Source: EURLEX
Language: en
Format: md

12. 3.. 90 Official Journal of the European Communities No C 62/11

its own merits. Even if the stabilizer mechanism continues

in one form or another, it does not necessarily follow that
the co-responsibility levy arrangements should be continued. The arrangements, for example, lower the returns
to growers without encouraging consumers to use more
grain.

13. The Committee wishes to emphasize that since
cereal substitutes are exempt from levy the arrangements

Done at Brussels, 19 December 1989.

act as a further incentive to switch from EC cereals to

imported substitutes.

14. We may now be witnessing fundamental changes in
the world supply and demand situation for food which may
make the stabilizer arrangements redundant. However,
should structural surpluses continue to be a threat, a
balance is unlikely to be achieved through the stabilizer
arrangements as they stand. More direct action on supply
and demand would then become essential.

_The Chairman_

_of the Economic and Social_ _Committee_

Alberto MASPRONE

Opinion on the 18th Report on competition policy

(90/C 62/07)

On 1 December 1989 the Commission decided, under Article 198 of the Treaty setting up the
European Economic Community, to consult the Economic and Social Committee on the 18th
Report on competition policy.

The Section for Industry, Commerce, Crafts and Services, which was responsible for preparing the
Committee's work on the matter, adopted its Opinion on 29 November 1989. The Rapporteur was
Mr Mourgues.

At its 272nd Plenary Session (sitting of 19 December 1989) the Economic and Social Committee
adopted the following Opinion unanimously (apart from one abstention):

1. Introduction

1.1. The introduction to the 18th Report on competition
policy states that Community competition policy is at a
crossroads. The favourable short-term economic situation

has led economic operators to incorporate increasingly in
their planning the need to adapt to the new market
conditions expected for 1993. The strategic planning
implemented by firms leads them to overcome the
Community's internal economic barriers by conducting a
variety of transnational operations.

1.2. On these general grounds, the Committee has
thought it best to divide the Opinion into two specific parts.

1.2.1. Part I will be a critical review — both positive and
negative — of the 18th Report.

1.2.2. Part II will formulate suggestions for certain
guidelines for Community competition policy in the run-up
to the Single Market.

1.3. These suggestions will take account not only of
competition conditions within the EEC but also of those
associated with commercial transactions with third

countries.

2. Opinion on the 18th Report proper

2.1. _General_ _Comments_

2.1.1. The long wait for a Regulation on the control
of mergers, acquisitions and joint ventures

2.1.1.1. Chapter I of the fourth part of the 18th Report
makes an instructive assessment of the progress in links
between firms. These data are not exhaustive, and are not
based on official, systematic statistics, but on general
information.

No C 62/12 Official Journal of the European Communities 12. 3. 90

2.1.1.2. However, the data enable the Commission to
distinguish operations which foster the harmonious
development of competition from those which produce
distortions in practice and structure. In this connection the
Committee would point out that, in the absence of a
specific provision under Article 86 of the Treaty, the
Commission has no legal power to grant exemptions
approving or encouraging concentrations which favour
competition.

2.1.1.3. Moreover, if due account is taken of the
'Continental-Can' judgement of 21 February 1973, the
abuse of a dominant position in the Common Market or in
a substantial part thereof jeopardizes an effective competition structure.

2.1.1.4. Accordingly the Committee proposes that, at
the next amendment of the Treaty, an additional provision
should be incorporated into Article 86, similar in spirit to
Article 85(3), enabling the Commission to grant exemptions for concentration operations regarded as compatible
with the aims of improving production or distribution, or
likely to promote technical or economic progress, and to
the extent that they are ultimately beneficial to consumers.

2.1.2. The major disadvantages of this situation

2.1.2.1. The Commission states that 'the impact of
mergers and majority acquisitions on competition is likely
to be more severe in already highly concentrated industries,
such as chemicals' and particularly 'downstream' for
pharmaceutical products and certain food products (point
327). Price-fixing in these sectors shows that the degree of
concentration has reached a critical point.

