,35

0,3

0,25

0,2

0,15

0,1

0,05

i

s
e
n
a
p
m
o
c

l
i

a
t
e
r

f
o
s
e
t
a
r
n
r
u
h
C

0

0

1

2

3

4

5

Establishment restrictions level 

Source: Eurostat 2012, Commission analysis 

125 The level of restrictiveness is presented on a scale from 0 to 6, where a higher value corresponds to stricter 
regulations. 

44 

 
 
                                                 
 
 
 
 
 
Figure 26 - Correlations between the level of restrictiveness of retail establishment and birth rates of retail 
companies 

0,25

0,2

0,15

0,1

0,05

i

s
e
n
a
p
m
o
c

l
i

a
t
e
r

f
o
s
e
t
a
r
h
t
r
i
B

0

0

1

2

3

4

5

Establishment restrictions level 

Source: Eurostat 2012, Commission analysis 

The  links  revealed  by  the  correlation  analysis  are  confirmed  by  the  results  of  a  regression 
analysis.  As  indicated  in  the  tables  below,  there  appears  to  be  a  statistically  significant 
positive impact of the level of establishment restrictions on the price level index as well as a 
negative impact on companies' birth rate and churn rate.  

Table 3 - Impact of the level of retail establishment restrictions on various indexes 

Level of retail establishment restrictions 

Constant 

Observations 
R-squared 
Standard errors in parentheses 
*** p<0.01, ** p<0.05, * p<0.1 

Price level index 

Birth rate 

Churn rate 

15.49*** 
(3.156) 
54.54*** 
(8.241) 

28 
0.481 

-0.0141** 
(0.00631) 
0.128*** 
(0.0163) 

26 
0.171 

-0.0228** 
(0.00991) 
0.246*** 
(0.0260) 

25 
0.187 

Source: Eurostat 2012 (2013 for price level index), Commission analysis 

Several  aspects  of  the  establishment  process, such  as  the  number  of  permits  required  in  the 
authorisation procedures, regulations specific to the location of a retail outlet and regulations 
leaving  room  for  potential  involvement  of  competitors  show  a  positive  correlation  with 

45 

 
 
 
 
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
market concentration measured by the Herfindahl index. This is confirmed by the results of 
the regression analysis. 

Table 4 – Impact of aspects of the retail establishment process on market concentration 

Number of permits 

Constant 

Observations 
R-squared 
Standard errors in parentheses 
*** p<0.01, ** p<0.05, * p<0.1 
Regulations on outlet location 

Constant 

Observations 
R-squared 
Standard errors in parentheses 
*** p<0.01, ** p<0.05, * p<0.1 

Involvement of competitors 

Constant 

Observations 
R-squared 
Standard errors in parentheses 
*** p<0.01, ** p<0.05, * p<0.1 

Concentration  
(HHI index) 
0.156* 
(0.0830) 
-0.0242 
(0.187) 

25 
0.133 

0.00319* 
(0.00161) 
0.0284*** 
(0.00668) 

25 
0.146 

0.00363* 
(0.00204) 
0.0333*** 
(0.00547) 

25 
0.121 

Source: Euromonitor 2014, Commission analysis 
A recent Commission study126 shows that less strict regulation of the retail sector, measured 
by  the  OECD's  Product  Market  Regulation  (PMR)  index127  fosters  competition  and  hence 
reduces firms' mark-ups. Mark-ups, i.e. the difference between the cost and the selling price 
of  a  good  or  service,  are  an  important  determinant  of  the  producer  and  consumer  surplus. 
Lower  mark-ups  increase  purchasing  power  for  consumers  and  downstream  users  and  are 
generally seen as welfare enhancing.  

126  Thum-Thysen  A.  and  Canton  E.,  'Estimation  of  service  sector  mark-ups  determined  by  structural  reform 
indicators', European Economy Economic Papers 547, 2015. 
127 http://www.oecd.org/eco/growth/indicatorsofproductmarketregulationhomepage.htm#indicators 

46 

 
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
                                                 
Schiantarelli128 argues that a reduction in mark-ups may lead to less productive firms exiting 
the  market,  and  thereby  lead  to  a  reallocation  of  resources  to  more  productive  firms  and  to 
further increases in growth. 

A  positive  effect  of  the  PMR  indicators  on  mark-ups  indicates  that  an  increase  in  the 
strictness  of  product  market  regulations  increases  mark-ups.  Conversely  a  loosening  of 
product  market  regulations  would  reduce  mark-ups.  The  table  below  shows  that  the  retail 
sector displays a positive effect. 

Table 5 – Effect of OECD PMR indicator on mark-ups in different sectors 

Source: European Commission 

The  following  table  shows  that  in  the  retail  sector,  when  controlling  for  all  PMR  sub-
indicators, the strongest indicator seems to  be regulations in registration and licensing.  This 
indicator  is  based  on  whether  licenses  and  registrations  are  needed  for  commercial  activity 
and  outlet  siting.  Tightening  regulation  in  this  area  corresponds  to  a  significant  increase  in 
mark-ups in retail.  

128  Schiantarelli,  F.  'Product  market  regulation  and  macroeconomic  performance:  A  review  of  cross-country 
evidence', Boston College Working Papers in Economics No. 623, 2008. 

47 

 
 
 
                                                 
Table 6 – Effect of various OECD PMR sub-indicators on mark-ups 

Impact on consumer accessibility and choice  

Source: European Commission 

Consumers  benefit  from  improved  competition  through  lower  prices,  greater  choice  of 
retailers and better access to retail outlets. Both the correlation (an example in the following 
graph)  as  well  as  the  econometric  analysis  show  that  retail  establishment  restrictiveness 
impacts  negatively  on  changes  in  the  number  of  outlets  and  selling  space  for  most  store 
formats (such as supermarkets, hypermarkets and convenience stores). As a result, less shops 
(and smaller shops) are opened in more restrictive countries, which can be indirectly linked to 
the accessibility and choice of retailers, as well as price levels.  

48 

 
 
 
Figure 27 - Correlation between the level of restrictiveness of retail establishment and growth in the 
number of supermarket outlets 

s
t
e
l
t
u
o
f
o

.

o
n
n

i

h
t
w
o
r
g
s
t
e
k
r
a
m
r
e
p
u
S

0,4

0,3

0,2

0,1

0

0

-0,1

-0,2

1

2

3

4

5

Establishment restrictions level 

Source: Euromonitor 2014, Commission analysis 

Here  as  well,  the  regression  analysis  showed  that  the  observed  links  were  statistically 
significant.  As  indicated  in  the  tables  below,  there  appears  to  be  a  statistically  significant 
negative impact of the level of establishment restrictions on the growth of the selling space of 
convenience  stores,  non-grocery  stores  and  supermarkets,  as  well  as  on  the  growth  of  the 
number of outlets of convenience stores, hypermarkets and supermarkets. 

However,  positive  links  were  found  between  the  level  of  establishment  restrictions  and  the 
development of discount stores. It has to be noted that the discount sector has been growing 
dynamically  over the  past  years,  benefitting  from  consumers'  increasing  orientation towards 
lower prices. The results may also reflect the fact that discounters display a certain flexibility 
in  terms  of  location  compared  to  other  similar  store  formats.  They  become  profitable  on  a 
smaller surface than supermarkets129 and can serve both as neighbourhood stores and outskirt 
outlets,  thus  replacing  both  supermarkets  and  convenience  stores  on  the  map  of  the  retail 
market.  The  number  of  discount  outlets  and  their  selling  space  per  capita  are  higher  in 
countries with stricter requirements for entry linked to size thresholds. 

129 As they do not sell a full range of products. 

49 

 
 
 
 
                                                 
 
 
 
 
 
 
Table 7 - Impact of retail establishment restrictions on the growth of selling space 

Convenience 
stores 

Growth of selling space in: 
Discount 
stores 

Non-grocery 
stores 

Supermarkets 

-0.0895** 
(0.0328) 
0.279*** 
(0.0816) 

1.55e-05** 
(6.38e-06) 
1.25e-05 
(1.57e-05) 

24 
0.253 

25 
0.204 

-0.0381* 
(0.0192) 
0.0569 
(0.0471) 

25 
0.146 

-0.0612*** 
(0.0182) 
0.225*** 
(0.0447) 

25 
0.330 

Level of retail establishment restrictions 

Constant 

Observations 
R-squared 
Standard errors in parentheses 
*** p<0.01, ** p<0.05, * p<0.1 

Source: Euromonitor 2014, Commission analysis 

Table 8 - Impact of retail establishment restrictions on the growth of the number of outlets 

Growth of the number of outlets of: 

Convenience 
stores 

Discount 
stores 

Hypermarkets 

Supermarkets 

-0.0808* 
(0.0424) 
0.247** 
(0.106) 

24 
0.142 

2.42e-05** 
(1.00e-05) 
1.25e-05 
(2.46e-05) 

25 
0.203 

-0.0831* 
(0.0409) 
0.373*** 
(0.101) 

25 
0.152 

-0.0685*** 
(0.0211) 
0.232*** 
(0.0520) 

25 
0.314 

Level of retail establishment restrictions 

Constant 

Observations 
R-squared 
Standard errors in parentheses 
*** p<0.01, ** p<0.05, * p<0.1 

Source: Euromonitor 2014, Commission analysis 

A further analysis of possible scenarios revealed that if certain restrictions were removed and 
others limited to a minimum level, this could help to increase of the number of outlets and the 
selling area for most store formats, in particular in countries with the highest restrictions. It 
would also have a positive impact on churn rates, and could therefore increase competition in 
the sector. 

Results  of  the  regression  analyses  indicate  that,  in  general,  restrictive  regulation  on 
establishment may hamper the development of supermarkets, hypermarkets, non-grocery and 
convenience stores, in terms of the growth of their selling space and the number of outlets. In 
countries with stricter establishment rules, the number of retail companies entering the market 
also appears to be lower and the level of concentration of the retail sector higher. Competition 
may  therefore  also  be  lower.  In  these  countries,  price  level  indices  for  many  product 
categories  are  also  higher,  as  well  as  the  sales  value  of  existing  shops  for  certain  store 
formats. 

50 

 
  
 
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
  
  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.5. 

Preventing discrimination of consumers and entrepreneurs 

Policy context  

Consumers are in theory well equipped to reach out for the best offers available in the Single 
Market. They can travel, buy products and services online and use credit cards across borders. 
However,  too  often  both  consumers  and  firms  are  still  discriminated  as  regards  access  to 
services/goods  as  well  as  in  terms  of  prices  and  sales  conditions  based  on  their  country  of 
residence  or  nationality.  Discrimination  undermines  the  trust  of  consumers  and  increases 
reluctance  to  engage  in  cross-border  trade,  thus  reducing  the  opportunities  created  by  the 
Single Market to consumers and businesses. 

These situations are addressed by the Article 20 (2) of the Services Directive, which prohibits 
discrimination  against  service  recipients  on  the  basis  of  their  nationality  or  country  of 
residence.  The  purpose  of  this  provision  is  to  help  service  recipients,  who  can  be  either 
consumers or entrepreneurs, to access offers available on the markets of other Member States 
and make the most of the Single Market. 

To  put  such  high-level  principles  in  practice  and  tackle  territorial  restrictions  and 
geographically based discrimination, particularly in  the digital domain,  the Commission  has 
already  launched  a  sector  enquiry  regarding  anticompetitive  restrictions  in  e-commerce  and 
has announced in its Digital Single Market Strategy a legislative action to address unjustified 
geo-blocking130.  

Discrimination  based  on  nationality  and  place  of  residence  has  already  been  effectively 
eliminated in the transport sector131. Passengers of different modes of transport (air, maritime, 
bus  and  coach)  can  purchase  travel  tickets  without  any  discrimination  based  on  their 
nationality or place of residence or on the place of establishment of carriers or ticket vendors. 
The  situation  in  other  sectors  is,  however,  not  as  encouraging,  even  in  cases  in  which 
customers of different nationalities and residences receive the same service/good in the same 
location. 

On 24 September 2015, the Commission launched a public consultation allowing stakeholders 
to  present  their  views  on  how  best  to  tackle  geographically  based  restrictions  imposed  by 
traders  to  final  consumers  and  firms132.  The  results  from  this  public  consultation  will 
complement the analysis contained in this Staff Working Document. 

Problem and impact 

Consumers  and  firms  are  often  discriminated  against  in  two  different  ways  based  on  their 
country of residence or nationality: (1) outright refusals to sell (consumers cannot access the 
service/product  at  all);  and  (2)  application  of  different  prices  or  other  sales  and  after-sales 
conditions.  When  shopping  online,  consumers  may  also  experience  geo-blocking,  i.e.  being 
blocked upfront from accessing a specific webpage or content on a webpage. In some cases, 
customers are able to access the webpage but are then not allowed to purchase the product or 
service  based  on  their  place  of  residence.  Outside  copyright  issues,  these  practices  may 

130 The Digital Single Market Strategy already announced that such action could include targeted change to the 
e-Commerce framework and the framework set out by Article 20 of the Services Directive. 
131 Article 23(2) of Regulation 1008/2008/EC (Air transport), Article 4(2) of Regulation 1177/2010/EU (sea and 
inland waterways), Article 4(2) of Regulation 181/2011 (bus and coach transport). 
132 European Commission, Open consultation on geo-blocking and other geographically-based restrictions when 
shopping and accessing information in the EU: https://ec.europa.eu/eusurvey/runner/geoblocksurvey2015/ 

51 

 
                                                 
concern the purchase of both digital goods/services (downloads, apps) and tangible goods that 
involve physical delivery.  
The  European  Consumer  Organisation  BEUC  reported  in  2015133  that  there  are  important 
barriers  to  a  genuine  Single  Market  for  consumers  in  financial  services,  since  restrictions 
linked  to  residence  prevent  consumers  from  opening  a  bank  account,  getting  a  mortgage  or 
buying  an  insurance  policy  in  another  country  than  the  one  in  which  they  reside,  thus 
preventing  them  from  enjoying  the  opportunities  of  cheaper  loans,  higher  interest  rates  or 
lower premiums available in other Member States.  

Discrimination often takes place when customers of different nationalities or residences book 
services  or  products  in  the  same  location.  Examples  include  car  rental  pick-up  in  a  certain 
location on a certain date for a particular duration with the same car and options, amusement 
park entrance on a particular date, hotel room booked on a particular date and for a particular 
duration, museums, mobile phone subscription, electricity bill, and pick-up of a product in a 
store  in  a  particular  city  after  having  purchased  it  online.  For  example,  in  2013  the 
Commission services commissioned a web-scraping study covering car rental companies that 
found  large  price  differences  (up  to  470  euros)  for  consumers  based  on  their  country  of 
residence134.  Similarly,  a  web-scraping  study  commissioned  by  the  Commission  services  in 
July 2015 discovered that the prices of the entry tickets to Disneyland Paris were 15 % higher 
for  the  UK  residents  compared  to  other  European  customers.  Moreover,  Disneyland  Paris 
offered  certain  deals  only  to  Belgian  and  French  residents.  After  a  public  reaction  by  the 
Commission, the discount tickets for the Belgian and French customers were removed, but the 
differences  in  the  ticket  prices  remained.  In  such  cases,  different  treatment  on  the  basis  of 
nationality or residence is a particular source of frustration and dissatisfaction for customers, 
whether consumers or companies, who legitimately expect equal treatment. 

Justifications given for discrimination  

Companies use a wide range of justifications for treating consumers differently based on their 
country of residence, as observed in a 2009 Commission study on business practices.  135 For 
example,  the  following  reasons  have  been  given  by  companies  to  justify  price  differences 
based  on  the  consumers  place  of  residence:  regulatory  environment  (e.g.  compliance  costs, 
fragmentation  of  consumer  or  environmental  legislation,  regulatory  uncertainty,  etc.), 
different marketing costs in different Member States (e.g. online ads and costs for translating 
brochures); corporate structure (e.g. franchisees having their own pricing policy); exchange-
rate  fluctuations;  need  for  a  bank  account  in  the  country  where  the  company  is  established, 
taxation and credit card processing fees; operational drivers (e.g. costs such as re-registration 
of cars or verification of foreign driving licenses in the car rental sector); competition; market 
growth,  risks related to stricter  consumer protection laws; seasonality (e.g. different  holiday 
periods)  and  simply  the  fact  that  the  cost  for  different  services  varies  between  the  Member 

133 Letter to the European Commission, 23 April 2015. 
134    In  this  particular  case,  the  price  was  EUR  581.15  for  the  customers  whose  country  of  residence  was 
Romania,  Slovenia  or  Poland  and  up  to  EUR  887.84  for  the  consumers  from  other  countries,  with  the  UK 
consumers having the highest price. The average standard deviation in prices for the 29.322 car-trip options for 
different countries of residence was EUR 12.90 and the average price range (difference between the highest and 
lowest  price)  for  a  given  car-option  EUR  24.12.  The  car  rental  company  set  different  prices  based  on  asking 
consumers explicitly to state their country of residence. 
135  European  Commission,  'Study  on  business  practices  applying  different  condition  of  access  based  on  the 
nationality  or  the  place  of  residence  of  service  recipients  –  Implementation  of  Directive  2006/123/EC  on 
Services in the Internal Market', 2009. The study covered car rental, digital downloads, online sales of electronic 
goods and tourism. 

52 

 
                                                 
States.  These  justifications  have  been  given  by  companies  operating  in  different  fields 
including car rental, leisure parks and rental of summer accommodations and were confirmed 
in recent interviews with the European Consumer Centres and Your Europe Advice. 

Different  treatment  of  consumers  based  on  residence  or  nationality  should  not  be  allowed 
unless  justified  in  a  convincing  and  verifiable  way.  One  of  the  main  reasons  why  the  non-
discrimination principle is not effectively enforced on the ground is that the Article 20 of the 
Services Directive provides a list of justifications that is potentially too broad. In addition, the 
effectiveness of the current legal framework is hampered by the lack of means of redress and 
proper enforcement across all Member States. 

Consumers'  behaviour  on  the  market  is  greatly  influenced  by  their  perception  of  fairness 
regarding market conditions and prices136. In the Single Market, this sensitivity is amplified 
by the fact that the prices charged in one Member State are often used as 'reference prices' by 
consumers in other Member States. 

Complaints 

The  European  Consumer  Centres  (ECCs)  analysed  all  complaints  related  to  discrimination 
cases in the field of services received in the period of 2010-2012. As this research was limited 
to  the  Services  Directive,  it  generally  excludes  telecoms  and  transport  cases.  Most  frequent 
are cases related to the distribution of goods and services (including downloads), which make 
up  73 %  of  the  case-load.  Services  in  the  field  of  tourism  and  leisure  (including 
accommodation  and  food)  amount  to  20 %  of  the  cases.  The  results  also  show  that 
discrimination  is  much  more  often  based  on  residence  (75 %  of  cases)  than  on  nationality 
(25 %  of  cases).  The  highest  number  of  complaints  relates  to  the  refusal  to  deliver,  which 
concerns about two thirds of all reported cases. Significant differences in prices come second 
with  slightly  more  than  30 %.  Furthermore,  ECCs  analysed  all  complaints received  in  2014 
regarding  discrimination  cases  in  the  field  of  services  covered  by  the  Services  Directive. 
Complaints  regarding  recreation  and  culture  services  amount  to  36   %%  of  all  cases.  The 
main causes of complaints are refusal to sell or non-delivery (43 %) and differences in prices 
(14  %).  One  out  of  four  complaints  is  related  to  purchases  made  by  consumers  on  the 
premises  of  the  provider.  The  Commission  also  received  complaints  through  Your  Europe 
Advice. Since 2008, 53 % of all such complaints concerned offline transactions, 30 % online 
ones and 17 % both. 37 % concerned transport services (including car hire), 15 % concerned 
retail of tangible goods and 22 % tourism services. 31 % were linked to nationality and 69 % 
were linked to residence. 57 % resulted in a price difference, and 15 % in an outright refusal 
to sell. 
These findings are broadly in line with the results of the 2013 Eurobarometer survey137, which 
enquired about discrimination of customers when shopping online based on where they live, 
with  12 %  of  total  respondents  and  22 %  of  those  being  active  online  shoppers  confirming 
this.  

Regulatory responses so far 

136 Kahneman, D. et al., 'Fairness and the Assumptions of Economics', The Journal of Business Vol. 59 (4), 1986 
or  Kahneman,  D.  et  al.,  'Fairness  as  a  Constraint  on  Profit  Seeking:  Entitlements  in  the  Market',  American 
Economic Review Vol. 74 (4), 1986. Other relevant research includes Anderson, E. T. and Simester, D. I., 'Does 
Demand Fall When Customers Perceive That Prices Are Unfair? The Case of Premium Pricing for Large Sizes', 
Marketing Science Vol. 27 (3), 2008. 
137 European Commission, 'Special Eurobarometer 398', 23 September 2013. 

53 

 
                                                 
The  current  EU  competition  law  framework138  can  deal  with  the  concerns  related  to  cross-
border  trade  that  are  based  on  agreements  between  companies.  Contractual  restrictions  that 
ban retailers from serving consumers from another Member State in  response  to  unsolicited 
orders  in  competition  law  terminology  are  traditionally  referred  to  as  'passive  sales 
restrictions'.  Thus,  according  to  the  EU  competition  law,  retailers/licence  holders  should  be 
free  to  sell  'passively'  over  the  internet  to  consumers  outside  their  Member  State.  Where  a 
restriction is, in contrast, due to unilateral action by (non-dominant) companies, or the result 
of  regulatory  barriers,  then  competition  law  does  not  provide  recourse.  The  e-commerce 
sector  inquiry  that  started  in  May  2015  aims  at  identifying  potential  competition  concerns 
hampering  cross-border  e-commerce.  It  complements  the  legislative  actions  planned  to 
remove obstacles to cross-border trade. 

Addressing discrimination based on consumers' place  of residence and nationality will have 
positive  impacts  on  transparency,  which  can  be  a  powerful  tool  to  drive  changes  in  a 
marketplace,  given  the  importance  of  companies'  reputation.  In  particular,  by  prohibiting 
unjustified  geo-blocking  practices,  consumers  will  be  granted  access  to  information  on  the 
different prices that companies  charge in  other EU countries. Moreover,  the consumers will 
be  able  to  access  offers  available  to  consumers  in  other  EU  markets  if  the  service/good  is 
received  at  the  same  location.  This  will  put  additional  pressure  on  companies  to  stop 
unjustified price discriminations and remove existing discriminatory barriers to cross-border 
trade. Due to more transparency and the reduction of the barriers, it is expected that the level 
of  cross-border  sales  will  increase.  Addressing  the  geo-blocking  of  news  and  political 
broadcasting  will  help  foster  the  democratic  participation  and  interest  in  the  political  life  at 
Union level. 

Article  20  of  the  Services  Directive,  which  has  been  in  force  since  2009,  has  not  been  the 
object  of  dedicated  enforcement  actions  by  Member  States,  some  of  which  even  failed  to 
identify  clear  enforcement  authorities.  It  covers  discriminations  of  service  recipients 
(consumers  and  businesses)  both  in  online  and  offline  situation.  Despite  the  recurring 
complaints  received  from  consumers,  the  Commission  is  not  aware  of  any  company  having 
been  sanctioned  for  infringing  the  non-discrimination  provision  of  article  20  (2)  of  the 
Services  Directive.  The  current  legal  framework  does  not  offer  concrete  solutions  for 
consumers and businesses. 

Article  8(3)  of  the  Consumer  Rights  Directive  does  not  prohibit  territorial  restrictions  and 
simply places on traders an obligation to inform about such restrictions. It thus cannot address 
the root of the matter. 

Dispute  resolution  mechanisms  (such  as  ADRs  and  ODRs)  currently  cover  contractual 
arrangements  and  do  not  apply  to  pre-contractual  relationships,  such  as  the  ones  where 
discrimination could take place. 

138 In particular, certain practices can be stopped through the application of Article 101 of the Treaty prohibiting 
any agreement or concerted practice that restricts competition together with the Block Exemption Regulation on 
vertical  agreements  and  the  corresponding  guidelines  or  via  enforcement  of  Article  102  prohibiting  abuses  of 
dominance. 

54 

 
                                                 
3. 

ENCOURAGING MODERNISATION AND INNOVATION 

3.1.  Modernising our standards system 

3.1.1.  European Standardisation System 

Policy context  

European Standardisation is a cornerstone for the functioning of the Single Market as well as 
a powerful tool in support of European policies for product and services market integration. 
Standardisation is relevant for everyone, industry and consumers, public authorities and civil 
society.  

The  strategic  vision  for  European  Standardisation  was  set  out  by  the  Commission 
Communication139  for  standards,  while  the  legal  framework  is  set  by  Regulation  (EU)  No 
1025/2012140, in force since 2013. 

The  new  Regulation  establishes  the  rules  of  transparency  for  the  development  of  standards 
requests sent by the Commission to the European Standardisation Organisations (ESOs), and 
for  reporting  obligations  for  the  different  actors.  It  promotes  the  inclusiveness  of  the  less-
represented stakeholders in the standardisation process (SMEs, consumers, trade unions and 
environmental  interests).  In  addition  to  European  standards,  it  recognises  ICT  technical 
specifications for public procurement purposes. 

The current system is mainly focused on products, but there is significant potential for further 
integration both in products and in service markets through the use of standards. To this end, 
the Council conclusions on Single Market Policy (paragraphs 9 and 10) which were adopted 
by the Competitiveness Council on 2 March 2015 support the Commission and stakeholders’ 
joint  endeavours  to  promote,  where  appropriate,  the  position  of  European  standards  as  a 
recognised reference point in facilitating compliance with EU legislation. This includes areas 
such as the Digital Single Market, business services, new and high-end technologies as well 
as e-policies (e-procurement, e-government, e-governance), as well as international trade and 
global EU interests. 

Problem and impact  

European Standardisation has been a cornerstone of the Single Market for the last 30 years. 
Today  however,  the  European  industry  is  faced  with  a  difficult  and  fast  changing  global 
environment  where  frontiers  between  manufacturing,  digital  and  services  are  increasingly 
blurred.  The  main  challenge  lies  in  keeping  and  enhancing  the  competitiveness  of  EU 
industries  in  global  trade.  Standardisation  plays  an  important  role  in  this  and  the  European 
Standardisation System (ESS) needs to be fit for current and future challenges.  

The European Standardisation System is a private sector based system, which the EU utilizes 
for  its  legislative  purposes  and  to  implement  EU  policies.  About  20  %  of  all  European 
Standardisation activities stem from EU policy objectives and priorities. The remaining 80 % 
European  standards  are  elaborated  bottom-up  and  strictly  based  on  industry  needs. 
Standardisation  is  mostly  financed  by  industry  (up  to  95  %)  while  the  EU  co-finances  the 
system (about 2 %). 

139 Communication from the Commission to the European Parliament, the Council and the European Economic 
and Social Committee, 'A strategic vision for European Standards: ‘Moving forward to enhance and accelerate 
the sustainable growth of the European economy by 2020’, COM (2011) 311. 
140 Regulation (EU) No 1025/2012 of the European Parliament and of the Council of 25 October 2012. 

55 

 
                                                 
Many national studies demonstrate that standards positively influence economic growth due 
to the resulting improved diffusion of knowledge. Studies from Germany, the UK and France 
confirmed  that  standardisation  contributes  to  increase  a  country's  GDP  by  reducing  general 
industrial costs, improving interoperability, fostering the quality of products and services and 
facilitating the access to European and global markets. 

For France the impact on growth is estimated at 0.8 %, for United Kingdom at 0.3 % and for 
Germany  at  0.9  %  of  GDP.  To  put  this  in  monetary  terms,  DIN  estimates  that  in  Germany 
alone, standards generate up to EUR 17 billion a year. A more recent study from the UK 'The 
Economic  Contribution  of  Standards  to  the  UK  Economy'  also  confirms  that  the  use  of 
standards benefits the national economy: standards contributed to around EUR 11 billion of 
the EUR 40 billion GDP growth in 2013 (2014 prices) and to around EUR 8.5 billion to UK 
exports.  The  same  study  shows  that  standards  help  to  enhance  quality,  with  70 %  of 
respondents stating that standards had contributed improving the quality of supplier products 
and services141. 

An 'Independent Review of the European Standardisation System' was conducted to assess if 
the  system  is  fit  for  future  challenges  and  how  it  copes  with  five  strategic  objectives142 
identified  by  the  Commission  Communication  of  2011,  i.e.:  speed  of  the  process,  tool  for 
competitiveness,  support  EU  policies,  inclusiveness  of  societal  stakeholders  and  global 
impact. As part of the review, an online consultation was launched and generated around 800 
answers.  The  Independent  Review  resulted  in  a  number  of  recommendations  calling  for  a 
better interaction between the actors of the European Standardisation System, its governance 
and the communication within the system. 

This  review  covered  the  standardisation  system  as  a  whole:  goods,  services,  ICT  and  other 
standards.  There  are,  however,  specific  issues  on  service  standards  which  need  to  be 
addressed.  

Standards rely on a system that is created and operated by the industry for the industry. The 
challenge is to ensure that European Standardisation continues to be at the heart of industrial 
modernisation  and  innovation  in  Europe.  Thus,  the  Commission  wants  to  explore  strategic 
avenues to optimise the European Standardisation impact, and to this aim the public-private 
partnership between the Commission and the European Standardisation Organisations should 
become more visible and tangible for all. 

Therefore,  the  Commission  proposes  a  ‘Joint  initiative  on  Standardisation’  to  be  concluded 
with all actors in order to enhance and modernize the current system. The Joint initiative will 
encompass a joint vision in order to develop solutions to issues arising from servicification, 
digitalisation  and  focus  on  interoperability  as  a  result  of  the  Priority  ICT  standards  plan.  It 
will  also  explore  how  the  gap  between  research/innovation  priorities  and  European 
Standardisation could be  analysed  in a  more systematic and forward looking way and  more 
effectively bridged, as well as how to produce timely standardisation deliverables. 

The Joint initiative is  a way to  enable Europe  to become a global  standardisation hub. This 
means keeping a system able to impact on growth (between 0.3 and 0.9 % depending on the 
current  figures  registered  from  different  Member  States),  contributing  to  the  GDP  growth, 
maintaining and increasing competitiveness of the EU economy.  

141 British Standards Institution (BSI), 'The Economic Contribution of Standards to the UK Economy', 2015. 
142 Identified in the Commission Communication of 2011. 

56 

 
                                                 
3.1.2.  Standardisation for services 

Policy context 
In addition to product standards, the Services Directive recognises standards143 as one of the 
quality  enhancing  measures  that  will  benefit  recipients  of  services,  especially  consumers. 
Regulation (EU) No 1025/2012 on European standardisation144 also recognises the potential 
of service standards. However, unlike goods standards, which are widely used and accepted to 
be  beneficial,  there  are  only  few  services  standards  in  Europe  (approximately  2  %  of  all 
standards).  While  their  number  is  growing,  most  existing  and  newly  emerging  services 
standards are national (fewer than 20 % of existing service standards are European). 

Problem and impact 

In contrast to goods, the development of service standards has been much more limited, both 
within Member States and at EU level. As a result, service standards account for only 2 % of 
all EU standards.  

Yet, voluntary European service standards could and should yield many of the same benefits 
for  the  services  sector,  raising  standards  across  Europe,  giving  consumers  and  businesses 
confidence  in cross-border services and consequently  enhancing  cross-border  trade. It could 
be a key element in the delivery of an integrated European services market. 

At  a  national  level,  the  number  of  national  service  standards  is  very  likely  to  increase 
considerably in the coming years. Such a proliferation however makes it harder for European 
service providers to operate cross-border, by subjecting them to ever more different standards 
every time they enter a new market.  

Differing voluntary national service standards as well as integrating standards or certificates 
in mandatory authorisation requirements (as described in the section on services passport for 
companies) can create barriers to European companies trying to trade cross-border. Results of 
a Commission survey on barriers to the services Single Market show that 19 % of companies 
providing or buying services cross-border experienced difficulties related to service standards 
and  the  linked  usage  of  national  certificates.  Certificates  were  problematic  for  18  %  and 
products standards for 15 % of respondents. Problems reported concern mostly construction 
and business services (technical services) areas. They often refer to installation, maintenance 
and  repair  services,  or  to  requirements  concerning  products  used  for  the  service  provision. 
Insufficient awareness and understanding of standards (by businesses, public authorities, etc.) 
also create unnecessary costs and bureaucracy. 

Barriers emerge in particular when standards and certification schemes, although in principle 
voluntary,  are  made  de  facto  mandatory  through  the  requirements  set  in  national  legislation 
(e.g. in authorisation and licensing procedures). On top of that, the authorities may require the 
provision  of  national  certificates  as  a  condition  for  access  to  their  market.  Companies  may 

143  Article  26(5)  states  that:  'Member  States,  in  cooperation  with  the  Commission,  shall  encourage  the 
development  of  voluntary  European  standards  with  the  aim  of  facilitating  compatibility  between  services 
supplied  by  providers  in  different  Member  States,  information  to  the  recipient  and  the  quality  of  service 
provision'. 
144  European  Union,  'Regulation  (EU)  No  1025/2012  of  the  European  Parliament  and  of  the  Council  of  25 
October  2012  on  European  standardisation,  amending  Council  Directives  89/686/EEC  and  93/15/EEC  and 
Directives  94/9/EC,  94/25/EC,  95/16/EC,  97/23/EC,  98/34/EC,  2004/22/EC,  2007/23/EC,  2009/23/EC  and 
2009/105/EC  of  the  European  Parliament  and  of  the  Council  and  repealing  Council  Decision  87/95/EEC  and 
Decision No 1673/2006/EC of the European Parliament and of the Council', 2012. 

57 

 
                                                 
then  need  to  obtain  a  new  certification  in  addition  to  the  one  obtained  in  their  country  of 
establishment.  

National  certificates  can  be  required  both  in  the  absence  of  a  European  standard,  where 
diverging  national  standards  and  certification  schemes  exist,  or  in  situations  where  even 
though  a  European  standard  exists,  a  national  certification  procedure  is  still  required.  Such 
certificates are not necessarily recognised in other Member States145. Mandatory compliance 
with standards can in certain cases be justified if this is non-discriminatory and proportionate. 
However,  in  many  cases,  requirements  appear  to  exceed  the  necessary  means  of  achieving 
public policy objectives. 

In addition to duplicate standards and certificates that are not recognised across borders, there 
might be conflicting national systems or practices, which make it harder and more costly for 
service providers to comply. 

In  conclusion,  there  is  still  significant  untapped  potential  from  the  development  and  use  of 
voluntary  European  service  standards  to  address  servicification  and  deliver  an  integrated 
European  services  market.  The  Commission  will  therefore  issue  dedicated  guidance, 
exploring  the  issues,  including  ensuring  that  such  standards  are  demand-led  and  adopted 
where they are most needed. 

3.2.  More transparent, efficient and accountable public procurement 

3.2.1.  For better governance in procurement: better data and more effective remedies 

systems 

Policy context 

Government expenditure on works, goods and services represents around 19 % of EU GDP, 
accounting for more than EUR 2.3 trillion annually146. Efficient public procurement is key to 
addressing  major  policy  challenges,  including  growth  and  jobs,  fiscal  discipline,  the 
modernisation  of  public  administration,  the  fight  against  corruption  and  collusion,  market 
access  for  SMEs,  the  trust  of  citizens  in  public  authorities  and  democracy,  innovation  and 
environmentally  and  socially  sustainable  growth.  It  is  also  crucial  to  the  recovery  of  public 
investment spending, which fell in 2012-2014 (in terms of percentage of GDP) compared with 
2000-2007, in almost half of the EU Member States and all the stressed economies. 

The EU has recently seen a major reform of the procurement framework, which is now being 
implemented. The new provisions will allow for simplified and more flexible procedures and 
better access to the market for SMEs. They also seek to ensure greater inclusion of social and 
environmental considerations in the procurement process. 

Efficient  public  procurement  relies  on  good  governance  at  national  level.  It  has  many 
components and each must perform well. Above all, public procurers must be equipped to act 
with the greatest professionalism in order to get best value for money for each purchase. The 
integrity  of  decision-makers  and  their  staff  must  also  be  beyond  doubt.  Institutions  or 
mechanisms must be in place to coordinate procurement between public authorities in order to 
secure  economies  of  scale,  audit  public  contracts  and  efficiently  and  rapidly  manage 
complaints lodged by companies. Finally, the public sector must be able to respond to threats 
of collusion by suppliers. 

145  Mutual  recognition  of  certificates  is  mandatory  if  these  are  requested  by  public  authorities,  but  only  if  the 
certificates are delivered by accredited certification bodies. 
146 This is the latest estimate including spending by utility companies. Newer estimates give values only for non-
utility procurement, which is around 14 % of EU GDP, i.e. roughly EUR 1.8 trillion. 

58 

 
                                                 
Problem and impact  

The governance of the procurement systems needs to be improved in the EU; further efforts 
are still required to ensure the efficiency, transparency and integrity of the process. Some of 
the main missing links are the lack of relevant quality data, the inability to match related data 
from  different  databases,  the  insufficient  sharing  and  reuse  of  data,  and  a  shortage  of  skills 
and tools for analysing available information. These barriers are widely acknowledged having 
been identified by the G-20 and the World Bank,147 the OECD148 and the European Court of 
Auditors and the Commission149 itself. The increasing use of information technology in public 
administrations,  including  the  transition  to  mandatory  e-procurement  in  2018,  offers 
opportunities to tackle these problems. 

Better  data  would  allow  Member  States  to  improve  governance.  This  means  better 
evidence-based  policy and  management  by  public  authorities and  increased  transparency  by 
opening  up  data.  Sharing  data  triggers  feedback  from  the  public,  which  can  be  used  to 
improve  aspects  of  procurement  practice  at  all  levels,  from  local  procurement  to  national 
legislation. Furthermore, better information on the vulnerabilities of their public procurement 
systems  would  help  Member  States  take  remedy  measures  and  promote  good  procurement 
practices. 

Limited data availability  

However,  procurement  in  Europe  is  currently  largely  data  blind.  Four  categories  of 
shortcomings can be identified:  

(i)   insufficient data is available; 

(ii)  existing data is often of poor quality;  

(iii)  frequently  data  cannot  be  linked  when  it  comes  from  different  sources  and  even 

when available;  

(iv)  it is often not sufficiently analysed and used for policymaking purposes. 

Currently, the main source of data is in procurement notices. These notices are used to inform 
about  tender  opportunities  and  results  and  their  publication  in  the  Tenders  Electronic  Daily 
(TED)  website  is  obligatory  for  procurement  above  thresholds  defined  by  the  Directives150. 
However,  the  transparency  and  the  quality  of  data  reported  vary  among  Member  States. 
According to the most recent Single Market Scoreboard (2015)151, in many Member States the 
proportion  of  contract  awards  notices  containing  no  information  about  the  value  of  the 
contracts awarded is higher than 50 %.  

147 World Bank, ‘Benchmarking Public Procurement’, 2015. 
148  OECD,  ‘Discussion  Paper  on  Public  Procurement  Performance  Measures’,  GOV/PGC/ETH(2013),  2013 
(p.2);  OECD,  ‘Recommendation  of  the  OECD  Council  on  Fighting  Bid  Rigging  in  Public  Procurement’, 
C(2012)115 - C(2012)115/CORR1 - C/M(2012)9, 2012. 
149 European Commission/PWC, ‘Stock-taking of administrative capacity, systems and practices across the EU 
to ensure the compliance and quality of public procurement involving European Structural and Investment (ESI) 
Funds’,  2015,  forthcoming;  Europe  Economics,  ‘Estimating  the  Benefits  from  the  Procurement  Directives’, 
2011. 
150  Directive  2004/18/EC  on  the  coordination  of  procedures  for  the  award  of  public  works  contracts  public 
supply contracts and public services contracts and Directive 2004/17/EC coordinating the procurement of entities 
operating in the water, energy, transport and postal services sectors. 
151 European Commission, The Single Market Scoreboard: 
http://ec.europa.eu/internal_market/scoreboard/index_en.htm 

59 

 
                                                 
Transparency  of  below  threshold  procurement  also  varies  greatly.  National  thresholds  for 
publication on  national websites  range  from  less  than  EUR 10  000  in  Portugal  to  EUR  134 
000 in Italy for goods and services, and there is similar diversity in works152. This means that 
the spending of a large portion of taxpayers' money is not transparently accounted for, data for 
management is not collected, and most importantly, fewer bidders are attracted and thus less 
value for money is achieved153. 

This  opaqueness  of  public  spending  also  means  that  procurement  rules  can  still  be 
circumvented by simply awarding contracts below the radar of national authorities and of the 
public scrutiny - if contracting authorities decide not to apply all procurement rules, this may 
go undiscovered. The exact terms and conditions under which a purchase was made are often 
not transparently communicated. Where transparency is lacking, misconduct grows. 

Furthermore,  audits  are  not  used  to  their  fullest  potential.  According  to  the  Report  on 
spending of ESI Funds by the European Court of Auditors154, the valuable data from audits is 
not sufficiently collected and used. For example, data on irregularities from auditors' findings 
are not always electronic and structured for automated process and often cannot be linked to 
data  on  procurement  procedures.  This  is  the  case  for  audits  of  both  national  and  European 
funds. 

Finally,  even  for  already  existing  data,  public  authorities  in  Member  States  do  not  always 
analyse it and use the results for decision-making, nor do they share it with other parties. For 
example,  while  in  the  Czech  Republic  the  procurement  performance  of  each  municipality, 
based on data analysis, is available online, in most other Member States this is not the case, 
even though comparable data is often available. 

A  recent  survey  identified  nine  obstacles  to  participation  in  public  procurement  including 
uncompetitive  practices  (such  as  collusion,  bid  rigging  and  corruption),  lengthy  procedures, 
low  quality  of  eProcurement  services  and  risks  of  litigation  by  unsuccessful  tenderers155. 
However,  the  monetary  value  of  such  inefficiencies  is  hard  to  estimate,  especially  in  areas 
such  as  professionalization  or  corruption156.  Nevertheless,  on  the  basis  of  available  studies, 
there are approximate estimates of impact. 
PWC,  Ecorys,  and  the  University  of  Utrecht  have  estimated157  that  costs  of  corruption  are 
around 3.7 % of procurement expenditures. Using this as a conservative158 ballpark estimate, 
this indicates that just out of the EUR 420 billion advertised at EU-level annually  159 around 
EUR 16 billion are wasted on corruption. 