2.1.2.2. This tendency appears to be accelerated by:

— the imminent prospect of the Single Market;

— but also probably by the delay in introducing Community rules in this field, or by the temporary retention
of sometimes illegally imposed prices;

— the promotion of research and development agreements
which establish links between enterprises.

2.1.2.3. The juxtaposition of these reasons may prompt
the belief that there is a combination of circumstances

favourable to the development of capital movement
operations (takeover bids, etc.) within the Community.

2.1.2.4. At the same time there is a blatant slowness in

the development of social provisions and in regulating
public tenders; these are other factors influencing the
market and competition.

2.1.2.5. This discord in the factors contributing to
competition policy threatens to cause serious difficulties,
and the Committee, which is deeply concerned about this,
feels duty bound to warn the Commission.

2.1.3. The direct and indirect causes of inequality
of treatment of enterprises and holdings

2.1.3.1. The inequality results primarily from the
'notification' conditions required sometimes in advance
and sometimes retrospectively.

2.1.3.2. In addition, some factors of inequality result
from the fact that the Commission exercises control

retrospectively by defining the Community dimension of a
concentration operation mainly on the basis of a threshold
based on a high turnover figure ( [!] ), but also

— because the only enterprises concerned are those
engaged in trade between Member States or with third
countries;

— because Community case law has introduced the
concept of 'collective dominant position' (see point
2.1.4 below).

2.1.3.3. On the other hand, in those sectors exempted
from Article 85 for which rules have been drawn up, prior
notifications are controlled without a lower limit. This

applies to know-how licensing, franchising and research
and development agreements.

2.1.3.4. In this connection, attention is drawn to the
Commission's positive stance in the following cases:

Research and development

In three interesting cases, the Commission proved that it
favoured technical progress and innovation in the Community. The first of these cases concerns the development
by the Continental and Michelin companies of a tyre of
entirely new design requiring considerable investments and
involving an economic risk which is difficult to assess.

In this context reference should also be made to the

Commission decision in the case of Brown-Boveri AG, a
company which had concluded agreements with the
Japanese company NGK Insulators Ltd. This decision
authorizes intensive cooperation between these two firms
for the purpose of developing, manufacturing and
marketing high-performance batteries, intended primarily
for use in electrically powered vehicles.

Franchising

In a decision on franchising, the Commission also showed
that it is prepared in certain cases to waive the conditions

(*) The draft rules currently before the Council seek to diversify
notification conditions on the basis of geographical criteria,
competition external to and within the Community and market
shares held by a firm outside the country where it is based.

12. 3..90 Official Journal of the European Communities No C 62/13

laid down by the block exemption regulation concerned
where the structure of competition on the market in
question so allows (Service Master).

2.1.3.5. The same applies to subsidies policy: in
particular, CAP subsidies are precisely assessed irrespective
of the size of holdings, whereas in other sectors the severity
of the checks is a function of their impact on intraCommunity trade.

2.1.4. The 'activism' of case law

2.1.4.1. There is a hallowed tradition that, when the
Community legislator is marking time, the Courts move
things along through case law, which emphasizes the spirit
of Community law.

2.1.4.2. This is true of:

(a) The Van Eycke versus Aspa judgement, which confirms
that Member States are prohibited from enacting or
maintaining in force measures likely to render Articles 85 and 86 inoperative (point 98).

Attention should be drawn to the Court of Justice ruling
in the case 'Pascal van Eycke versus Aspa' by which it
confirmed and extended its critical case law in respect of
national measures which prejudice competition. The
Court ruled that Member States must not enact or

maintain in force measures likely to render Articles 85
and _86_ of the EEC Treaty inoperative. This judgement
confirms earlier case law (e.g. Vereniging van Vlaamse
reisbureaus — Association of Flemish Travel Agents,
1 October 1987) in that it maintains that the effective
benefit of the competition rules is limited: when a
Member State imposes or encourages the conclusion of
agreements contrary to Article 85; or when by adopting
certain rules, it reinforces the impact of such agreements; or when it undermines its own rules by
delegating to private operators responsibility for taking
decisions on economic intervention (ground No 16 of
the judgement).