152 PWC, 'e-Procurement Uptake study', 2015, Figure 3, p.19. 
153 Coviello, D., and Mariniello M., 'Publicity requirements in public procurement: Evidence from a regression 
discontinuity design', Journal of Public Economics 109, 2014, pp.76-100. 
154 European Court of Auditors Special report No 10/2015: Efforts to address problems with public procurement 
in EU cohesion expenditure should be intensified, http://www.eca.europa.eu/en/Pages/DocItem.aspx?did=32488 
155 European Commission, 'Flash Eurobarometer 417', 2015. 
156  E.g.  Heywood,  P.  M.,  and  Rose,  J.  'Close  but  no  Cigar:  the  measurement  of  corruption',  Journal  of 
Public Policy 34(03), 2014, pp.507-529. 
157 PWC, ECORYS, University of Utrecht, 'Identifying and Reducing Corruption in Public Procurement in the 
EU', 2013 (p. 211). Study based on a sample of procurement procedures, sectors (road and rail; water and waste; 
urban/utility construction; training; research and development) and countries (FR, IT, HU, LT, NL, PL, RO, ES). 
158 The study covers only the direct costs of detected corruption. Furthermore, public spending covered by EU 
directives is only a small part of overall expenditures on works, goods, and services. 
159 European Commission, 'Public Procurement Indicators 2013', 2015. This figure excludes utility spending. 

60 

 
                                                 
Concerning professional procurement skills, according to Bandiera, Pratt, and Valetti160, the 
problem is even more important than for corruption. Their estimates indicate that corruption is 
responsible for 17 %  of waste in spending, as compared  to 83 %  which can  be attributed to 
too  low  professionalization.  Using  again  a  back-of-the-envelope  calculation  based  on  the 
above  estimates,  this  means  that  the  potential  economic  gains  from  solving  problems  of 
professionalisation are more than EUR 80 billion.  

Data is widely acknowledged as an important solution to procurement governance problems. 
Besides the studies by international organisations mentioned above, data is also recognized as 
an  issue  in  Member  States,  with  dedicated  studies  being  conducted  for  instance  by  the 
British161,  German162,  and  Swedish163  governments  and  the  non-governmental  sectors  in 
Croatia, Czech Republic, and Hungary164. 

Not  all  public  procurement  problems  will  be  solved  by  data.  However,  even  with  a  very 
conservative estimate where better governance could solve 10 % of waste due to insufficient 
professionalization  and  to  corruption,  this  would  still represent  a  benefit  of  around  EUR  50 
billion  annually.  This  estimate  should  be  further  extended  to  benefits  such  as  fighting 
collusion, as well as increased trust in government. 

The Commission will take a number of initiatives to address these data shortcomings. 

First, in order to improve data on procurement above the EU thresholds, the Commission will 
define  a  data  structure  for  procurement  reporting  before  end-to-end  eProcurement  becomes 
mandatory in 2018. The new standard will be fit for the digital age (e-standard forms), simple 
to  implement  and  use,  fulfil  business,  governance,  and  transparency  needs  of  procurement, 
and  fulfil  the  legal  obligations  required  in  the  standard  forms.  It  will  be  designed  in 
cooperation with the Publications Office of the EU, take in account existing work done within 
the  CEN  Workshop  on  Business  Interoperability  Interfaces  for  Public  Procurement  in 
Europe165 as well as other existing standards. Member States will be consulted on the project. 

Second,  the  Commission  will  encourage  national  collection  of  data  on  below-threshold 
procurement,  for  instance  through  the  use  of  the  data  standard  defined  for  above-threshold 
procurement  which  will  take  in  account  below-threshold  procurement  practices  in  the  EU. 
This  will  enable  the  Member  States  to  harmonize  their  structures  for  collecting  data  about 
below-  and  above-threshold  procurement.  The  Commission  will  promote  this  goal  through 
policy dialogues with the Member States on data transparency.  

The Commission will also promote,  inter alia through financial support and bilateral policy 
dialogues,  the  usage  of  contract  registers.  They  are  a  cost-efficient  tool  for  managing 
contracts,  and  also  for  the  promotion  of  good  governance  through  enhanced  transparency. 
They store digitalized contracts, their structured summaries as well as full wording, including 
contract  performance  conditions,  terms  of  delivery,  and  subsequent  modifications.  In  some 
countries these registers are accompanied by the requirement that any contract not published 

160 Bandiera, O., Prat, A., and Valletti, T. M., 'Active and passive waste in government spending: evidence from 
a policy experiment', 2008. 
161 Harrower D., 'Measuring public sector ICT expenditure, Approaches and evidence from the United Kingdom', 
2014. 
162 BMWi, 'Public Procurement Statistics for Germany', Research project commissioned by the Federal Ministry 
for Economic Affairs and Energy (IC 4 – 80 14 34/45), 2015, forthcoming. 
163  Konkurrensverket  Swedish  Competition  Authority,  'Public  Procurement  Thresholds  and  Data  in  Sweden', 
Uppdragsforskningsrapport 2015:3, 2015. 
164 See http://integrityobservers.eu/, http://zindex.cz/ and http://k-monitor.hu/ respectively 
165 http://www.cenbii.eu/  

61 

 
                                                 
in the register is void. These registers help contracting authorities manage their contracts and 
help improve the governance of public procurement. The Commission will facilitate, through 
the relevant expert group and a peer review, the exchange of best practices such as the recent 
successes  from  Slovakia166  and  Portugal.  If  deemed  useful  by  Member  States,  the 
Commission  will  support  the  development  of  standards  for  contract  registers.  It  will  also 
develop  a  contract  register  of  Commission  tenders  for  its  own  use  and  in  the  interest  of 
transparency. 

Audits  are  a  source  of  valuable  information  instrumental  for  improving  public  procurement 
systems.  The  Commission  will  support  the  creation  of  irregularity  databases,  which  will 
contain digitalised audit reports. These reports must be structured (e.g. contain a classification 
of  irregularities  found,  provisions  infringed  and  corrections  imposed)  and  capable  of  being 
matched with other procurement data. First, the Commission will ensure the availability and 
appropriate  structure  of  its  own  audit.  Furthermore,  it  will  encourage  Member  States  to 
improve their reporting capacities: it will facilitate the exchange of best practices (e.g. from 
the Czech Republic, Italy and Spain) and, possibly, standards.  Finally, the Commission will 
provide guidance on the monitoring reports under Article 83 of Directive 2014/24/EU in order 
to  help  Member  States  to  structure  the  information  (including  the  use  of  the  anomaly 
detection tools presented below).  
The Commission will consolidate current work streams167 on anomaly detection tools. It will 
provide feedback to Member States on the robustness of their public procurement systems, for 
instance through a performance (governance and transparency) scoreboard. Furthermore, the 
Commission  will  encourage  the  Member  States  to  improve  their  data  analysis  capacities, 
notably  by  building  on  the  latest  technological  developments  in  the  field  of  data  analytics 
including  through  financial  support  and  facilitating  the  exchange  of  best  practices  and 
standards. 

Besides  the  actions  above,  other  initiatives  will  be  taken.  In  line  with  the  Digital  Market 
Strategy, the Commission will support the establishment of connections between procurement 
data  and  various  existing  data  and  IT  systems,  most  importantly  business  and  public  body 
registries. Following the same logic, the Commission will strive to enable the combining of 
procurement data with data on financial flows through opening up and standardizing data on 
budgets,  financial  statements  of  public  administrations,  and  invoicing168.  Finally,  the 
Commission  will  make  efforts  to  improve  the  structure  of  data  on  ESI  funds169,  their 
connection with procurement data, and their sharing as open data.  

166 Transparency International Slovakia, 'Not in Force Until Published Online', 2015.  
167  There  are  many  examples  of  best  practices  in  the  area  of  data  analysis.  Member  States,  the  World  Bank, 
researchers and NGOs work on developing methodologies for benchmarking, measuring the cost of corruption in 
public  procurement  and  monitoring  public  procurement.  Tools  for  facilitating  data  analysis  and  anomaly 
detection are also being developed by or with the support of the Commission. ARACHNE, a Commission tool 
for  managing  authorities  to  highlight  risky  EU  Funded  projects,  is  currently  promoted  as  “best  practice”  for 
Member States. The project "Digital Whistleblower", funded by Horizon 2020, is designing an easy-to-use risk 
assessment software which will be offered to public authorities to assess procurement procedures by 2018. See 
Website: http://digiwhist.eu/ 
168 Harrower D., 'Measuring public sector ICT expenditure, Approaches and evidence from the United Kingdom', 
2014;  Czech  Ministerial 
and  procurement  data,  2014 
http://www.anobudelip.cz/file/edee/2014/06/proverka-hospodareni.pdf 
169  K-monitor  in  Hungary  -  Fazekas,  M.,  Chvalkovska,  J.,  Skuhrovec,  J.,  and    János,  I.,  'Are  EU  funds  a 
corruption  risk?  The  impact  of  EU  funds  on  grand  corruption  in  Central  and  Eastern  Europe',  CRCB-
WP/2013:03, 2013, p.30.  

audit  based  on  matching 

invoicing 

62 

 
                                                 
More efficient remedies systems 

Good  governance  in  procurement  also  include  an  effective  and  efficient  review  system: 
companies must be able to find recourse when they believe rules have not been respected. The 
Remedies  Directives170  ensure  that  procurement  decisions  may  be  reviewed  effectively  and 
rapidly.  However,  there  are  strong  discrepancies  in  the  functioning  of  the  review  bodies 
between  Member  States,  in  particular  on  delays  and  costs.  In  addition,  the  Directives  allow 
great  flexibility  as  to  the  nature  and  institutional  place  of  the  bodies  which  should  conduct 
these  reviews.  Subsequent  to  the  transposition  of  the  Directives,  review  mechanisms  with 
ultimate  judicial  guarantees  will  have  been  established  in  each  Member  State.  These 
mechanisms  rely  either  on  (i)  newly  created  first  instance  specialised  public  procurement 
administrative review bodies or (ii) existing administrative bodies with enlarged functions for 
first instance review or (iii) the judiciary.  

The knowledge of the full extent of these discrepancies and their impact is still limited. This 
is  largely  due  to  the  lack  of  relevant  data.  In  most  Member  States,  the  information  on 
complaints lodged  by economic operators is not collected in a structured manner and rarely 
used for policy making purposes. This impacts both the efficiency of the remedy system (e.g. 
by  preventing  accurate  assessment  of  the  resources  needed  to  deal  with  complaints; 
identifying abusive complaints, consistency of decisions due to a lack of effective searching 
tools) as well as the general procurement system (e.g. identifying the contracting authorities 
against which successful complaints are lodged most often, or which aspects of procurement 
procedures are being appealed against successfully). 
A study commissioned by the Commission services171 on the economic efficiency and legal 
effectiveness  of  review  and  remedies  procedures  for  public  contracts  underlines  widespread 
stakeholders’  positive  perceptions  of  the  relevance  of  the  remedies  procedures  and  of  their 
impact  in  improving  the  openness  and  transparency  of  public  procurement.  Furthermore, 
public consultations carried out by the Commission from 24 April to 20 July 2014 also point 
at  the  conclusion  that  effective  remedies  improve  the  openness,  transparency,  fairness  and 
help  public  procurement  process  to  become  more  compelling  for  contracting  authorities. 
Notwithstanding these elements, the study clearly demonstrates that the efficient functioning 
of the remedy systems varies considerably across Member States and that data collection on 
remedy system performance is deficient.  

The most telling examples from this study, which demonstrate the need to strengthen public 
procurement remedy systems, relate to time taken and costs: 

  The length of review procedures across Member States is particularly divergent. The 
five  greatest  duration  values  for  first  instance  pre-contractual  cases  are  observed  in 
Member  States  relying  on  judicial  review  (Ireland  –  over  500  days,  Greece  and 
Belgium–  over  400  days,  Luxembourg  and  Finland  –  over  300  days).  For  most 
Member  States  relying  on  non-judiciary  bodies  at  first  instance172  the  median 
estimated  review  length  is  below  100  days  –  which  can  be  considered  a  satisfactory 
length.  The  median  estimated  length  of  review  for  second  instance  pre-contractual 
cases  are  700  –  1  000  days  in  Austria  and  Spain;  around  600  days  in  Cyprus,  the 

170 Directive 89/665/EEC and Directive 92/13/EEC, as amended by Directive 2007/66/EC. 
171  Europe  Economics  and  Milieu,  'Economic  efficiency  and  legal  effectiveness  of  review  and  remedies 
procedures for public contracts', 2015. 
172  The  Study  points  at  Austria,  Bulgaria,  Cyprus,  the  Czech  Republic,  Denmark,  Estonia,  Hungary,  Latvia, 
Malta, Poland, Romania, Slovenia and Slovakia. 

63 

 
                                                 
Czech Republic, Denmark, Finland and Latvia; and 0-200 days in Bulgaria, Germany, 
Estonia, France, Lithuania, Luxembourg, Portugal, Romania and Sweden; 

  The fee for a review also varies widely across Member States: in some countries the 
fee  is  a  fixed  flat  rate,  irrespective  of  the  size  and  characteristics  of  the  contract;  in 
others the costs are determined by a scale criterion or by a value-range that depends on 
the  size  or  type  of  contract  (for  works,  supply  or  services),  i.e.  for  a  EUR  250  000 
contract  fees,  vary  from  0  (Spain,  Luxembourg,  Latvia  and  Sweden)  to  EUR  5  000 
(Slovenia); 

  Median  additional  costs  of  review  for  contracting  authorities  as  a  percentage  of 
contract  value  in  individual  Member  States  range  from  around  0.1 %  (in  Greece, 
Poland,  Slovenia  and Slovakia)  to  around 2 %  (Austria).  Among suppliers, litigation 
median additional costs of review range from 0.3 % (Spain, Lithuania, Romania, and 
Sweden) to 1.5 % (Cyprus, Greece and Slovenia). 

The level of fees and additional costs173 might in some cases discourage economic operators 
from launching complaints.  

Finally, the study points to a wide variety in the number of first instance decisions, be they of 
administrative or judicial nature, taken in Member States from 2009 to 2012174. This could be 
partially explained by disparities in the effectiveness of the national remedies systems. 

The Commission will at this stage propose different initiatives which will be complemented 
by the REFIT evaluation report on the Directive 2007/66/EC. 

The  Commission  intends  to  create  a  network  of  first  instance  review  bodies,  which  would 
facilitate exchanges of information and best practice, promote optimal model solutions, help 
identify  needs,  develop  different  assistance  programmes  and  training  activities  (e.g. 
exchanges programmes, study visits) and conduct similar activities. The main purpose of the 
network would be to promote effectiveness. The Commission will particularly encourage and 
(technically  and  financially)  assist  Member  States  willing  to  create  or  strengthen  their 
specialised first instance administrative review bodies.  

The  Commission  will  also  propose  increasing  transparency  regarding  the  performance  of 
national  remedy  systems.  To  begin  with,  data  need  to  be  collected  in  an  automated  fashion 
without  imposing  an  additional  administrative  burden.  In  that  context,  it  will  develop  a 
limited  number  of  objective  indicators  (number  of  complaints,  number  of  successful 
complaints,  costs,  length  of  procedures,  etc.)  in  agreement  with  the  Member  States.  These 
indicators  will  be  published  via  a  performance  scoreboard,  integrated  in  the  Single  Market 
Scoreboard,  to  monitor  the  effectiveness  of  the  national  review  systems.  This  will  allow 
Member  States  and  the  business  community  to  compare  the  efficiency  of  the  remedies 
systems in different Member States. It will also give the Commission a better overview of the 
situation. 

173 Around 69 % respondents to the public consultation claim that in their jurisdiction costs (such as the cost of 
legal advice and representation) may have an impact in access to justice. 
174 The number of first instance decisions reported in the study from 2009 to 2012:  
AT -932 
BE- 711 
BG – 4,411 
CY-380 

NL-1,111 
PL-10,570 
PT-86 
RO-1,672 

SE-11,144 
SI-1,864 
SK-1,259 
UK-47 

HR-6,939 
HU-2,419 
IE-21 
IT-340 

LT-1,410 
LU-39 
LV-3,775 
MT-240 

CZ-2,778 
DE-4,222 
DK-580 
EE-879 

EL-620 
ES-1,323 
FI-2,191 
FR-40 

64 

 
                                                 
 
3.2.2.  Efficient large-scale infrastructure projects 

Policy context 

Large scale infrastructure projects are particularly important segments of public procurement. 
They  are  generally  public  or  partially  private  investments,  and  can  take  the  form  of  public 
works or concessions. Such projects can vary in nature and could concern the construction of 
a power plant (as the one in 2011 in Estonia) or of a road viaduct in the Netherlands (award in 
2012)  each  with  a  budget  of  around  EUR  1  billion175.  They  are  essential  for  the  proper 
functioning  of  the  Single  Market.  Without  a  European  transport  network,  a  pan-European 
technical  platform  for  communication  and  data  exchange,  or  appropriate  energy 
infrastructures to ensure Europe's security of supply, the Single Market cannot deliver its full 
potential.  The  investment  plan  for  Europe176  will  complement  Member  States  efforts  in  this 
area.  

There  are  many  factors  which  determine  whether  the  projects  can  ultimately  contribute  to 
growth,  the  creation  of  jobs  and  enhancing  Europe’s  competitiveness.  Alongside  the 
availability of financial resources, correct planning and proper identification of the technical 
solutions for infrastructure projects, efficient and timely public procurement procedures play 
an important role, by ensuring that the broadest scope for competition is warranted and that 
the  best  possible  offers  are  chosen,  in  terms  both  of  quality  and  cost.  Successful, 
well-managed projects should therefore be a priority of the Single Market. 

If run efficiently, large-scale infrastructure projects can have an important positive impact on 
the overall economy. According to the IMF, if carried out in certain conditions, an increase of 
1 percentage point of GDP in investment spending raises the level of output by about 0.4 % in 
the same year and by 1.5 % four years after the increase.177  

Problem and impact 

Nine out of ten of such large-scale infrastructure projects do not go according to plan, either 
concerning  the  budget  and/or  the  time-frame.  Cost  overruns  of  up  to  50 %  are  common178. 
Delays are also common in all stages of the process, from the planning, to the implementation 
of  the  project  and  the  execution  of  the  contracts.  For  example,  the  costs  for  the  Slovenia-
Hungary rail connection were 52 % higher than foreseen. The railway line linking Rotterdam 
to the German border costs 3 times more than initially estimated and 27 % more than planned 
at the start of the implementation. This project is also subject to significant time delays179.  

Many factors have been identified as contributing to these difficulties. One is the complexity, 
length  and  duration  of  the  public  procurement  process.180  Many  legal  aspects  have  to  be 
clarified before the launch of the procedures — ranging from the type of public procurement 
procedure to the definition of selection and award criteria to the contract conditions, including 
the  allocation  of  risks  between  the  parties.  Discussions  at  political  and  technical  levels  on 
these aspects tend to be lengthy. While Member States sometimes consult the Commission on 
the most sensitive issues at an early stage, this is rarely done in an orderly manner. As there 

175 Information extracted from TED notices. 
176 European Commission, 'Communication on an Investment Plan for Europe', COM(2014) 903. 
177 http://www.imf.org/external/pubs/ft/survey/so/2014/res093014a.htm 
178 Flyvbjerg B., 'What You Should Know About Megaprojects, and Why: An Overview', 2014. 
179 European Parliament, 'TEN-T large Projects – Investments and costs', January 2013. 
180 The Directorate-General for Regional Development considers public procurement errors to be the single most 
common cause of administrative errors and financial corrections across all EU funds. 

65 

 
                                                 
are  currently  no  clear  procedures,  Member  States  may  be  hesitant  to  obtain  the  necessary 
clarifications and the consultation process tends to take a long time. 

The elements presented above weigh even more in cross-border projects. This is because two 
or more Member States need to agree on many legal aspects, which may also vary because the 
transposition  by  2016  of  the  new  Public  Procurement  Directives181  introduces  additional 
elements  to  be  agreed  upon.  Any  legal  uncertainty  in  the  legal  framework  can  lead  to 
considerable delays, due to the need for corrections and the possibility of legal proceedings. 

Investigations  and  infringement  procedures  initiated  by  the  Commission  or  proceedings  in 
national courts, often at an advanced stage in the procurement process, can have a significant 
impact on the duration and the costs of a project. In certain circumstances, proper remedies 
may no longer even be available, e.g. due to the advanced stage of contract execution. 

Another  important  issue  is  transparency.  Such  big  projects  may  not  follow  the  information 
requirements for public procurement (not all the information is published on TED) or may not 
be  published  at  all  when  they  are  awarded  directly  as  a  result  of  an  inter-governmental 
agreement. These practices restrict competition in the Single Market. 

All  of  these  elements  are  especially  important  for  particularly  big  infrastructure  projects 
aimed  at  expanding  existing  capacities  or  developing  completely  new  components  of 
infrastructure. The sectors most affected are transport, ICT and energy. 

Problems  that  have  not  been  solved  before  launching  public  procurement  procedures  will 
generate delays later on, not only due to complaints and legal review, but also to corrections 
by  the  contracting  authorities  themselves.  Projects  over  EUR  700  million  generally  take 
substantially  longer  to  contract  than  other  tenders182  and  the  reason  is  not  longer  time  to 
tender. If the duration of a typical procedure, from the dispatch of the invitation to tender to 
the award of the contract, is 3 and a half months, for large-scale infrastructure projects it is 
approximately  25  months,  increasing  to  35  months  for  negotiated  procedures.  However,  the 
time the tenderer has to submit a proposal is often quite similar to a lower value procedure. 

An  investigation  by  the  Commission  takes  at  least  4  months  for  initial  exchanges  with  the 
Member State and at least an additional year for an infringement procedure up to the potential 
referral  to  the  ECJ.  It  can  intervene  at  any  moment  of  the  procedure.  Blocking  a  project 
during this process to avoid subsequent difficulties engenders high costs, but by pursuing the 
project a Member State risks paying fines or penalties for cancelling contracts. 

The costs resulting from delays depend on the value of the project, its advancements as well 
as  the  source  of  funding  or  the  Member  State  in  which  the  project  is  implanted  (different 
inflation and interest rates). 

However, one could compute a rough estimation of the opportunity costs of delaying a large 
infrastructure  project.  A  project  worth  EUR  10  billion  which  would,  for  some  reason,  be 
delayed in its implementation by 2 years could generate additional costs of more than EUR 
600 million considering only two factors: opportunity costs on the financial market (EUR 400 
million) and inflation (EUR 200 million). 

181 Directive 2014/24/EU on public procurement (and Repealing Directive 2004/18/EC); Directive 2014/25/EU 
on procurement  by  entities  operating  in  the  water,  energy,  transport  and  postal services  sectors (and repealing 
Directive 2004/17/EC); Directive 2014/23/EU on the award of concession contracts. 
182  The  duration  for  the  large-scale  projects  is  calculated  based  on  TED  data  for  contracts  awarded  between 
2010-2014, the calculations for a typical project come from European Commission, 'Impact and Effectiveness of 
EU Public Procurement Legislation', Staff Working Paper, SEC(2011) 853 of 27 June 2011. 

66 

 
                                                 
significant  additional  costs 

the 
Other 
beneficiaries/population  at  large,  which  would  have  benefitted  from  the  project,  but  also 
significant  administrative  costs  for  both  the  authority  dealing  with  the  project  and  for  the 
tenderer/contractor  that  has  to  internalise  a  significant  degree  of  uncertainty  regarding  the 
project. 

social  and  economic  costs 

include 

for 

Public procurement uncertainties contribute to the general cost  overruns. Considering that 9 
out  of  10  big  transport  infrastructure  projects  run  over  budget  on  average  by  28 %183,  the 
overall cost increase of projects above EUR 700 million registered in TED could amount up 
to EUR 4 billion per year. Although the factors leading to overruns are many, improving this 
situation  even  marginally,  due  to  better  public  procurement  procedures,  can  imply  large 
savings for EU tax payers. 

Considering  the  complexity  of  large  infrastructure  projects,  the  Commission  will  propose  a 
three-stage  approach:  a  helpdesk,  an  ex-ante  assessment  and  a  system  for  exchange  of 
information. All the projects with a total value of more than EUR 700 million will be covered 
by the initiative. In order to determine the threshold, an analysis has been carried out on TED 
data. The threshold was chosen for the increased economic impact of delays for such projects, 
keeping in mind the resources needed to assess the notifications, and a relative good coverage 
of Member States. 

During  the  planning  phase  of  such  a  project,  many  questions  can  arise  which  delay  the 
process significantly. A helpdesk could assist Member States in clarifying these issues upfront 
and  before  the  project  is  mature  enough  to  be  notifiable  under  the  mechanism  described 
below.  It  can  play  a  particularly  important  role  for  cross-border  projects  in  helping  to  find 
mutually acceptable solutions. The helpdesk could also continue to perform its advisory role 
throughout the execution of the project. 

The  Commission  will  develop  a  specific  procedure  with  a  view  to  providing  an  ex  ante 
assessment  of  a  specific  project  with  EU  procurement  rules.  Member  States  will  have  the 
possibility  to  notify,  on  the  basis  of  a  standard  information  sheet,  projects  early  enough  to 
ensure  that  the  Commission  can  assess  the  compatibility  of  the  project  before  irreversible 
decisions  are  taken.  The  project  would  have  to  be  notified  at  the  latest  before  publishing 
notices directly linked to the implementation. If no publication is intended, the Commission 
should be notified before any binding commitment or communication to potential contractors 
or  other  partners  (including  Member  States  and  third  countries)  is  undertaken.  The 
Commission will deliver its opinion within a specific timeframe which should in principle not 
exceed three months following the notification of the project. 

Due to their complexity it is not uncommon that procurement plans are subsequently changed 
or the contracts amended. Therefore, it could be envisaged that the Member States will also 
be  asked  to  notify  any  substantial  changes  to  the  prior  notification  that  might  have  an 
influence  on  the  outcome  of  the  assessment;  e.g.  the  change  of  the  public  procurement 
procedure  from  a  standard  to  an  exceptional  procedure  or  significant  modifications  of  the 
contracts awarded. 

In addition, an information exchange mechanism between Member States and/or promotors of 
cross-border projects, coordinated by the Commission, will be introduced. The aim will be to 
build  up  reference  classes  of  similar  projects  and  to  profit  mutually  from  experiences.  The 
Member  States  would  be  encouraged  to  submit  information  on  large-scale  infrastructure 

183  Flyvbjerg  B.,Skamris  Holm,  M.  K  and  Buhl,  S.L.  'What  Causes  Cost  Overrun  in  Transport  Infrastructure 
Projects?', 2003. 

67 

 
                                                 
projects. This  collection of data will also be  instrumental to the achievement of the broader 
objective of better governance through data as described above.  

3.3. 

Consolidating Europe's intellectual property framework 

The  crisis  had  a  significant  impact  on  the  private  sector's  innovative  activity,  with  the 
commercial  uptake  of  innovation  constituting  a  particular  weakness,  and  the  number  of 
innovative  firms  in  decline.  SMEs’  innovations  also  suffered,  as  did  patent  applications, 
exports of high-tech products, venture capital investments, and sales of innovative products. 
While there have been improvements in human resources, business investments in R&D and 
the quality of science, these have not been enough to result in a stronger performance overall 
in  terms of  innovation. All  of this has  posed  risks for the long-term growth  potential of the 
EU, as have other aspects relevant to innovation performance. From the perspective of SMEs, 
lack  of  financial  resources  is  viewed  as  the  main  problem  in  the  commercialisation  of 
innovative  products  or  services.  The  few  innovative  businesses  that  receive  public  financial 
support  for  R&D  or  other  innovation  activities  consider  it  insufficiently  effective.  In  this 
context, it is necessary to consolidate and modernise the intellectual property (IP) framework. 

3.3.1.  A comprehensive strategy to support the use of IP by SMEs 

Policy context 

SMEs represent 99 % of all businesses in the EU. 85 % of net new jobs in the EU between 
2002  and  2010  were  created  by  SMEs184.  This  figure  is  considerably  higher  than  the  67 % 
proportion  of  SMEs  in  total  employment  and  shows  that  SMEs  are  the  main  drivers  of  job 
creation  in  Europe.  To  enable  more  growth  in  business  and  employment,  the  Commission's 
entrepreneurship  and  innovation  policies  are  especially  focused  on  SMEs,  and  aim  to  assist 
SMEs  to  enhance  their  business  and  innovation  models  through  better  education  and 
information, and improving their access to finance.  

The Single Market holds the promise of a bigger market for products and therefore of more 
and faster growth for companies. However, SMEs and especially start-ups often do not make 
use  of  the  possibility  to  expand  cross-border.  This  decreases  their  chances  of  becoming 
sustainable  or  competitive  at  international  level.  While  there  are  different  views  on  what 
stimulates  high  growth  firms  or  how  best  to  measure  sustainable  firm  growth185,  helping 
SMEs benefit from the Single Market is an important driver behind the Commission's Single 
Market  policy.  Moreover,  the  proliferation  of  out-sourcing  and  of  network  innovation  as  a 
means  for  SMEs  to  be  competitive  also  suggests  that  a  smooth  functioning  Single  Market 
should enhance their possibilities to find and work with ideal business and innovation partners 
that might not be found at national level. These dual objectives, to facilitate cross-border trade 
and  cross-border  partnerships,  combined  with  the  view  that  innovation  is  the  driver  of 
competitiveness in a knowledge-based economy, provide the rationale for European policy IP 
rights in this field.  

One  of  the  means  to  improve  returns  on  investment  in  innovation  and  to  protect  intangible 
assets, which are at the heart of the competitiveness of EU enterprises, is the application of an 
amenable and efficient IP rights framework.  

184  European  Commission  press  release,  'Small  companies  create  85  %  of  new  jobs',  6  January  2012: 
http://europa.eu/rapid/press-release_IP-12-20_en.htm 
185 Coad, A., Daunfeldt, S., Hölzl, W., Johansson, D. and Nightingale P., 'High-growth firms: introduction to the 
special section', Industrial and Corporate Change, 2014, volume 23, number 1, pp. 91–112, 2014. 

68 

 
                                                 
The  EU's  harmonisation  of  industrial  property  rights  (through  the  recently  modernised 
European trademark  acquis, design rights and the forthcoming  unitary patent) has sought to 
reduce the costs of applying and maintaining IP rights across the Single Market. This should 
make it easier for SMEs to exercise these rights and help companies invest in innovation, as 
the potential scale of the Single Market could make those innovations commercially viable.  

Furthermore,  the  Commission  adopted  an  action  plan  against  infringements  of  IP  rights  in 
2014186,  which  focused  specifically  on  SMEs.  This  includes  general  initiatives  to  improve 
small claims procedures and the review of national schemes that have been established for IP 
protection.  These  range  from  the  establishment  of  specialised  mediation  and  arbitration 
centres  (that  allow  for  faster  and  generally  less  expensive  out  of  court  procedures),  to 
specialised IP courts (that potentially allow for faster and more predictable outcomes) and to 
improved  access  and  information  on  IP  enforcement  procedures.  Furthermore,  the 
Commission has established an IPR Helpdesk, and through the Iporta project187 it has worked 
with national IP offices to provide better access to IP information. The European Observatory 
on  infringements  of  IP  rights188  provides  similar  services.  Finally,  the  Commission  also 
announced in its action plan that it would review nationally funded schemes to assist SMEs in 
applying for and enforcing their IP rights. This includes a review of unsuccessful attempts to 
develop national IP legal expense insurance schemes in certain Member States. 

In the field of IP enforcement, the Commission's proposal to harmonise civil redress against 
the  unlawful  misappropriation  of  confidential  business  information  (also  known  as  trade 
secrets)189,  which  are  an  essential  form  of  IP  but  not  an  exclusive  right,  seeks  to  assist 
innovative SMEs. Companies are fearful of sharing such information with privileged partners 
in  cross-border  innovation  networks  precisely  because  the  legal  framework  for  civil  redress 
against such misappropriation is fragmented within the EU. In the public consultation on the 
need for such harmonisation, 73 % of responding SMEs called for EU action190. The impact 
assessment for this proposal191 revealed that SMEs depend heavily on secrecy as a means to 
protect  their  know-how  and  that  this  dependency  is  accentuated  by  their  difficulty  in 
accessing and enforcing IP rights.  

Problem and impact 

There  is  evidence  that  EU  SMEs  significantly  underexploit  the  potential  of  IP  rights  to 
enhance  their  competitive  performance,  and  that  the  economic  benefits  of  changing  this 
situation are sizeable. Recent evidence shows that the schemes put in place at national and EU 
level  do  not  fully  address  the  problem  of  missed  IP  opportunities  for  SMEs  for  various 
reasons,  including  duplication  and  lack  of  coordination,  difficulties  to  reach  out  to  SMEs 
effectively, amenability problems, etc.  

186 European Commission, 'Towards a renewed consensus on the enforcement of Intellectual Property Rights: An 
EU Action Plan', COM(2014) 392. 
187 EU Accessible Intellectual Property. 
188 Established by Regulation (EU) 386/2012 of 19 April 2012. 
189  European  Commission,  proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  on  the 
protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, 
use  and  disclosure,  COM(2013)  813.  Inter-institutional  discussions  between  the  European  Parliament  and  the 
Council to finalise the text of the directive are currently at an advanced stage. 
190  European  Commission,  'Public  consultation  on  the  protection  against  misappropriation  of  trade  secrets  and 
confidential business information – summary of responses', 2013. 
191 'Commission Staff Working Document  – Impact Assessment - Accompanying the document proposal for a 
Directive  of  the  European  Parliament  and  of  the  Council  on  the  protection  of  undisclosed  know-how  and 
business information (trade secrets) against their unlawful acquisition, use and disclosure, SWD(2013) 471. 

69 

 
                                                 
The  above-mentioned  Commission's  action  plan  against  infringements  of  IP  rights  includes 
the  results  of  a  public  consultation  on  the  impact  of  the  2004  IP  rights  enforcement 
directive192, which indicates that the high costs and complexity of litigation have a dissuasive 
impact on SMEs both as regards using and enforcing IP rights. This leads to SMEs in the EU 
under-using  IP  rights  as  a  means  to  ensure  that  they  earn  sufficient  returns  on  their 
investments in innovation.  
The Observatory on infringements of IP rights, hosted by OHIM193, is currently undertaking a 
survey  of  SMEs  in  IP  intensive  sectors  in  Europe  to  evaluate  their  needs  in  this  field.  The 
final report will be available in autumn 2015. The preliminary results show that there would 
be a greater willingness to apply for EU IP titles if the process was more accessible and easier 
to  use194.  The  main 
information  and  costs  of 
application/enforcement.  

inhibitors  seem 

to  be  access 

to 

IP  intensive  industries  account  directly  for  26 %  of  all  jobs  in  the  EU  and  generate  almost 
39 %  of  total  EU  economic  activity  (GDP).  They  pay  higher  remuneration  than  non-IP 
intensive industries, with a premium of more than 40 %195.  
Although survey results from May 2014196 suggest that 63 % of companies with between one 
and nine employees have introduced at least one innovation since 2011, this proportion rises 
to  85 %  of  companies  with  500  employees  or  more.  Moreover,  71 %  of  companies  with 
between  one  and  nine  employees  encountered  difficulties  in  commercialising  their 
innovations due  to  a lack of  financial resources, as  compared with  48 %  of companies  with 
500 employees or more.  
Another recent OHIM study for the Observatory197 reveals that only 9 % of SMEs in Europe 
own IP rights but that, on average, they generate 32 % more revenue per employee than those 
that do not. Only 0.8 % of EU SMEs were found to own patents. The study also finds that, 
compared  to  large  companies,  SMEs  tend  both  to  use  national  rights  more  often  than 
European rights and that they have a relatively greater reliance on trademarks. 
A recent study by Eurostat (2014) has estimated the proportion of patents filed198 by European 
companies  and  coming  from  SMEs  in  different  fields  of  technology.  Combining  different 
databases, the study found that 79 % of all patent technologies can be attributed to large firms 
while only 17 % can be attributed to SMEs.  

The need for an EU wide scheme to help innovative SMEs has most recently been confirmed 
by  the  European  Patent  Office  (EPO)  Select  Committee199  that  is  working  on  the 
establishment of the unitary patent. In the context of the negotiations on fees for the unitary 

192 European Commission, 'Corrigendum to Directive 2004/48/EC of the European Parliament and of the Council 
of 29 April 2004 on the enforcement of intellectual property rights', OJ L 195/16, 2004. 
193 Office for Harmonization in the Internal Market, based in Alicante, Spain. 
194 Based on a pilot of 10 % (900) of the sample of 9 000 EU SMEs involved in this telephone survey, 42 % of 
respondents noted that they had an intangible assets that could be protected by an IP right but was not and 33 % 
noted that they would have applied for IP rights if the process to do so was simpler and more accessible. 
195  OHIM,  'Intellectual  property  rights  and  firm  performance  in  Europe:  an  economic  analysis',  Firm-Level 
Analysis Report, 2015. 
196 Flash Eurobarometer 394, 'The role of public support in the commercialisation of innovations', Report, 2014 
197  OHIM,  'Intellectual  property  rights  and  firm  performance  in  Europe:  an  economic  analysis',  Firm-Level 
Analysis Report, 2015. 
198  To  the  European  Patent  Office  and  Patent  Cooperation  Treaty  applications  and  US  Patent  and  Trademark 
Office patent grants. 
199 EPO Select Committee, http://www.epo.org/about-us/organisation/select-committee.html 

70 

 
                                                 
patent,  Member  States  requested  that  the  Commission  identify  possible  actions  to  support 
SMEs which apply for a unitary patent and other EU IP titles.  

The  cost  exposure  for  IP  rights  and  particularly  patent  litigation  is  significant,  hits  SMEs 
disproportionately hard and acts as a serious deterrent for SMEs to engage in patenting in the 
first place. Indeed, under the Unified Patent Court, firms that lose a legal dispute will have to 
pay the court fees of the winner (provisionally estimated at a fixed fee of EUR 11 000 plus a 
value  based  fee  of  up  to  EUR  220  000).  To  this  have  to  be  added  the  winner's  legal  costs, 
which  on  the  basis  of  the  draft  Unified  Patent  Court  rules  could  amount  to  up  to  EUR  3 
million.  In  addition,  the  losing  party  will  typically  also  be  required  to  pay  damages.  Such 
exposure  can  only  be  effectively  addressed  through  a  functioning  IP  litigation  insurance 
market. Once the unitary patent (including the court and the official procedures) is in force, 
such  a  market  –  which  did  not  develop  at  national  level  due  to  the  too  limited  size  of  the 
market - could start to grow. An insurance scheme would not only counter the risks of such 
legal fee exposure: the security of insurance and the possibility of a valorisation of IP assets 
could in turn lead to more investment by banks and other financial institutions into innovative 
start-ups and SMEs. 

Building on the initiatives already in place, the Commission will consider extending its efforts 
to the following measures: 

  better  co-ordinate  information  desks  and  assistance  programmes  with  the  aim  of 

moving to a common EU portal, possibly based in OHIM;  

  ensure  that  funds  available  in  the  networks  of  national  IP  offices  with  the  EPO  and 
OHIM  are  earmarked  for  activities  to  support  awareness  and  access  to  specialist 
services on the new unitary patents and other European IP titles among SMEs; 

  work  towards  reducing  the  costs  of  post-grant  management  of  IP  portfolios, 
specifically  for  SMEs  through  engagement  with  specialised  IP/patent  management 
service providers and IPOs; 

  ensure that COSME funds seeking to encourage innovative European SMEs are used 
to assist the latter in applying for European IP titles including the new unitary patent; 

  ensure  that  the  SME  investment  instrument  in  Horizon  2020  is  used  to  encourage 
European  'disruptive'  innovators  to  protect  their  investments  with  unitary  patents  so 
that  they  exploit  them  commercially  at  EU  level,  rather  than  at  national  level  where 
they may not be commercially viable; 

 

facilitate  the  development  and  launch  of  a  European  commercial  IP  legal  costs 
insurance  market  that  has  not  grown  at  national  level  because  of  the  small  scale  of 
national markets. This would be launched when the unitary patent comes into effect; 
and 

 

improve the  monitoring of the take-up of EU IP titles by ensuring  that the EPO and 
OHIM report on the relevant data systematically. 

71 

 
3.3.2. 

Interaction between the unitary patent and national patent systems 

Policy context 

The upcoming unitary patent system will play an essential role in enabling innovation in the 
participating Member States200. Europe is now on the cusp of putting this patent into force and 
establishing  the  European  patent  specialised  court  -  the  Unified  Patent  Court  -  for  which 
industry  has  been  calling  for  decades.  Now,  the  key  challenge  is  to  get  the  end-game  right, 
including  addressing  uncertainties  over  how  the  unitary  patent  will  work  together  with 
national patents and current EU rules on national supplementary protection certificates (SPC) 
granted under the EU SPC arrangements  201 and the creation of a unitary SPC (see next sub-
section).  The  objective  of  the  unitary  patent  package  is  to  offer  European  innovators, 
especially  SMEs,  a  patent  with  a  truly  European  dimension  and  more  affordable  patent 
protection. The exclusive competence of the new specialised jurisdiction, the Unified Patent 
Court, will result in much greater legal certainty and allow innovators to save on costs, as it 
will avoid multiple parallel legal disputes. 