The need for this approach to competition law is seen
(for instance) in the efforts made by cooperatives, faced
with global competition, to set up an integrated
cooperative network.

(b) Judgements relating to the concept of delegated
monopolies (points 106 ff.) which hinge on 'whether the
unconnected parallel conduct of several economically
independent firms might be caught by Article 86 as
constituting abuse of a collective dominant position'
and confirm the Commission's conclusions in this

respect.

(c) Particular attention should be given to judgements
made by certain national courts (e.g. in the Federal
Republic of Germany) which 'directly apply European
competition law' (point 127).

2.1.5. The inadequacy of DG IV resources

2.1.5.1. The comments in 2.2 and 2.3 illustrate that

insufficient manpower, equipment and legal resources,
frequently prevent the Directorate-General for Competition from fully exploiting its high-quality work on
analysing the markets and implementing competition
policy in the Community — a policy which has the
hallmarks of common sense and realism.

2.1.5.2. The Committee therefore notes that:

— the Annual Report appears much too late;

— there is a significant delay in decision-making on issues
subject to the decision procedure (cf. point 45).

2.1.5.3. In these circumstances, the question arises
whether 'an instrument to monitor concentrations with a

Community dimension' (Introduction to the Report,
penultimate paragraph) will have the resources necessary
for its operation.

2.1.5.4. This leads the Committee to recommend:

— Continuing 'public relations' measures in order to
ensure that all economic operators in whatever sector,
and all consumers, are always kept informed of their
rights and duties with regard to competition policy.
Along these lines, the Commission has announced the
publication of an additional _White Paper_ for the Single
Market.

This _White Paper_ will give particular attention to
setting out the economic and social significance of
competition as a basis for a democratic society.

2.1.6. Coordination with anti-dumping policy

2.1.6.1. In consultation with the other Commission

departments, the Directorate-General for Competition
needs to take account of the safeguard measures in
Community trade policy authorized by the Treaty of
Rome. Moreover consideration should be given to reopening the debate in the Community on the implementation of anti-dumping policy.

2.1.6.2. The Community, and especially Member States
which joined recently, are sometimes threatened by
uncontrolled competition from certain third countries —
either from those at an advanced stage of technological
development or from those with a large, low — paid
workforce.

2.1.6.3. It is not unusual for some countries or their

firms to engage in dumping in particular sectors, either to
provide an outlet for their goods or to discourage incipient
competitive initiatives in the Community.

No C 62/14 Official Journal of the European Communities 12. 3. 90

_2.1.6.4._ While guarding against the risk of a market
imbalance which would impair fair pricing, the Commission needs an effective bulwark against certain unfair
trading practices employed by third countries — practices
which are often forms of protectionism contradicting and
indeed violating international agreements such as the
GATT. In this context, the state of the Community market
must be assessed not only in relation to world trade but also
by production sector.

2.2. _Sectors of activity deserving special attention_

2.2.1. Maritime traffic is the subject of a Committee
Opinion on positive maritime Mmeasures ( [1] ). This involves certain competition policy aspects. These are:

— maritime conferences and exemptions by category,
already referred to in 1986 (in this connection the 17th
Report mentioned the formal complaints about the
Regulation which came into force on 1 July 1987; the
18th Report provides little information on the followup to these cases);

— intra-European maritime traffic competing with land
and air links, raising the problem of taxation planned in
principle but whose application to Community flags
should be extended to the flags of third countries to
avoid distortions of competition (legal difficulties to be
overcome);

— in connection with maritime traffic, subsidies to
European shipyards: investments have considerable
effects on freight charges, and difficulties are exacerbated by the disparity between subsidies;

— similarly, the taxes and social security contributions
paid by ships' crews give rise to distortions which also
have an effect on these disparities.