Problem and impact  

In spite of the work already done by the EPO Select Committee, some provisions of the two 
Regulations202 creating the unitary patent system and the language arrangements still require 
additional  clarification  in  order  to  ensure  that  the  unitary  patent  offers  the  highest  level  of 
legal certainty for future users. The issues involved concern the following: 

 

  coherence between the upcoming unitary patent and current EU rules on SPC - in the 
absent of a unitary SPC title  – will be important. SPCs are instrumental for industry 
sectors whose products are subject to regulated market authorizations; 
the consequences of the rejection of a request for unitary effect, and the revocation of 
a  unitary  patent  due  to  defeating  national  prior  art203  and  the  possible  acceptable 
conditions to convert such a putative unitary patent into a bundle of national patents; 
the  principle  of  non-double  protection  deriving  from  unitary  patent  and  national 
patents, except in very limited circumstances; and 

 

  possible  issues  stemming  from  the  obligation  to  designate  all  participating  Member 

States for the purpose of obtaining a unitary patent204. 

Based  on  a  single  application,  the  unitary  patent  will  automatically  deploy  its  effect  in  the 
territories  of  all  the  Member  States  taking  part  in  the  enhanced  cooperation.  For  equivalent 

200 Commission Decision (EU) 2015/1753 of 30 September 2015 on confirming the participation of Italy in the 
enhanced cooperation on unitary patent protection in the EU. This has brought the total number of participating 
Member States to 26, with Croatia and Spain not participating. 
201  Existing  nationally  granted  SPCs  are  regulated  in  the  EU  by  the  Council  Regulation  (EEC)  No.  1768/92, 
codified as Regulation (EC) No. 469/2009 concerning the SPC for medicinal products, and Regulation (EC) No. 
1610/96 concerning the creation of a SPC for plant protection products. 
202  Regulation  (EU)  No.  1257/2012  of  the  European  Parliament  and  of  the  Council  implementing  enhanced 
cooperation in the area of the creation of unitary patent protection, and Council Regulation (EU) No. 1260/2012 
implementing  enhanced  cooperation  in  the  area  of  the  creation  of  unitary  patent  protection  with  regard  to  the 
applicable translation arrangements. 
203 Prior art is any evidence that an invention is already known. 
204 Article 3(1) of Regulation (EU) No. 1257/2012 provides that only European patent granted with the same set 
of  claims  for  all  the  participating  Member  States  shall  benefit  of  the  unitary  effect.  However,  participating 
Member  States  have  not  joined  the  European  Patent  Organisation  at  the  same  date  and  some  of  them  only 
became members in recent years. Consequently, old pending applications cannot designate these Member States 
(they were not member of the Organisation at the time of filing) and unitary effect could not be granted for these 
applications when becoming European patents. 

72 

 
                                                 
patent  protection  (i.e.  outside  the  framework  of  the  unitary  patent),  this  will  represent  a 
decrease in the administrative costs related to obtaining a unitary patent of up to 80 %. The 
Commission has estimated that the full implementation of the unitary patent could lead to a 
gain  of  0.25 %  in  EU  GDP205.  This  effect  captures  the  possible  net  productivity  impact 
resulting  from  the  reduction  of  validation  and  maintenance  fees  in  the  Member  States  for 
patents granted by the European Patent Office and, subsequently, the increase in the number 
of non-national patent rights enforced. The potential economic gains for individual Member 
States  could  vary,  due  to  differences  across  Member  States  regarding  the  current  cost  of 
patenting  (fees),  the  sensitivities  of  patents  to  fees,  and  the  sensitivity  of  productivity  to 
patents.  

The  Commission  will  address  uncertainties  over  how  the  unitary  patent  will  work  together 
with current EU rules on SPCs. The other issues identified will be analysed further together 
with participating Member States with the view to bringing legal certainty to these matters.  

3.3.3.  Optimising the legal framework for industry sectors whose products are subject 

to regulated market authorisations  

Policy context 

Industry  sectors  whose  products  are  subject  to  regulated  market  authorisations,  such  as  the 
pharmaceutical,  medical  devices  and  agrochemical  industries,  rely  heavily  on  industrial 
property  protection  through  patents,  SPCs  and  data/market  exclusivity.  This  protection 
ensures the recovery of the very high investments necessary over a long development period 
to bring a successful innovative product to the market206. SPCs207 in particular are critical for 
these sectors. Existing national SPCs complement national patents to ensure an extra period - 
up  to  five  years  -  of  protection  for  patent  holders,  to  offset  the  time  required  to  obtain 
marketing authorisation for their patented products. 

SMEs and start-ups are playing an increasing role in these highly innovative sectors both in 
Europe208 and in the USA, as reported in an OECD study209 on the pharmaceutical sector. 

Problem and impact 

The  specific  industrial  property  legal  framework  in  the  EU  for  industry  sectors  whose 
products are subject to regulated market authorisations might present several features not fit 
for purpose in today's global economy and in the light of new regulatory requirements. This 
may  create  obstacles  for  the  full  development  of  these  sectors  in  the  EU.  Firstly,  existing 
SPCs  are  granted  and  enforced  at  national  level,  which  can  result  in  Single  Market 
fragmentation. The advent of the unitary patent will make such fragmentation more evident. A 
coherent articulation between the unitary patent and the existing national SPCs will therefore 
be  important,  providing  an  initial  solution  for  users  of  the  SPC  system  to  use  the  unitary 
patent  system  (in  the  absence  of  a  unitary  SPC).  However,  such  a  solution  will still require 

205  Mejer  M.  and  Rutkowski  A.,  Analysis  of  the  country-specific  effects  of  the  unitary  patent  adoption, 
forthcoming: http://ec.europa.eu/growth/about-us/chief-economist/index_en.htm 
206 Mestre-Ferrandiz, J., Sussex, J. and Towse, A.K., ‘The R&D Cost of a New Medicine’, London: Office of 
Health Economics, 2012. 
207  Existing  nationally  granted  SPCs  are  regulated  in  the  EU  by  the  Council  Regulation  (EEC)  No.  1768/92, 
codified as Regulation (EC) No. 469/2009 concerning the SPC for medicinal products, and Regulation (EC) No. 
1610/96 concerning the creation of a SPC for plant protection products. 
208 http://www.ema.europa.eu/docs/en_GB/document_library/Report/2015/02/WC500181837.pdf  
209  Osabe,  J.  &  Jibu,  M.,  'SMEs  playing  a  key  role  in  drug  R&D:  Analysis  by  new  drug  R&D  indicators',  as 
presented at European Policy for Intellectual Property (EPIP) Conference, 4-5 September 2014. 

73 

 
                                                 
multiple  administrative  procedures  in  multiple  jurisdictions,  limiting  the  full  benefits  of  a 
unitary system. 

Secondly,  Member  States  implement  the  patent  research  exemption  and  the  'Bolar 
exemption'210  in  different  ways.  On  the  one  hand,  some  Member  States  do  not  allow  the 
supply of active pharmaceutical ingredients (APIs211) to EU-based generic manufacturers for 
the purpose of seeking marketing authorisation212. On the other hand, in a number of Member 
States, it is not certain whether testing in the EU by originators and biosimilars213 can benefit 
from these  exemptions  for the purpose of seeking  marketing authorisation in  the EU and in 
non-EU countries, or for meeting emerging regulatory requirements such as those related to 
health  technology  assessment.  Providing  clarity  on  the  application  of  the  EU  ‘Bolar 
exemption’ would also be important with the advent of the unitary patent and its centralised 
jurisdiction214.  

Thirdly, manufactures of generic and biosimilar medicines based in non-EU countries where 
SPC protection does not exist (e.g. in Brazil, Russia, India and China) enter markets in which 
patent  protection  expired  up  to  five  years  earlier  than  EU-based  manufacturers.  This  is 
possible  because  EU-based  manufactures  are  not  allowed  to  produce  in  EU  Member  States 
during the period of the SPC protection of the reference medicine. Furthermore, this situation, 
under  certain  circumstances,  gives  an  untended  lead-time  advantage  to  non-EU  based 
operators  to  enter  EU  Member  States  following  the  expiry  of  that  SPC  protection.  Such  a 
situation  could  have  the  effect  of  encouraging  European  manufacturers  of  generic  and 
biosimilar  medicines  to  move  their  production  outside  the  EU  -  either  via  delocalisation  or 
long-term outsourcing contracts - to overcome these legal hurdles and to stay competitive.  

In  Europe,  the  originator  pharmaceutical  industry  employs  116  000  staff  in  R&D  activities, 
and  about  15 %  of  its  sales  are  reinvested  in  R&D.  Producers  of  generic  medicines  and 
biosimilars devote 7 % of their revenues to R&D activities; a similar proportion of investment 
in  R&D  is  found  in  the  agrochemical  industry,  which  employs  5  500  staff  on  technical 
support, including R&D215.  

Expenditure on medicines amounts to 1.6 % of EU GDP and accounts, on average, for 15 % 
to 20 % of national health budgets. Timely and predictable entry of generics and biosimilars 
play  a  key  role  for  the  sustainability  of  public  health  budgets:  the  Commission216  has 
estimated  that  generics'  entry  on  the  first  day  after  patent  expiry  could  lead  to  additional 
savings of the order of 20 %. 

Some EU pharmaceutical industry have moved to the USA and emerging economies in recent 
decades217.  Countries  such  as  China,  Korea,  Singapore,  Brazil  and  India  are  emerging  as 
major competitors in this sector. In 2014, the Brazilian and Chinese markets grew by 12.6 % 

210 Art.10 (6) of Directive 2001/83/EC, and Art. 13(6) of Directive 2001/82/EC on the EU code of human  and 
veterinary medicines respectively. Art. 27(d) of the Unified Patent Court Agreement includes a cross-reference 
to those Articles of the cited Directives. 
211 An API is the ingredient in a pharmaceutical drug that is biologically active. 
212 As described in C-661/13, Astellas versus Polpharma case. 
213  Sanofi-Aventis  vs  Lilly  France,  Order  of  December  15,  2014,  Paris  TGI.  A  biosimilar  is  defined  as  a 
biological medicinal product similar to a reference medicinal product authorised in the EU. 
214 Art. 27(d) of the Unified Patent Court Agreement refers to Directive 2001/83/EC and Directive 2001/82/EC 
215 Data from European industry associations EFPIA, EGA and ECPA. 
216 Sector inquiry and follow-up, http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/ 
217 Gambardella et al., Global Competitiveness in Pharmaceuticals: A European Perspective (2001). 

74 

 
                                                 
and 11.6 % respectively, as  compared with  an average  market growth  of  2.4 %  for the total 
EU market and 12.5 % for the US market218. 

Global  spending  is  expected  to  shift  toward  generic  medicines,  with  an  expected  rise  from 
27 % in 2012 to 36 % of total sales by 2017. Generics and biosimilars could represent 80 % of 
the  volume  of  medicines  by  2020219.  An  SPC  manufacturing  waiver  for  export  purposes  to 
non-EU  countries  with  no  SPC  protection  could  allow  the  EU  generics  and  biosimilars 
industries  both  to  create  thousands  of  high-tech  jobs  in  the  EU  and  start  many  new 
companies220.  

Between  54 %  and  70 %  of  the  active  pharmaceutical  ingredients  market  in  Europe 
(depending  on  the  Member  States)  is  supplied  by  India,  China  and  Israel.  Active 
pharmaceutical ingredients manufactured in Poland, for example, have significant penetration 
in some of its neighbouring markets, but a negligible one in the EU-15 market221.  

Following  stakeholder consultation, the  Commission  will consider,  and as  appropriate  bring 
forward, a recalibration of the patent and SPC regulatory framework in the EU, including on 
the following issues:  

  a unitary SPC, which would enhance the value, transparency and legal certainty of the 
protection of medicines and plant protection products. This would provide a one stop 
shop  for  the  granting  of  SPCs  in  Europe,  and  give  enhanced  certainty  to  European 
health  authorities,  to  patients  and  to  generic  companies  on  the  status  of  a  regulated 
product’s IP protection; 

  a targeted SPC manufacturing waiver for export purposes that could allow EU-based 
manufacturers of generic and biosimilar medicines to compete on equal footing with 
competitors from non-EU countries; 
the scope of patent ‘Bolar’ and research exemption in the EU, notably in view of the 
upcoming  establishment  of  the  Unified  Patent  Court,  and  taking  into  account  best 
practice implemented in certain Member States. 

 

3.3.4.  Review of the Intellectual Property Rights enforcement framework 

Policy context 
The 2004 directive on the enforcement of intellectual property rights222 approximates the laws 
of  the  Member  States  in  the  area  of  civil  enforcement  of  IP  rights.  It  contains  rules  on 
measures  and  remedies  available  to  right  holders  in  order  to  enforce  their  IP  rights.  The 
directive  covers  all  types  of  IP  rights,  notably  copyright,  trademark,  patent  and  design.  As 
regards  copyright,  it  complements  the  Directive  on  the  harmonisation  of  certain  aspects  of 
copyright and related rights in the information society223. 

The protection of IP is an essential element for the success of the Single Market and plays a 
role  not  only  for  promoting  innovation  and  creativity,  but  also  for  developing  employment 
and  improving  competitiveness.  IP-infringing  activities,  in  particular  those  carried  out  on  a 
commercial  scale  (where  the  infringer  makes  money  on  the  back  of  the  right  holder's 

218 IMS Health, April 2015. 
219 Vicente V. and Simoes S., 'Manufacturing and export provisions: Impact on the competitiveness of European 
pharmaceutical manufacturers and on the creation of jobs in Europe', 2014. 
220 Ibid. 
221 European Commission, 'Economic study on the EU SPC system', preliminary findings, 2015. 
222 Directive 2004/48/EC of 29 April 2004. 
223 Directive 2001/29/EC of 22 May 2001. 

75 

 
                                                 
investment),  dissuade  investment  in  innovation,  undermine  job  creation  and  put  consumers 
and  businesses  at  risk.  A  comprehensive  enforcement  policy  is  required  to  successfully 
combat  IP  infringements  at  EU  and  national  level,  especially  given  the  borderless  nature  of 
the internet.  

Therefore,  the  Digital  Single  Market  Strategy  announced  a  modernisation  of  the  IP 
enforcement framework, focusing on commercial-scale infringements (the 'follow the money' 
approach) as well as on its cross-border applicability. Furthermore, to be fully comprehensive, 
enforcement  should  go  beyond  digital  and  look  at  the  role  intermediaries  play  in  the  entire 
supply chain. 

Problem and impact 
Stakeholder  consultations224  have  highlighted  a  number  of  issues  as  regard  the  IP 
Enforcement Directive. A number of key provisions may not be functioning properly or not 
delivering  expected  results,  especially  in  the  online  environment  and  in  a  cross-border 
context. This concerns in particular the possibility to receive information on infringing goods 
or  services,  preliminary  and  permanent  injunctions  to  prevent  infringement  and  their  cross-
border  execution,  calculation  of  damages,  reimbursement  of  legal  costs,  and  publication  of 
judicial decisions. 

Also, the role of intermediaries (e.g. advertising agencies, media operators, payment service 
providers and shippers) in IP enforcement seems significant, yet they are not covered by the 
current rules.  

IP  infringements  on  a  commercial  scale  have  steadily  increased  in  recent  years,  dissuading 
investments  in  innovation  and  creativity  and  affecting  all  types  of  IP  rights.  A  recent 
Europol/OHIM  report  concludes  that  while  the  exact  scope  and  scale  of  the  counterfeiting 
business is not known, it is probably fair to assume that the reality exceeds all projections225. 
For instance, it is estimated that the perfumes and toiletries sector alone loses approximately 
EUR  4  700  million  in  revenue  annually  due  to  the  presence  of  counterfeit  cosmetics 
(perfumes,  beauty  and  make-up)  and  other  personal  care  products  (7.8 %  of  the  sector's 
sales)226.  The  manufacture  and  distribution  of  fake  clothes,  shoes  and  accessories  (such  as 
ties,  scarves,  belts  and  gloves)  generates  losses  of  over  EUR  26  billion  every  year  for 
legitimate EU businesses. This equals nearly 10 % of total sales in the sector throughout the 
EU and translates into 363 000 lost jobs and over EUR 8 billion in government revenue that is 
not collected, due to unpaid tax, social contributions and VAT227. Value losses due to piracy 
in the creative and cultural industries are estimated to be in the range of about EUR 35 to 50 
billion for the 2008-2011 period228. 

Commercial-scale IP rights infringements result in economic harm for inventors and creators 
but  also  for  society  as  a  whole,  and  efficient  and  effective  cross  border  enforcement  of  IP 

224 European Commission, 'Synthesis of the comments on the Commission report on the application of Directive 
2004/48/EC,  COM(2010)  779;  and  the  Commission's,  Synthesis  of  the  responses  to  Civil  enforcement  of 
intellectual property rights: Public consultation on the efficiency of proceedings and accessibility of measures', 
2013. 
225  OHIM  study,  '2015  Situation  Report  on  Counterfeiting  in  the  European  Union  -  A  joint  project  between 
Europol and the Office for Harmonization in the Internal Market', April 2015. 
226 OHIM study, 'The economic cost of IPR infringement in the cosmetics and personal care sector: report of a 
pilot study', 2013. 
227 OHIM study, 'The economic cost of IPR infringement in the clothing, footwear and accessories sector', 2015 
228  Benzoni,  L.,  ‘The  Economic  Contribution  of  the  Creative  Industries  to  the  EU  in  terms  of  GDP  and  Jobs', 
TERA Consultants, 2014. 

76 

 
                                                 
rights  should  stimulate  investment  in  innovation  and  creation229.  Improving  IP  enforcement 
would  help  inventors  and  creators  to  derive  legitimate  profits  from  their  works  and  would 
reduce the negative economic impact on those consumers and businesses that unintentionally 
purchase IP infringing products.  

As announced in the Digital Single Market Strategy, the Commission will review the existing 
IP rights enforcement framework. It intends to focus its efforts on fighting commercial scale 
infringement (the 'follow the money' approach), including the role intermediaries play in the 
process and strengthening cross  border enforcement of IP rights. The Commission  will also 
look at whether enforcement could benefit from the creation of courts specialising in IP. Other 
issues for consideration include the need for better cooperation between Member States (e.g. 
at the level of enforcement authorities), and assisting SMEs in enforcing their IP rights. 

3.3.5. 

Indications of geographical origin for non-agricultural products 

Policy context 

Europe  has  a  rich  landscape  of  authentic  products  that  rely  on  specific  -  often  traditional  - 
know-how.  These  products  have  a  special  quality,  reputation  or  other  characteristics, 
essentially  due  to  their  deep  roots  in  their  place  or  region  of  origin.  Beyond  wines,  spirits, 
foodstuffs and other agricultural products, some 'geographically rooted products'230 are non-
agricultural. Those products may be in different economic sectors, e.g. stones and minerals, 
jewellery,  ceramics,  pottery  and  porcelain,  textile  and  tapestry  (including  lace  and 
embroidery),  leather  products,  glass  and  crystal,  wooden  and  paper  products,  steel  products 
(e.g. knives), cosmetics, and handicrafts.  

In  contrast  to  agricultural  products,  there  is  no harmonised  approach  at EU  level as  regards 
the  protection  of  indications  of  geographical  origin  for  non-agricultural  products.  National 
rules  exist  in  14  Member  States  providing  for  specific  protection  of  indications  of 
geographical  origin  as  sui  generis  rights231.  They  differ  in  many  aspects:  definitions 
(appellations  of  origin  versus  geographical  indications,  genericity),  procedures  (application, 
opposition  and  registration),  competent  authorities  and  fees.  Therefore,  non-agricultural 
producers who wish to protect an indication of geographical origin throughout the EU need to 
seek separate protection in each Member State, to the extent such protection exists at national 
level.  

In  July  2014,  the  Commission  launched  a  green  paper  entitled  'Making  the  most  out  of 
Europe’s traditional know-how: a possible extension of geographical indication protection of 
the  EU  to  non-agricultural  products'232.  The  objective  of  this  public  consultation  was  to 
ascertain  stakeholder  views  on  the  potential  merits  and  modalities  of  extending  EU-level 
geographical indication protection to non-agricultural products. Following on from the green 

229 Border enforcement with non-EU countries is regulated by Regulation (EU) No 608/2013 of 12 June 2013 
concerning customs enforcement of intellectual property rights. 
230  'Geographically  rooted  products'  are  defined  as  products  which  could  be  entitled  to  benefit  from  the 
protection schemes for indications of geographical origin pursuant to Article 22(1) of the Agreement  on Trade-
Related Aspects of Intellectual Property Rights (TRIPS). 
231 Belgium, Bulgaria, Croatia, Czech Republic, Estonia, France, Germany, Hungary, Latvia, Poland, Portugal, 
Romania, Slovak Republic and Slovenia. 
232 COM(2014) 469 of 15 July 2014. 

77 

 
                                                 
paper  process,  the  European  Parliament  adopted  a  Resolution  on  6  October  2015233  which 
welcomed the Commission's work in this area.  

Problem and impact 

In the absence of a specific legal framework, it is difficult for producers of non-agricultural 
geographically-rooted  (and  authentic)  products  to  effectively  use  this  uniqueness  as  a 
marketing  and  sales  asset.  First,  the  use  of  individual trademarks  would  not  be  possible:  an 
enterprise cannot register a trademark containing signs or indications which serve primarily to 
designate the geographical origin, since the sign or indication would be considered descriptive 
and  the  application  refused.  Secondly,  competitors  may  use  similar  names  or  indications 
serving to designate the same geographical origin without necessarily meeting the associated 
quality or characteristics or without a link to the place of origin, therefore free-riding on the 
reputation  of  the  original  geographically  rooted  products.  Consumers  trusting  the  quality 
features of the authentic products could therefore be misled and deceived. 

General rules on competition, unfair trading practices or consumer protection may be invoked 
against free-riders, in the sense that the relevant business practice can involve the misuse of 
an  indication  designating  the  geographical  origin.  However,  this  is  often  uncertain,  if  no 
specific rules are set out in the first place as regards the quality and/or characteristics of the 
products associated with a specific geographical origin. 

Protecting  the  collective  reputation  connected  to  the  indication  of  geographical  origin  from 
misuse and dilution acts as an incentive for investing in maintaining a certain minimum level 
of  quality  and  authenticity  on  the  products,  thereby  meeting  consumer  expectations.  If  such 
protection  is  fragmented  and  insufficient,  incentives  are  lower,  including  the  financial 
incentive both to invest in innovation on the production of geographically rooted products on 
the one hand, and to grow beyond regional boundaries on the other. Moreover, the protection 
of  indications  of  geographical  origin  may  have  positive  effects  on  promotion  of  cultural 
heritage. This could also have a positive spill-over as regards the provision of linked services, 
such as tourism (e.g. the indication of geographical origin publicises localities and regions and 
may attract tourism). In the Commission's 2014 public consultation, the above issues were all 
identified  as  important  elements  by  participating  stakeholders234.  The  consultation  revealed 
large support for an initiative in this field, while pointing out at the same time potential trade 
restrictions, high costs for SMEs and the risk of extra regulatory burden. 

A case study in the context of an external study carried out for the Commission examined the 
economic  impact  within  the  EU  of  non-agricultural  geographically  rooted  products235.  The 
study identified a sample236 of 127 relevant products237 from 22 EU Member States238 within 
a  range  of  sectors.  While  the  study  cannot  be  considered  fully  representative,  trends  can 

233  European  Parliament  resolution  of  6  October  2015  on  the  possible  extension  of  geographical  indication 
protection of the European Union to non-agricultural products, 2015/2053(INI). 
234  A  report  setting  out  the  results  of  the  public  consultation  and  a  stakeholder  conference  of  January  2015  is 
available at: http://ec.europa.eu/growth/tools-databases/newsroom/cf/itemdetail.cfm?item_id=8254 
235  Insight  Consulting,  REDD  and  OriGIn,  'Study  on  geographical  indications  protection  for  non-agricultural 
products in the internal market', Final Report, 18 February 2013, p. 115 et seq. 
236 The sample was the result of two criteria: firstly, relevance of the products in terms of reputation and socio-
economic impact, and secondly, the availability of producers’ groups to provide data. 
237  Stones  and  minerals;  jewellery;  ceramics,  pottery  and  porcelain;  textile  and  tapestry  (including  lace  and 
embroidery);  leather  products;  glass  and  crystal;  wooden  and  paper  products;  steel  products  (e.g.  knives); 
cosmetics;  firearms;  music  instruments;  watches  and  clocks;  and  handicrafts  generally.  In  34  %  of  cases, 
products used local raw material, Insight Consulting et al, op. cit., p. 118-119. 
238 All but Cyprus, Denmark, Greece, Croatia, Latvia and Malta. 

78 

 
                                                 
nevertheless be observed. The study also presented turnover data in relation to 72 products of 
the sample, totalling EUR 4 174 million in 2010239. Concerning the destination of sales, the 
study was able to  present figures for 90 products: for 16 of  those products at least 50 %  of 
their  sales  were  in  international  markets;  and  for  65  of  them,  more  than  50  %  of  the  sales 
remained domestic.  

Regarding infringements (understood as copies of products protected by an IP right, such as 
trademark  or  sui  generis  rights)  and  imitations  (understood  as  copies  of  non-protected 
products),  data  was  obtained  for  94  products.  Out  of  these  94  products,  infringements  were 
considered a major problem in 57 % of the cases and some producers indicated losses of over 
50 % of turnover due to infringements. Furthermore, the study found that most of the products 
are produced by micro- or small-size enterprises (80.1 %)  

As  regards  employment,  the  sample  presented  data  on  99  products  showing  that  the  total 
number  of  jobs  provided  by  the  geographically  rooted  products  is  significant:  the  average 
number of full-time equivalent jobs is 1 622 jobs per product. The contribution of several of 
these products to local employment is significant (above 30 %).  

Finally,  experience  in  the  agricultural  sector  shows  a  direct  relationship  between  the 
protection  of  indications  of  geographical  origin  and  the  promotion  of  the  economic 
development of the territory concerned, most notably rural areas. This protection has helped 
maintain local infrastructure and employment, especially in poorer areas240. 

The  Commission  will  take  work  forward  on  how  to  make  the  most  of  Europe’s  traditional 
know-how, and in the light of its 2014 green paper, it will follow up the public consultation 
on the protection of non-agricultural geographical indications. 

4. 

ENSURING PRACTICAL DELIVERY 

4.1. 

A culture of compliance and smart enforcement  

Single Market legislation includes measures considered to have an impact on the functioning 
of the Single Market, as defined in Articles 26 and 114 (1) in the Treaty on the Functioning of 
the  European  Union  (TFEU)241.  Since  1992,  the  Single  Market  has  brought  tremendous 
benefits  and  created  new  opportunities.  However,  the  full  potential  of  the  Single  Market 
remained unexploited, due notably to existing obstacles and insufficient enforcement.  

In 2012, the Commission adopted a Communication which called for a renewed commitment 
to  make  the  Single  Market  deliver  more  effectively  for  growth  and  jobs242.  In  particular,  it 
proposed an ambitious course of action involving swift progress in certain key areas with the 
greatest  growth  potential,  and  concrete  measures  to  further  improve  the  way  Single  Market 
rules were designed, implemented, applied and enforced. The key areas in question included 
services, financial services, transport, the digital Single Market and energy. It also called for a 
‘zero  tolerance’  approach:  Member  States  should  transpose  and  implement  EU  legislation 
listed  in  the  annex  to  the  Communication  swiftly  and  correctly,  so  as  to  reduce  both  the 
transposition and compliance deficits to 0 %. It also called for a more rigorous approach and 

239 Insight Consulting et al, op. cit., p.140 et seq.  
240  European  Commission,  Study  commissioned  to  AND  International,  'Value  of  production  of  agricultural 
products  and  foodstuffs,  wines,  aromatised  wines  and  spirits  protected  by  a  geographical  indication  (GI)', 
October 2012. 
241 On 30 April 2015, 1 115 directives and 2 953 regulations were in force in the field of internal market. 
242 European Commission Communication, 'Better governance for the Single Market', COM (2012) 259. 

79 

 
                                                 
enforcement in these key areas, with a maximum 18-month average duration of infringement 
procedures when there are indications that key pieces of legislation are breached.  

In light of the current economic challenges, there is a need for further improvement to allow 
businesses and consumers to fully benefit from their rights. The Single Market Strategy aims 
to unleash the full potential of the Single Market by further promoting a compliance culture in 
cooperation  with  Member  States  and  economic  operators,  applying  a  smart  enforcement 
approach, and bringing forward a proposal for a Single Market Information Tool which would 
allow the Commission to collect information on selected markets.  

4.1.1.  A culture of compliance 

Policy context 
The Single Market Scoreboard of October 2015243, which covers the period from November 
2014  to  May  2015,  notes  that  the  average  of  the  EU  transposition  deficit  stands  at  0.7  %. 
Moreover, five Member States exceed the 1 % target (see graph below). 

Figure 28 - Transposition deficit (as of 10 May 2015) 

Source: Online Scoreboard (Governance tools-Transposition), Commission 2015 

Fourteen Member States met the 0.5 % target proposed by the Commission in the 2011 Single 
Market Act. The fact that half of Member States have now achieved this objective shows that 
it could be reached with some additional efforts by the majority of Member States. Only three 
Member States have matched or beaten their best ever result, while five other Member States 
have equalled or improved on their last score.  

On the matter of long-overdue directives, fewer directives and Member States are concerned. 
Seven Member States have long-overdue directives and five long overdue directives are not 
fully notified. It should be noted that considering the 'zero tolerance' target established by the 
European  Council  in  2002  for  delays  of  two  years  or  more  in  transposing  directives,  the 
number of these long overdue directives remains too high.  

In  a  nutshell,  the  EU  average  deficit  has  been  decreasing  steadily  for  the  past  sixteen  years 
(i.e. since 1997). It has more or less been stable since November 2012 (between 0.5 % and 0.7 

243  European  Commission, 
'The  Single  Market  Scoreboard  –  Transposition  –  Achievements', 
http://ec.europa.eu/internal_market/scoreboard/performance_by_governance_tool/transposition/index_en.htm#m
aincontentSec2 

80 

 
 
                                                 
%).  Member  States  have  beaten  the  average  1  %  target  for  the  last  three  years.  After  the 
lowest ever score of 0.5 %, reached in November 2014, the current score stands at 0.7 %. This 
slight increase is partly due to the noticeable reduction in the total number of Single Market 
directives  since  November  2014.  However,  the  results  show  that  the  Commission  and 
Member States should work with an objective of full compliance (i.e. a 0 % deficit).  

In  addition  to  the  transposition  deficit,  there  is  a  need  to  verify  the  compliance  of  national 
measures taken pursuant to directives, in order to ensure the proper functioning of the Single 
Market.  

According to the information provided by the Single Market Scoreboard (see graph below), 
the  average  compliance  deficit  stands  at  0.7  %.  In  particular,  twelve  Member  States  have  a 
compliance deficit of 0.5 % or less, four Member States show the highest deficits (more than 
1 %) and two other Member States have hit the 1 % mark. 

Figure 29 - Compliance deficit (incorrectly transposed directives) (as of 10 May 2015) 

Source: Online Scoreboard (Governance Tools-Transposition) Commission 2015 

The  2015  Single  Market  Scoreboard  states  that  the  number  of  pending  infringement 
proceedings  has  gone  down  to  749  (from  826  in  November  2014),  which  represents  a 
decrease of 10 %. This reduction in cases is in line with the increased use of early problem 
solving systems (SOLVIT and EU-Pilot). It appears that 50 % of cases are for late or incorrect 
transposition of directives, and 22 % of cases are for bad implementation of directives. Thus, 
72 % of total cases related to enforcement of directives244. 

244  European  Commission, 
'The  Single  Market  Scoreboard  –  Transposition  –  Achievements', 
http://ec.europa.eu/internal_market/scoreboard/performance_by_governance_tool/transposition/index_en.htm#m
aincontentSec2 

81 

 
 
 
 
                                                 
Figure 30 - Types of cases 

Source: Online Scoreboard (Governance Tools-Transposition) Commission 2015 

However,  despite  the  reasonably  good  results  obtained  until  now,  late  and  incorrect 
transposition  of  Single  Market  directives  remains  a  problem  hindering  delivery  of  tangible 
benefits for consumers and SMEs. Reducing both the transposition deficit and the compliance 
deficit  to  0.5  %  are  long-established  priorities  for  the  Commission.  Enforcement  of  Single 
Market rules  continues to  be  a  challenge  for  many  Member  States,  so the  Commission  will 
continue its active monitoring, including by providing them with necessary assistance. Only if 
directives  are transposed in  a timely and correct manner into national law, will citizens and 
firms be able to take full advantage of the opportunities offered to them by the Single Market. 
This approach is in line with the Commission's 'Report on the Single Market Integration'245, 
which  stressed  that  whilst  a  number  of  Member  States  have  improved  their  transpositions 
records in  the  key  areas  identified  in  the  Communication of  2012,  many  still  fail  to  respect 
transposition deadlines. In the same areas, the average duration of infringement proceedings is 
29.4 months, which as still far from the target of an average of 18 months, as set out in the 
2012 Communication. 

Problem and impact 

Taking into account the current situation related to the transposition and conformity of Single 
Market  directives  and  the  negative  effects  for  the  consumers  and  companies  of  non-
compliance,  there  is  still  a  need  to  further  reinforce  work  in  partnership  with  the  Member 
States  to  reach  0  %  transposition  and  compliance  deficits.  For  this  purpose,  enhancing 
cooperation with Member States, as well as the use of adequate tools, will be very important 
to  ensure  a  swift  implementation  of  EU  law.  Therefore,  a  new  culture  of  compliance  in 
partnership with the Member States should be promoted. In addition to other actions already 

245 Report from the Commission to the European Parliament, the Council, the European Central Bank, the the 
European Economic and Social Committee, the Committee of the Regions and the European Investment Bank 'A 
Single Market for Growth and Jobs: an analysis of progress made and remaining obstacles in Member States- A 
contribution to the Annual Growth Survey 2014', COM(2013) 785. 

82 

 
 
                                                 
ongoing, the Commission will support Member States to achieve compliance with the Single 
Market rules through the following initiatives. 

Implementation plans for new legislation 
As  part  of  the  Better  Regulation  Agenda246,  the  Commission  should  ensure  efficient 
monitoring  of  EU  law  throughout  the  full  regulatory  life-cycle  from  the  proposal  of  new 
legislation,  to  its  adoption,  transposition,  notification,  implementation,  enforcement  and 
evaluation, with the overall objective of ensuring clarity, operability and enforceability of EU 
legislation.  

In line with the better regulation principles, implementation plans must accompany proposals 
for major directives and regulations whose requirements are similar to those of directives. An 
implementation plan should be prepared when the implementation of the legal act concerned - 
due to its nature or complexity - could benefit or be facilitated by supportive measures. The 
plan  should describe implementation challenges and  relevant  support actions to  be taken by 
the Commission. 

In the framework of the Single Market Strategy, the Commission will examine and agree with 
the  Member  States,  once  the  legislation  is  adopted  by  the  co-legislators,  on  the  need  of 
revising and/or preparing an implementation  plan to  assist them with  the timely and correct 
implement of the new measure. 

Compliance dialogues with Member States on a yearly basis 

Over the past  years, the Commission  and Member States have  joined forces to  ensure swift 
transposition and effective implementation of EU rules.  

These  efforts  to  enhance  the  transposition  and  implementation  of  the  Single  Market  rules 
should be reinforced. The Commission will streamline the structured dialogues with Member 
States  and  will  organize  with  each  Member  State  the  strategic  meeting  on  a  yearly  basis  to 
take  stock  of  the  state  of  the  Single  Market  in  that  Member  State,  in  particular  the  state  of 
play of transposition and ongoing infringement proceedings.  

Development of a data analytics tool 

Effective  policies  need  to  rely  on  data  and  evidence  which  are  accurate  and  meaningful.  In 
order to foster conformity checks as part of the new compliance culture, the Commission will 
seek  to  develop  a  data  analytics  tool247  to  analyse  national  transposition  of  directives  and 
better detect patterns of bad implementation. The data analytics tool should offer a wide range 
of functionalities and should help to carry out various checks to verify compliance of national 
legislation with EU law.  

The  feasibility  of  developing  such  a  data  analytics  tool  will  be  assessed  through  a  pilot 
project. It will analyse two sample Single Market directives: Directive 2014/60/EU of 15 May 
2014  on  the  return  of  cultural  objects  unlawfully  removed  from  the  territory  of  a  Member 

246 European Commission, Communication on 'Better regulation for better results – an EU Agenda', COM(2015) 
215. 
247 Data analytics encompasses gathering and analysing large and diverse data sets in order to be able to establish 
patterns to design, prioritise and monitor policies. 

83 

 
                                                 
State248;  and  Directive  2011/7/EU  of  16  February  2011  on  combating  late  payments  in 
commercial transactions249.  

The pilot project should allow for a first quick glimpse into the state of compliance of national 
legislation  with  the  above-mentioned  directives  and  facilitate  any  decision  to  examine  the 
situation  in  more  depth  and  eventually  on  the  steps  to  be  taken  to  remedy  the    non-
compliance.  It  would  provide  a  means  for  generating  an  automated  vision  of  the  quality 
of Member  States'  transposition  of  these  directives  in  2016.  The  pilot  project  should  also 
provide quantitative estimations of deficiencies in transposition, allowing detection of 'general 
under or over performance' in the EU Member States that would require an ad-hoc approach.  

More specifically, the tool will help carrying out the analysis related to: i) the completeness of 
the  transposition, indicating  shortcomings;  ii)  the  compliance  or  adequacy  with  the  EU  rule 
and  iii)  the  existence  of  'gold  plating'  (i.e.  extra  obligations  or  requirements  set  out  in  the 
national  acts  issued  for  the  purpose  of  transposition  of  the  concerned  directives)  in  the  28 
Member States. 

Upon  completion  of  the  project  and  in  the  light  of  the  overall  results,  the  Commission  will 
assess the possibility of considering whether to apply the data analytics tool in priority sectors 
identified  in  the  follow-up  to  the  2012  Communication  on  better  governance  for  the  Single 
Market. 

4.1.2.  Develop a smart enforcement strategy 

Policy context 

The  Single  Market  is  Europe’s  best  asset  in  times  of  increasing  globalisation.  Effective 
compliance is essential to delivering its opportunities and benefits to citizens and businesses.  

In this context, the timely and correct transposition of legislation - in compliance with Treaty 
obligations and having due regard to relevant case-law - is of utmost importance for ensuring 
that  businesses  and  consumers  enjoy  the  rights  that  were  envisaged  for  them  and  that  the 
objectives of Single Market legislation are attained. 

In  overseeing  the  application  of  EU  law,  the  Commission  has  relied  to  a  great  extent  on 
complaints. They represent one of the main sources of detecting (potential) violations of EU 
law and the Commission will continue to make use of this important source of evidence and 
information.  

Problem and impact 

In  recent  years,  the  focus  in  the  handling  of  infringements  has  increasingly  shifted  to  a 
broader and more targeted approach, based on identification of dysfunctional sectors and on 
evaluations/complaints as indicators of compliance deficiencies in a given territory or a sector 
of economic activity. This work should be further pursued, with a more strategic approach to 
enforcement.  

To  that  end,  the  Commission  possesses  various  tools,  such  as  mechanisms  for  structured 
cooperation,  workshops  and  fora  for  discussion,  package  meetings,  the  European  Semester, 

248  European  Commission,  'Commission  Delegated  Regulation  (EU)  No.  574/2014  of  21  February  2014 
amending  Annex  III  to  Regulation  (EU)  No.  305/2011  of  the  European  Parliament  and  of  the  Council  on  the 
model to be used for drawing up a declaration of performance on construction products', 2014. 
249 Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late 
payment in commercial transactions. 

84 

 
                                                 
etc., and it should further exploit them. To help Member States improve overall compliance, 
the Commission will also look at the coherence of its approaches across policy areas. 

The  Commission  will  develop  an  active  and  holistic  approach  to  case  handling  –  through  a 
smart  enforcement  strategy  -  which  will  include  new  working  methods  aimed  at  a  more 
strategic  way  of  identifying  problematic  sectors  and  proceeding  on  the  basis  of  systematic 
stock-taking exercises. This will include the mapping of infringements and the use of a new 
Single Market Information Tool. 

The mapping of the Commission's case load will enable the Commission to divide cases into 
groups  of  thematic  issues.  The  outcome  of  such  a  mapping  exercise  should  give  the 
Commission the opportunity to propose packages of cases in future decision-taking exercises 
on infringements. This has the advantage of pursuing cases on the basis of a more complete 
picture, which will allow the identification and tackling of the most perceptible and pressing 
obstacles to the functioning of the Single Market.  

4.1.3.  Single Market Information Tool (SMIT) 

Policy context 

The  enforcement  of  Single  Market  rules  requires,  first  and  foremost,  reliable  information 
about  the  conduct  of  market  operators,  in  particular  market  conduct  by  private  firms.  In 
addition, such conduct can itself create barriers which fragment the Single Market. Examples 
include  geo-blocking,  unjustified  price  differentiation  in  cross-border  parcel  delivery,  cross-
border  insurance  provision,  customer  segmentation  through  the  territoriality  of  copyright 
licensing, or financial market fragmentation. In responding to such Single Market failures, the 
Commission must be able to obtain an adequate factual basis both for its enforcement action 
and to determine where regulatory solutions are needed.  

Problem and impact 

The  Commission  needs  to  ensure  that  enforcement  of  Single  Market  rules  is  done  both 
correctly  and  in  a  timely  and  efficient  manner.  Currently,  Member  States  are  the 
Commission's primary information source in enforcing Single Market acquis, pursuant to the 
principle of sincere cooperation between EU institutions and Member States. Furthermore, the 
Commission also relies on other information sources, such as public consultations, reports by 
stakeholders, studies and complaints. However, with the increasing role of economic analysis 
in  the  assessment  of  Single  Market  malfunctioning,  the  Commission  may  need  additional 
information  directly  from  market  players,  given  that  publicly  available  sources  may  be 
insufficient and Member States may not have the required information either. 

Publicly available statistics are often produced with a time delay and at a level of aggregation 
that might not match firm-level policy making. While studies commissioned to third parties 
can often gather more information, they suffer from similar limitations, as consultants often 
cannot obtain firm-level data nor corroborate evidence submitted by firms. The Commission 
might not entirely rely either on the accuracy of external voluntary submissions from market 
participants,  without  access  to  the  underlying  raw  data,  as  firms  may  have  incentives  to 
present the facts in a particular way or not to provide certain information at all.  

The  ability  to  obtain  timely,  comprehensive,  reliable  and  robust  quantitative  and  qualitative 
information  directly  from  affected  firms  would  improve  enforcement  of  the  Single  Market 
acquis and help addressing flaws in existing legislation. The introduction of a Single Market 
Information  Tool  (SMIT),  which  will  allow  the  collection  of  information  directly  from 
selected market participants, will help the Commission to ensure the optimal enforcement of 
the Single Market acquis.  

85 

 
The use of the SMIT by the Commission will be decided on a case by case basis and will be 
adequate and proportionate to the intended objectives. This tool will not be a blanket right to 
require  information  from  any  firm  at  any  time.  First  of  all,  before  engaging  into  such  an 
exercise, the Commission will analyse whether already available data are sufficient to address 
the issues at stake. Second, information request will only be addressed to a subset of the most 
affected firms. Third, the data sought through the SMIT will normally be readily available to 
the market players concerned, such as questions relating to the market behaviour, cross-border 
trade  and  business  model  and  will  typically  cover  factual  market  data  (e.g.  market  size  and 
share, level of imports etc.), company data (e.g. cost structure, profits, volumes, new products, 
ownership,  control,  participations  in  other  companies,  etc.)  and  facts-based  analysis  of  the 
market functioning (e.g. regulatory and entry barriers, entry cost, growth rate of the market, 
growth  perspectives  or  overcapacity).  The  Commission  will  consider  existing  best  practice, 
including from the competition law domain, when shaping the procedural and administrative 
process of the SMIT, notably with regard to confidentiality-related issues. 

Information  gathered  through  the  SMIT  will  be  made  publicly  available  in  a  report,  once 
confidentiality  issues  have  been  addressed.  Such  information  will  help  the  Commission  to 
better target its cooperation with Member States, reinforce the basis for infringement action 
and determine where regulatory solutions are needed. 

4.2. 
procedure  

Improving  the  delivery  of  the  Services  Directive  by  reforming  the  notification 

Policy context 

The  2006  Services  Directive  established  that  national  rules  restricting  the  right  of 
establishment  and  the  freedom  to  provide  services  falling  under  the  directive  must  be  non-
discriminatory, proportionate and justified by certain public interest objectives. To ensure that 
all new regulatory measures imposed by Member States fulfil these conditions, the Services 
Directive introduced a procedure whereby Member States must notify the Commission of any 
new  or  changed  legislation  introduced  in  the  Member  State.  This  should  allow  the 
Commission  to  assess  whether  such  adopted  measures  are  justified  and  proportionate. 
However,  the  notification  scheme  under  the  Services  Directive  is  not  working  properly, 
therefore hampering the effective and preventive enforcement of the Directive in the Member 
States.  

Problem and impact 

Experience  with  the  application  of  the  current  notification  procedure  under  the  Services 
Directive points to a number of difficulties which, taken together, mean that it is not possible 
to  ensure  that  all  new  and  changed  national  regulation  is  non-discriminatory,  justified  and 
proportionate.  

In  2012,  the  Commission  called  for  a  continued  ambitious  implementation  of  the  Services 
Directive.  The  objective  of  the  Directive  remains  to  remove  unjustified barriers,  but  also  to 
avoid  the  introduction  of  new  barriers  which  would  further  slowdown  the  integration  of 
services markets. The continued low integration of the Single Market for services - hampered 
by  the  introduction  of  new  barriers  -  causes  important  economic  costs  and  leads  to  unused 
economic potential: 

  Slow  productivity  growth  harms  competitiveness,  growth  and  employment  creation  in 
services.  Over  the  last  decade,  labour  productivity  growth  in  the  EU  services  sector  has 
been outperformed by the manufacturing sector. Also, in comparison with average annual 

86 

 
labour  productivity  growth  in  the  USA,  recent  estimates  show  that  EU  services 
underperformed in several sectors; 

  Studies have shown that mark-ups in services tend to be larger than in manufacturing and 
have a higher variation across countries. This implies that consumers and businesses across 
the EU are currently missing out on potential savings; 

  Inefficient  allocation  of  resources  prevents  innovative  and  competitive  companies  from 
growing. Services sectors are in general - and also when compared to manufacturing - not 
showing an efficient flow of resources to its most competitive firms.  

There  is  a  need  for  strong  preventive  enforcement  to  ensure  disproportionate  barriers  are 
tackled before they are introduced.  

Four main problems have been identified in relation to the notification of regulatory measures 
by Member States under the procedure of the Services Directive:  

Lack of notifications by more than half of the Member States since 2012 

The figure below shows a breakdown of EU GDP covered by the Services Directive in three 
groups of Member States. 8 Member States (representing 27.2 % of total EU GDP covered by 
the Services Directive) have never notified any new regulations over the period 2012-2014. 9 
Member  States  have  only  notified  very  few  (5  or  less)  new  regulations.  This  is  in  clear 
contrast to other Member States, who each communicated more than 50 notifications during 
the same period.  

Figure 31 - Member States notifications % of Services Directive (EU GDP)  

53,2%  
(10 MSs) 

27,2% 
(8 MSs) 

19,6% 
(9 MSs) 

None

5 or less

More than 5

Source: Eurostat, Commission assessment, 2015 

These differences cannot be explained by different degrees of regulatory intensity as some of 
the top-notifying Member States are countries with highly liberalised services markets. There 
are  no  legal  consequences  for  Member  States  at  EU  level  if  they  do  not  notify.  However, 
examples  of  such  consequences  do  exist  at  national  level,  for  instance  if  a  region  does  not 
notify new restrictions under the Services Directive to the federal level250.  

250 Italy where regional measures are considered void if not notified to the Commission. 

87 

 
 
                                                 
Limited possibilities for the Commission, other Member States and stakeholders to intervene 
in a proactive manner 

There is no requirement for Member States to notify draft regulations. In practice, from the 
277  notifications  received  via  the  Internal  Market  Information  system  during  the  period 
September 2013 to February 2015, 198 referred to final legislation and 79 to draft legislation 
(which  means  either  not  yet  adopted  or  not  yet  into  force).  Therefore,  the  large  majority  of 
measures  notified  have  already  been  adopted  in  a  Member  State,  severely  limiting  the 
possibility for the Commission to intervene to verify and ensure compliance with the Services 
Directive and only leaving infringement action as a last resort.  

In  addition,  notifications  are  not  transparent  to  stakeholders  and  the  business  community  at 
large.  The  Services  Directive  does  not  allow  granting third parties access  to  the  contents  of 
the notifications (contents of national rules, any explanation by a Member State). As a result, 
service  providers  do  not  have  the  possibility  to  react  and  will  be  confronted  with  new 
regulation  on the ground. This  is in contrast  to the goods area, where  measures are notified 
before being adopted at national level and such notified measures are made public. 

Lack of thorough proportionality assessments 

The Services Directive imposes a proportionality test which requires Member States to take 
into  account  less  restrictive  alternatives  to  meet  public  policy  objectives.  In  particular,  the 
assessment  of  proportionality  requires  that  due  consideration  be  taken  of  the  global 
environment  in  which  the  service  activity  takes  place  including  other  mechanisms  and 
safeguards.  The  principle  of  proportionality  has  become  even  more  important  following  the 
recent  judgement  by  the  Court  of  Justice  in  the  Riina  case  (C-593/13)  in  which  the  Court 
confirmed that only a limited number of the overriding reasons of public interest can be used 
as justification.  

Nevertheless,  the  Commission  is  on  a  regular  basis  still  detecting  cases  of  existing  or  new 
regulation  which  cannot  be  considered  proportionate  to  achieve  the  intended  public  policy 
objectives. For example, the Commission launched infringement proceedings in 2015 against 
various Member States for excessive shareholding requirements and compulsory tariffs251.  

This  shows  the  need  for  more  careful  reflections  on  proportionality  when  introducing  new 
restrictions.  Member  States  are  nevertheless  often  providing  incomplete  and  insufficient 
proportionality assessments when notifying national measures. At present, no framework is in 
place  to  ensure  that  in-depth  proportionality  assessments  are  carried  out  before  introducing 
new  restrictions.  As  a  consequence,  Member  States  appear  to  have  difficulties  applying  the 
principle  and  often  seem  to  introduce  requirements  which  have  indeed  not  undergone  a 
thorough proportionality test. 

Unclear legal consequences 

Differences  between  the  notification  obligations  regarding  establishment  (Article  15)  and 
temporary  service  provision  (Articles  16  and  39)  currently  in  the  Service  Directive  lead  to 
different legal consequences even though one national measure could affect both the right of 
establishment  and  the  freedom  to  provide  services.  On  the  basis  of  Article  15(7),  the 
Commission  may  adopt  a  decision  requesting  the  Member  State  in  question  to  refrain  from 

251  European  Commission,  Press  release  -  Commission  launches  infringement  procedures  against  six  Member 
States for lack of compliance with the Services Directive in the area of regulated professions, 2015. 

88 

 
                                                 
adopting the notified measures or abolish them252. The possibility to adopt such decisions is 
not possible for temporary provision of services. 

These four shortcomings have been reflected in debates on the notification procedure in the 
Council,  which  adopted  Conclusions  on  2  March  2015  calling  upon  the  Commission  'to 
increase  the  effectiveness  of  the  notification  procedure  under  Directive  2006/123/EC, 
including  by  investigating  the  possibility  of  introducing  a  "standstill  period",  where 
appropriate,  and  providing  clear  guidance  as  to  the  notification  obligations  and  as  well  as 
making  notifications  public  and  transparent  as  is  the  case  for  goods'.  The  Council  therefore 
'invites  the  Commission  to  address  this  issue  and  to  propose  the  necessary  action,  in  its 
forthcoming Single Market strategy'.  

Impact 

The implementation of the 2006 Services Directive prompted the adoption of more than one 
thousand  national  regulatory  measures  reducing  or  abolishing  previously  existing  barriers. 
The  majority  of  Member  States  adopted  new  horizontal  laws  to  introduce  the  general 
principles and provisions of the Directive. In  addition, Member States have  modified sector 
specific  legislation  to  eliminate  discriminatory,  unjustified  or  disproportionate  requirements 
imposed on service providers.  

In  2012,  the  Commission  estimated  the  EU-level  long-term  impact  of  these  reforms 
(implementation  status  end  of  2011)  at  0.8  %  of  EU  GDP.  The  economic  potential  of 
additional reforms stemming from a more ambitious implementation of the Services Directive 
was  estimated  at  up  to  1.8  %  EU GDP253.  On  the  basis  of  these  estimates,  the  Commission 
called for a more ambitious implementation of the Services Directive and announced a zero 
tolerance  policy  where  Member  States  fail  to  comply  with  unequivocal  obligations  (e.g. 
abolition of residence requirements)254. 

In  2015,  the  Commission  updated  its  2012  assessment  of  reform  progress  made  and  the 
economic  effect255.  The  assessment  of  reform  progress  over  the  period  2012-2014  showed 
that the pace of national  reforms slowed considerably compared to the period following the 
entry into force of the Services Directive (see figure below).  

Member States where most reforms have been adopted recently include those Member States 
having  implemented  economic  adjustment  programmes  or  reform  agenda  under  market 
pressures.  Beyond  these  Member  States,  only  a  few  others  have  made  important  reform 
progress. In some cases this can be explained by the fact that previous reforms already led to 
light  regulatory  regimes,  but  in  other  cases  there  has  been  little  reform  progress  despite  the 
fact  that  such  reforms  have  been  recommended  to  them  by  the  EU  Council  under  the 
European  Semester.  In  some  isolated  cases,  previously  achieved  reforms  have  even  been 
reversed. 

252 This does however not apply in case where a Member State already notified a draft measure under Directive 
(EU) 2015/1535 (former Directive 98/34/EC).  
253  Monteagudo  J.,  Rutkowski  A.  and  Lorenzani  D.  'The  economic  impact  of  the  Services  Directive:  A  first 
assessment following implementation', European Commission economic paper 456, 2012. 
254 European Commission, 'Communication on the implementation of the Services Directive', 2012. 
255 For further details on this update see: 
 http://ec.europa.eu/DocsRoom/documents/13327/attachments/1/translations/en/renditions/native 

89 

 
 
 
                                                 
Figure 32 - Evolution number of restrictions 2012-2014 

Abolished

Partially reduced

Introduced

GR IT PT BG EE PL AT CY ES SK BE FR RO CZ DE DK FI LT LU LV MT NL SE SI UK IE HU

20

15

10

5

0

-5

-10

Source: Commission assessment, 2015 

As a result, the additional economic gains to be achieved from reforms carried out in 2012 to 
2014 are limited. Of the 1.8 % potential additional GDP growth estimated by the Commission 
in  2012,  reforms  adopted  by  mid-2014  are  estimated  to  yield  a  limited  EU  GDP  long-term 
growth of no more than 0.1 %.  

This  lack  of  progress  shows  the  need  for  an  improved  notification  procedure  allowing  for 
more preventive enforcement.  

4.3. 

Strengthening the Single Market for goods  

Policy context 

The  EU  accounts  for  around  one  sixth  of  the  world’s  trade  in  goods.  Within  the  Single 
Market, free movement of goods is the most developed of all four fundamental freedoms and 
generates  around  25  %  of  EU  GDP,  75  %  of  intra-EU  trade.  Trade  in  goods  between  EU 
Member States (intra-EU trade) was valued at EUR 2 900 billion in 2014.  

Figure 33 - Trends in imports and exports from 2003 to 2014 (Intra-EU28 trade)  

Intra-EU28 trade, total product (in million of euro) 

3.500.000

3.000.000

2.500.000

2.000.000

1.500.000

1.000.000

500.000

0

Exports

Imports

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source of Data: Eurostat (last update 17.06.2015) 

In the Single Market for goods, where no EU rules exist (non-harmonised areas), regulatory 
obstacles within the EU are overcome by the principle of mutual recognition or at an earlier 

90 

 
 
 
stage prevented by Directive (EU) 2015/1535 (the former Directive 98/34/EC). In the case of 
harmonised  areas,  regulatory  obstacles  are  prevented  and  removed  through  relevant  EU 
legislation  on  specific  products  (i.e.  through  EU  harmonisation  legislation).  Furthermore, 
Member  States  are  responsible  for  effective  implementation  and  enforcement.  To  this  end, 
they  carry  out  market  surveillance  to  ensure  that  goods  are  compliant  with  the  applicable 
legislation. Goods which are lawful should thus move freely within the EU.  

Wide harmonisation of EU legislation became possible through the 'New Approach' method, 
according to which only the essential requirements of products are harmonised, supported by 
voluntary  technical  standards.  Outside  the  area  of  harmonized  goods,  Member  States  still 
have  national  (and  often  very  different)  rules  on  products.  While  these  national  rules  may 
conflict on paper, in practice mutual trust among Member States should apply: if a product is 
compliant in one Member State, it should be allowed to be marketed in all Member States by 
applying the principle of mutual recognition.  

EU  harmonisation  legislation  on  products  enabled  businesses  to  access  a  larger  market  for 
their products, while at the same time ensuring high levels of product safety, and led to fairer 
and more intense competition. EU legislation for industrial products has gradually expanded, 
covering industrial sectors that are essential for EU competitiveness256. 

Better access to the Single Market for goods and global markets has led to greater economies 
of  scale  and  more  employment.  Nevertheless,  inherent  potential  still  exists  to  further  bring 
growth  and  jobs,  foster  industrial  competitiveness,  and  protect  consumers.  Changing 
economic  patterns,  such  as  servicification  and  new  technologies,  as  well  as  challenges 
brought  by  digital 
increasing 
fragmentation of the value chain, the gradual blurring of traditional industry boundaries and 
globalisation, have to be considered. 

transformation,  mass  customisation,  e-commerce, 

the 

Problem and impact 

The main challenges for the Single Market for goods today are the need both to ensure market 
access and to prevent unfair competition generated by non-compliant products. 

Products not covered by EU common rules: the principle of mutual recognition 

In  areas  where  no  specific  EU  legislation  is  in  place,  national  rules  co-exist  that  lay  down 
requirements  to  be  met  by  such  products.  In  principle,  national  regulations  may  still  create 
barriers to intra-EU trade if rules in different Member States are divergent.  The principle of 
mutual  recognition  requires  that  a  product  lawfully  marketed  in  one  Member  State  and  not 
subject  to  EU  harmonisation  enjoys  the  basic  right  to  free  movement,  as  guaranteed  by  the 
Treaty.  Such  a  product  should  be  allowed  to  be  marketed  in  any  other  Member  State,  even 
when  the  product  does  not  fully  comply  with  the  technical  rules  of  the  Member  State  of 
destination. 

Exceptions to this principle only allow the receiving Member State to prevent the marketing 
of  a  product  and  impose  its  own  technical  rules  for  a  limited  number  of  reasons,  such  as 
protection of public morality, public security or protection of the health and life of humans, as 

256 There are currently more than 30 directives and regulations covering specific areas of industrial products (e.g. 
pressure equipment, gas appliances) and horizontal directives that apply across many different product groups, 
such as the RoHS (hazardous substances), REACH (chemicals) and Ecodesign. 

91 

 
                                                 
set out in the Treaty257 and further refined through case law. In addition, the Member State of 
destination must also demonstrate that it has chosen the least trade-restrictive measure. 

In practice, many businesses are not aware of the principle of mutual recognition and believe 
that they have to comply with national regulations in the Member State of destination when 
trading in the Single Market. Furthermore, legal uncertainty, imperfect implementation of the 
principle of mutual recognition by the Member States and lack of administrative cooperation 
constitute  a  further  barrier  preventing  the  principle  of  mutual  recognition  from  reaching  its 
full  potential.  Recurrent  barriers  to  the  application  of  the  principle  of  mutual  recognition  in 
goods  can  be  found  across  markets,  but  tend  to  concentrate  in  certain  areas  such  as 
construction products, food supplements and fertilisers.  

The discrepancy between the annual reports of Member States on the application of the 2008 
Mutual Recognition Regulation258 on the one hand, and feedback from economic operators on 
the other, should be mentioned from the outset. The small number of administrative decisions 
denying or restricting mutual recognition notified by Member States to the Commission could 
be misinterpreted as smooth application of the principle.  

On  average,  Member  States  notify  400  notifications  per  year,  though  with  an  uneven 
distribution,  since  90 %  are  notified  by  Portugal  and  regard  articles  of  precious  metals259. 
However, complaints or cases submitted to SOLVIT seem to indicate that not all decisions are 
notified260, in particular for sectors most affected by poor application of the principle. Thus, 
businesses  do  not  enjoy  the  procedural  protection  put  in  place  by  the  Mutual  Recognition 
Regulation.  The  flaw  in  the  notification  procedure  renders  the  identification  of  recurrent 
obstacles across Member States difficult. 

Economic  operators  on  the  other  hand  regularly  point  to  a  sub-optimal  application  of  the 
mutual  recognition  principle.  A  recent  evaluation261  identified  lack  of  awareness,  lack  of 
functional  understanding,  imperfect  implementation  by  Member  States  and  lack  of 
administrative  cooperation  as  the  main  obstacles  to  the  effective  application  of  the  mutual 
recognition principle. 

257 TFEU Article 36. 
258 According to Article 12(1) of Regulation (EC) No. 764/2008, Member States have to report on yearly basis 
on  the  application  of  the  Regulation,  and  notably  on  the  number  of  decisions  denying  or  restricting  mutual 
recognition and the type of product concerned, along with the grounds on which negative decisions were based. 
259 Pursuant Articles 6(2) and 7(2) of the Mutual Recognition Regulation Member States have to notify to the 
European  Commission  their  administrative  decisions  denying  the  application  of  mutual  recognition  to  a  given 
product. 
260  The  European  Commission  already  pointed  in  its  2012  Report  on  the  implementation  of  the  Mutual 
Recognition  Regulation  at  low  level  of  notifications  and  at  discrepancies  between  the  number  of  notifications 
reported by the Member States in their annual reports and the number of effectively received notifications. 
261  European  Commission,  'Study  commissioned  to  Technopolis  Group:  ‘Evaluation  of  the  application  of  the 
principle of mutual recognition in the field of goods,’ 2015. 

92 

 
 
 
                                                 
Figure 34 - Obstacles to effective mutual recognition? Rank from 1 (most important) to 4 (least important) 

Authorities in other MS do not know or do not
apply correctly the principle of mutual recognition
(N=57)

21,1% 

22,8% 

19,3% 

36,8% 

Legal uncertainty because legislation on mutual
recognition is difficult to understand

21,1% 

35,1% 

26,3% 

17,5% 

Legal uncertainty because of issues such as prior
authorisation procedures of different testing
methods used in another national markets (N=57)

22,8% 

29,8% 

33,3% 

14,0% 

Lack of awareness of the mutual recognition
principle among companies (N=57)

35,1% 

12,3% 

21,1% 

31,6% 

0%

20%

40%

60%

80%

100%

Rank 1

Rank 2

Rank 3

Rank 4

Source: DTI Survey among companies (October 2014 - January 2015) 

The results of this evaluation include were as follows: 

  Nearly 30 % of the surveyed companies relied on the principle of mutual recognition, 

but it turned out that it did not work in practice; 

  60  %  estimate  that  retesting  their  products  to  meet  technical  requirements  has  a 

significant or very significant cost262; 

  More than 40 % of the companies simply assumed it was necessary to undertake steps 

to adapt their product to the requirements of the host country market; 

  More  than  30  %  were  required  to  adapt  their  products  in  view  of  acceptance  in  the 
local market and did not check whether the mutual recognition principle could apply; 

  35 % identified lack of awareness among interested parties as the main obstacle for an 

effective application; 

  A  majority  of  businesses  either  does  not  know  about  the  principle  (26  %)  or  while 

having heard of it does not know how it functions (28 %); 

  National administrations still feel insecure about whether, when and how to implement 

the principle of mutual recognition. 

Access to a national market is frequently linked to legal uncertainty because of differences in 
testing  methods,  the  use  of  prior  authorisation  procedures,  the  legislation  being  difficult  to 
understand,  or  the  authorities  in  the  destination  Member  State  not  applying  the  legislation 
correctly. Moreover, it is often unclear for economic operators to which categories of products 
mutual  recognition  applies263.  Almost  half  of  the  companies  surveyed  identified  this  as  a 
significant bottleneck.  

262  Ibid,  The  evidence  gathered  is  anecdotal:  testing  costs  vary  considerably,  depending  on  the  sector  and  the 
product, and may reach up to 20 % of the turnover. 
263 Ibid.  

93 

 
 
                                                 
After  regulatory  approval,  another  approach  is  the  non-harmonised  path  towards  market 
access, i.e. the rating of the comparative clinical and economic value of health technologies 
are  potentially  source  of  uncertainty  and  delay  of  access  for  innovators.  Technology 
assessments  are  fragmented  across  borders  and  not  mutually  recognised.  In  particular  for 
medicinal  products  but  also  medical  devices,  multiple  assessments  trigger  duplicity  of 
administrative costs  for innovators but  also clinical evidence generation costs when varying 
clinical  requirements  are  imposed  by  lack  of  coordination  of  HTA  bodies.  The  EUnetHTA 
Joint Action264 provides scientific cooperation between Member States authorities since 2006 
but it does not have binding mechanisms265 for mutual recognition of joint assessments.  

The  effective  implementation  of  the  principle  of  mutual  recognition  is  primarily  the 
responsibility of the Member States. More than half of the companies surveyed consider there 
are  still  problems  impeding  correct  application  of  the  principle266.  Sometimes,  ‘traditional’ 
rules,  or  old  pieces  of  legislation,  act  as  obstacles  to  the  free  movement  of  goods,  often 
unintentionally.  In  other  cases,  technical  barriers  may  be  intentionally  adopted  to  protect 
national  or  regional  markets  (e.g.  requirements  for  compulsory  nationally  conducted  tests; 
extra  labelling  requirements;  stringent  rules  on  the  use  of  languages267;  mutual  recognition 
clauses268 that amount to denying recognition of products by requiring fulfilment of technical 
standards;  reference  to  mandatory  national  conformity  marks;  or  voluntary  standards  which 
are  de  facto  compulsory).  Furthermore,  considering  the  increasing  link  between  some 
products  and  their  accompanying  services,  even  where  a  product  would  benefit  from  the 
application of the principle of mutual recognition, accompanying services may not be equally 
accepted, thus rending the benefits of mutual recognition void.  

Finally,  another  obstacle  is  the  lack  of  cooperation  between  Product  Contact  Points  (PCPs) 
established with the view to provide information on technical rules on products to enterprises 
and  to  competent  authorities  in  other  Member  States269.  Three-quarters  of  PCPs  mention 
unduly long delays for replies, while two-thirds report lack of reaction from their counterpart 
in another Member State270. 

When the Mutual Recognition Regulation was adopted, it provided a procedural framework to 
boost the application of the principle of mutual recognition, in particular through placing the 
burden  of  proof  on  the  national  authorities  denying  market  access  and establishing  PCPs  in 
each Member State.  

A deeper Single Market should provide businesses a more predictable regulatory framework 
for the free movement of products lawfully marketed in another Member State. It should also 
enhance  confidence  of  businesses  that  they  can  sell  their  products  and  build  trust  among 
national authorities within the EU. 

More market integration will not be achieved unless the emergence of new barriers within the 
Single  Market  is  prevented,  in  particular  through  a  more  strategic  approach  as  enshrined  in 

264 http://www.eunethta.eu/ 
265 http://ec.europa.eu/health/technology_assessment/docs/reuse_jointwork_national_hta_activities_en.pdf  
266 European Commission, Study commissioned to Technopolis Group, op. cit. 
267  Requesting  for  example  that  solely  the  official  language(s)  of  the  country  of  destination  be  used  in  the 
labelling and barring the use of multilingual labels. 
268  European  Commission,  'Commission  interpretative  communication  on  facilitating  the  access  of  products  to 
the  markets  of  other  Member  States:  the  practical  application  of  mutual  recognition',  (2003/C  265/02).  The 
Communication established standard mutual recognition clauses for national technical regulations on products. 
269 Established pursuant to Article 9 of the Mutual Recognition Regulation. 
270 European Commission, Study commissioned to Technopolis Group, op. cit. 

94 

 
                                                 
Directive  (EU)  2015/1535  (former  Directive  98/34/EC)  on  the  one  hand,  and  through 
overcoming national obstacles by means of more and better mutual recognition on the other. 

A  genuine  right  to  free  movement  of  products  lawfully  marketed  in  another  Member  State, 
along with a strengthened role for PCPs to also cover harmonised products, their integration 
into  a  wider  network,  as  well  as  better  cooperation  among  national  administrative  bodies 
should  lead  to  an  optimal  application  of  the  principle  of  mutual  recognition  and  thus  to 
smooth  market  access  especially  for  SMEs.  Furthermore,  eliminating  current  obstacles  can 
create  an  incentive  for  companies  to  make  better  use  of  Single  Market  opportunities  and 
engage more in cross-border trade.  

It is expected that the current costs for companies wishing to trade in another Member State 
are  likely  to  decrease  if  obstacles  such  as  unnecessary  retesting  of  their  products  are 
eliminated.  

Being  at  the  forefront  of  the  effective  application  of  the  principle  of  mutual  recognition, 
Member  States  should  facilitate  its  correct  functioning  and  ensure  appropriate  resources  for 
strengthening the PCPs.  

Products covered by EU harmonisation legislation  

EU legislation covers a wide range of products such as machines, radio equipment, electrical 
and  electronic  devices,  toys  and  many  others.  For  these  products,  the  requirements  are 
harmonised at EU level and products manufactured according to those requirements can move 
freely across the EU.  

There  are  a  growing  number  of  products  found  in  the  EU  Single  Market  which  are  not  in 
compliance with the applicable EU legislation on industrial products. The growing number of 
non-compliant  products  is  to  a  large  extent  due  to  the  fact  that  the  current  level  of  product 
checks is insufficient to deter rogue operators. The responsibility to check products lies with 
national  market  surveillance  authorities,  working  within  national  boundaries,  and  facing  the 
challenge to check a substantial number of products, with limited resources available.  
There are several reasons which may explain non-compliance271:  

a)  Manufacturers  and  importers  of  industrial  products  must  ensure  that  their  products  are 
designed and manufactured in accordance with the requirements set out in EU legislation. A 
lack  of  clarity  in  a  rule  may  bring  about  unintentional  non-compliance.  The  Commission's 
'Evaluation  of  the  Internal  Market  Legislation  for  Industrial  Products'272  pointed  out  that 
familiarisation with EU legislation on industrial products is an important and ongoing task for 
all  firms.  Information  about  EU  legislation  on  industrial  products,  technical  standards  and 
administrative requirements is obtained from a variety of sources (the legislative authorities, 
suppliers,  industry  and  trade  associations,  market  surveillance  authorities,  etc.).  However, 
there  is  a  low  level  of  knowledge  among  SMEs  and  especially  micro-firms  about  EU 
legislation  on  industrial  products,  and  the  specific  requirements  for  different  economic 
operators in the value chain (i.e. manufacturers, importers and distributors). Furthermore, the 
evaluation  also  showed  that  e-commerce  with  third  countries  presents  serious  challenges 

271  These  are  based  on  research  by  the  OECD  showing  the  conditions  which  need  to  be  fulfilled  to  ensure 
regulatory compliance by businesses, http://www.oecd.org/regreform/regulatory-policy/1910833.pdf 
272  European  Commission,  'Commission  Staff  Working  Document  -  Part  1:  Evaluation  of  the  Internal  Market 
Legislation for Industrial Products - Accompanying the document the Communication from the Commission to 
the  European  Parliament,  the  Council  and  the  European  Economic  and  Social  Committee  -  A  vision  for  the 
internal market for products', SWD (2014) 23. 

95 

 
                                                 
related to non-compliant products, mainly due to ignorance or ambiguity over responsibilities 
for importing products or placing products on the market in the case of e-commerce.  

b) Suppliers often deliver from premises outside the jurisdiction of the competent authorities 
of the place where the final client of the product is established, hence the risk of sanctions for 
those suppliers - established in another Member State and selling non-compliant products - is 
smaller than the risk of sanctions for domestic suppliers.  

c)  Enforcement  of  EU  harmonisation  legislation  relies  on  efficient  and  effective  controls 
carried  out  by  market  surveillance  authorities  operating  in  the  different  Member  States. 
Market surveillance is a crucial tool to ensure that all economic actors stick to the rules and 
protect consumers and other users from unsafe and non-compliant products.  

Unfortunately, market surveillance does not operate effectively in the EU mainly because of 
weak  coordination  among  market  surveillance  authorities  in  different  Member  States,  sub-
optimal  functioning  of  EU  procedures  for  exchange  of  information  on  product  risks  and 
inconsistent enforcement of EU-wide product safety action. Furthermore, market surveillance 
authorities  face  significant  practical  problems  to  trace  and  intercept  non-compliant  products 
imported  from  third  countries  via  e-commerce  and  to  identify  the  responsible  entity  within 
their jurisdiction. As a result, the risk of being caught and effectively sanctioned might not be 
an effective deterrent for businesses selling non-compliant products on the EU market.  

High number of non-compliant products 

Non-compliance  often  passes  unnoticed;  the  exact  share  of  non-compliant  products  on  the 
market  can  therefore  not  be  quantified.  In  a  public  consultation  organised  by  the  European 
Commission in 2010273, 92 % of economic operators considered that their sector was affected 
by non-compliance. 

The  share  of  inspections  reported  by  Member  States  in  the  period  2010-2013  on  non-
compliance with EU harmonised rules was on average 32 % in the field of toys, 55 % in the 
field of construction products, 30 % in the field of low voltage equipment, 30 % in the field of 
electromagnetic  equipment,  53 %  in  the  field  of  radio  equipment  and  40 %  in  the  field  of 
personal protective equipment274. In the case of the Ecodesign Directive dealing with products 
such  as  electric  equipment,  air-conditioning  systems,  machines  tools  etc.,  non-compliance 
was estimated to  be  10 %  - 20 %275. In  other  areas (e.g. gas  appliances,  personal protective 
equipment), existing studies indicate non-compliance levels of 5 % - 10 %276. 

In  the  field  of  radio  equipment,  the  impact  assessment  on  the  proposed  Radio  Equipment 
Directive  cited  evidence  from  market  surveillance  authorities  that  products  fully  compliant 
with the essential requirements ranged between 28 % and 56 %277. Administrative compliance 
has been estimated at an even lower level by market surveillance authorities at about 20 %.  

273 European Commission, 'Commission Staff Working Paper – Impact Assessment - Accompanying document 
to the 10 Proposals to align Product Harmonisation Directives to Decision No 768/2008/EC', SEC(2011) 1376. 
274  According  to  data  provided  by  16  Member  States  on  number  of  inspections  carried  out  and  on  number  of 
findings on non-compliances. This figure represents the weighting average of percentages at national level 
275 European Commission, 'Evaluation of the Ecodesign Directive (2009/125/EC) - Final Report', 2009. 
276 European Commission, 'Impact assessment study on the review of the Gas Appliances Directive' (Directive 
2009/142/EC), 2009. 
277  European  Commission,  'Executive  summary  of  the  impact  assessment  accompanying  the  Proposal  for  a 
Directive of the European Parliament and of the Council on the harmonisation of laws of the Member States to 
the making available on the market of radio equipment', SWD (2012) 300. 

96 

 
                                                 
Market  surveillance  performed  on  radio  equipment  and  telecommunications  terminal 
equipment by 24 market surveillance authorities in 2012278 shows that, out of 9 918 inspected 
pieces of equipment, 6 155 were non-compliant: 

Table 9 - Non-compliance in the R&TTE sector - 2012 

Element of inspection 

Equipment 
inspected 

Non-
compliances 

% 

Declaration of conformity  

CE marking 

Geographical area for use  

Essential requirements 

Technical documentation 

9693 

9683 

8281 

1678 

868 

3960 

3192 

2036 

613 

327 

40.8% 

32.9% 

24.9% 

36.5% 

37.7% 

Source: ADCO R&TTE report to TCAM on market surveillance statistics for 2012  

During a campaign to verify the compliance of LED lighting equipment with the Directive on 
electromagnetic  compatibility,  168  products  were  checked  by  18  market  surveillance 
authorities279,  76.8 %  of  the  products  complied  with  CE  marking  requirements  while  only 
39.9 % complied with the Declaration of Conformity requirements. The technical assessment 
indicated  that  61.5 %  complied  with  the  emissions  assessment  while  91.3 %  passed  the 
immunity  assessment.  Only  17.3 %  of  the  assessed  LED  lighting  equipment  was  fully 
compliant. 

A study by the Consumer and Industrial Products Committee (No. 39) of IFIA on electrical 
products  for  household  use  performed  in  2014280  shows  that  there  a  significant  number  of 
non-compliant  products  with  safety  issues  imported  from  the  outside  of  the  EU  which 
circulate within the Single Market. 

A  total  of  2  435  notifications  on  dangerous  products  were  submitted  by  Member  States  in 
2014 through RAPEX, the European rapid alert system for dangerous products. This is 3 % 
more  than  in  2013  and  almost  90 %  of  all  notifications  concerned  products  which  posed  a 
serious risk to consumers.  

The  necessary  controls  on  products  are  carried  out  by  market  surveillance  authorities 
operating  in  different  Member  States.  However,  market  surveillance  does  not  operate 
effectively  in  the  EU.  Given  the  fragmentation  of  responsibilities  along  national  (or  even 
local) borders, the principal causes of ineffective market surveillance in the Single Market are 
(i) a weak coordination of market surveillance authorities of different Member States, (ii) the 
sub-optimal functioning of EU procedures for exchange of information and (iii) inconsistent 
enforcement  of  EU-wide  action.  Furthermore,  in  order  to  have  a  real  impact  on  businesses' 
willingness  to  comply,  the  overall  number  of  product  checks  need  to  be  sufficiently  high. 

278 Telecommunications Conformity Assessment and Market Surveillance Committee (TCAM), 'ADCO R&TTE 
report to TCAM on market surveillance statistics for 2012', ADCO R&TTE 43(13)02 Annex 7, 2012. 
279 Bundesnetzagentur, 'Market surveillance statistics 2011', 2012. 
280 International Federation of Inspection Agencies (IFIA), 'Consumer Product Safety Study 2014', 2014. 

97 

 
 
                                                 
Unsafe consumer products also constitute an immediate threat to the safety of consumers and 
undermine consumer confidence. Consumers have confidence in products available on the EU 
market if products  are safe, irrespective  of the place in  which they are produced.  The latest 
Eurobarometer data shows a decrease in confidence on the part of consumers with regard to 
the safety of products sold in the EU (25 % in 2011 - compared to 20 % in 2010 - think that a 
significant number of products are unsafe, while 12 % in 2011 - compared to 16 % in 2010 - 
think that essentially all products are safe).  

Competitive disadvantage from competition by non-compliant products – costs of compliance 

Businesses selling compliant products face competition from traders who either deliberately 
ignore the rules or are not aware of them, thereby gaining an unwarranted competitive edge. 
To  determine  the  costs  of  complying  with  the  legislation  and  thus  the  corresponding 
competitive advantage of rogue traders, a distinction should be made between costs related to 
administrative  compliance  (costs  of  preparing  documentation  and  direct  fees),  and  costs 
related to substantive compliance (investments necessary to comply with the law). 

Table 10 - Administrative and substantive compliance costs 

Type of costs 

One-off costs 

Recurring costs 

Administrative 
costs 

Familiarisation  with 
legislation and standards 

Single  Market 

Notified  Bodies  fees  for  Single  Market 
legislation and mandatory testing 

Substantive 
compliance costs 

Modifications  to  product  design  (during 
new product development phase/ R&D) 

Modifications  to  product  design  once 
products have been placed on the market  

Costs  of  temporarily  or  permanently 
withdrawing products from the market 

Development and updating of technical files  

Production  of  a  Declaration  of  conformity 
and CE marking  

Conformity  assessment:  preparation  of 
technical 
testing 
activities 

in  parallel  with 

files 

files 

in  parallel  with 

Conformity  assessment:  preparation  of 
technical 
testing 
activities  testing  for  conformity  with  the 
applicable  modules  defined 
Internal 
Market legislation 

in 

Source: CSES 
The 'Evaluation of the Internal Market Legislation for Industrial Products'281 pointed out that 
while the amount of time that  firms spend  on familiarisation was found to  vary, most  firms 
indicate that they spend quite a lot of time on such activities, commonly 15 % - 20 % of the 
total in terms of human resources. This leads to higher costs for the operators abiding by the 
rules  which  negatively  impacts  their  competitiveness  vis-à-vis  their  competitors  who 
deliberately ignore them or are simply not aware of them. 

The  total  estimated  annual  costs  of  compliance  with  EU  legislation  on  industrial  products 
across 
domestic 
areas 
refrigerators/freezers,  lifts,  gardening  equipment,  petrol  pumps,  air  conditioners  and 

(electric  motors, 

harmonised 

laptops, 

product 

eight 

281 European Commission, 'Commission Staff Working Document - Part 2 Results of the case studies - A vision 
for the internal market for products - Accompanying the document the Communication from the Commission to 
the  European  Parliament,  the  Council  and  the  European  Economic  and  Social  Committee  -  A  vision  for  the 
internal market for products', SWD (2014) 23. 

98 

 
                                                 
integrated circuits) were estimated at EUR 342 million282. 

When  consulted  in  the  context  of  the  revision  of  ten  EU  harmonisation  directives,  87 %  of 
economic  operators  considered  that  they  suffer  from  distortion  of  competition  due  to  this 
situation283. Economic operators also provided estimates of the size of their losses in terms of 
their annual turnover, as outlined in the Figure below: 

Figure 35 - Perceived losses in % of annual turnover 

s
t
n
e
d
n
o
p
s
e
r

f
o
%

20

18

16

14

12

10

8

6

4

2

0

 0 - 5% of the turnover

 6 - 10% of the turnover

 11 - 15% of the turnover

 16 - 20% of the turnover

 21 - 30% of the turnover

Greater than 30% of the
turnover
Unable to provide indicative
estimates

% Respondents considering
that their sector is affected
by non compliance (90)

% of total number of
respondents (98)

Source: European Commission, 'Commission Staff Working Paper – Impact Assessment - Accompanying 
document to the 10 Proposals to align Product Harmonisation Directives to Decision No 768/2008/EC', 
SEC(2011) 1376 

Tackling  the  main  drivers  for  non-compliance  of  products  should  result  in  reducing  the 
number of unsafe and non-compliant products in the EU. Setting up an easily identifiable 'first 
port of call' available for firms, particularly SMEs, and expanding the role of 'Product Contact 
Points'  and  other  already  existing  tools  such  as  the  Your  Europe  portal,  through  the  Single 
Digital Gateway, should ensure that business are able to easily find out more about which EU 
legislation on industrial products is applicable to their products and which standards could be 
applied to meet essential requirements. 

Strengthening  market  surveillance  for  products  will  provide  the  necessary  incentives  for 
economic operators to place only compliant products on the EU market. By giving enhanced 
powers, or providing new common rules on the control of products, closer coordination on the 
treatment  of  infringements,  markets  surveillance  will  be  strengthened  and  made  more 
efficient.  Better  cooperation  between  compliant  companies,  market  surveillance  authorities, 

282  European  Commission,  'Commission  Staff  Working  Document  -  Part  1:  Evaluation  of  the  Internal  Market 
Legislation for Industrial Products - Accompanying the document the Communication from the Commission to 
the  European  Parliament,  the  Council  and  the  European  Economic  and  Social  Committee  -  A  vision  for  the 
internal market for products' SWD (2014) 23. 
283 European Commission, 'Commission Staff Working Paper – Impact Assessment - Accompanying document 
to the 10 Proposals to align Product Harmonisation Directives to Decision No 768/2008/EC', SEC(2011) 1376. 

99 

 
 
                                                 
 
 
 
consumers  and  the  Commission  should  facilitate  targeted  action  on  the  sources  of  non-
compliant products.  

By  reducing  non-compliance  in  the  EU,  compliant  business  should  face  less  unfair 
competition from illegal  and non-compliant products from rogue traders, meaning safer  and 
more compliant products will be available for consumers in the Single Market. 

100 

 
 
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