2.2.2. Competition rules and copyright

2.2.2.1. Throughout the twentieth century, the participation of 'authors' in economic activities has been

increasing. Going beyond the traditional arts, the development of cinema and audio-visual productions calls for new
talents. In addition, a new type of 'author' now exists,
producing computer software.

2.2.2.2. Sometimes misguided protection of intellectual
property rights, either by certain national provisions (e.g. a
single price), or by exercising a dominant position with
regard to software and refusing information, whether
subject to copyright or not, prompts the statement that
'The exercise of exclusive copyrights will not prejudice the

(!) Doc. CES 1257/89 of 16 November 1989.

application of the competition rules and the imposition of
effective remedies in appropriate cases ...'.

2.2.2.3. Such unfair protection is incompatible with the
abolition of internal frontiers. It is essential for Community
law to develop in such a way as to prohibit certain
'perverse' forms of discrimination which hamper free
competition and create new non-tariff barriers.

2.2.2.4. In this connection, the Committee has reserv
ations about the 'Tetra Pak' decision. In this case the

Commission took the view that an enterprise may exploit
its dominant position by acquiring another enterprise
which holds exclusive licence rights. The Commission did
not oppose this concentration, but in order to avoid
competitive disadvantage for one of Tetra Pak's competitors, the Commission threatened to withdraw Tetra Pak's
exemption from the patent licensing agreements. Tetra Pak
had to relinquish its exclusive licence rights, whilst its
competitor benefited from a non-exclusive licence. By
doing this the Commission interfered with a contractual
relationship which was in existence before the merger and
had no connection with that merger. This case leads the
Committee (a) to stress the sometimes arbitrary attitude
adopted by the Commission for a particular purpose, and
(b) to oppose its attitude strongly in order to stop this
becoming a trend.

2.2.3. Competition policy and intervention by
public authorities in favour of enterprises

2.2.3.1. In its first report on state aid in the European
Community, published at the beginning of 1989, the
Commission seeks to shed some light on the jungle of
European subsidies, and ultimately to exercise tighter
control on national aid granted by Member States.

2.2.3.2. The concept of aid distinct from capital input,
on which this study is based, covers the widest possible
field. Thus subsidies to public enterprises (particularly
national concerns) are included. Taking its cue from
Articles 92 and _93_ of the EEC Treaty, the report regards
measures to encourage certain enterprises or forms of
production as subsidies which distort or threaten to distort
competition and which affect trade among Member States.

2.2.3.3. An overall survey of all Member States shows
that the bulk of the aid goes to railways, agriculture, coal
and regional development. In France and Ireland, however,
the emphasis is more on promoting trade and exports. In
the Federal Republic of Germany regional aid frequently
has higher priority, arising partly from the federal
structure. The importance of regional aid is further

12. 3. 90 Official Journal of the European Communities No C 62/15

enhanced by the special situation of Berlin and the
economic position of the regions bordering on the GDR.

2.2.3.4. The first report on subsidies in the Community
has some gaps, mainly due to the inadequacy of the data:

— Important areas of the taxation and social security
systems have not been taken into account.

— The survey does not include funds granted to public
establishments' research projects, or the funding of
university research and research assignments (including
the military field), although these budget headings
constitute subsidies under the very broad basic
definition of aid.

— Because so-called general measures are excluded, some
subsidies whose importance has been proved by
experience (e.g. the European Regional Fund or the
EAGGF Guarantee Section) have not been taken into

account.

— There is great uncertainty about subsidies granted in a
wide variety of forms by local and regional authorities,
especially in federal structures.

— Some sectors are omitted, e.g. defence, energy (except
coal), transport (except rail and inland waterway
transport), press and media, banking, building and
public utilities services.

— The data compiled in some Member States (Greece and
Italy) are insufficient.

2.2.4. Other comments on the 18th Report

2.2.4.1. The programme of studies

Studies commissioned from bodies independent of the
Community enable it better to analyse the positive and
negative impact of competition in the various sectors of
activity.

These studies follow on from the proposal made in the
Committee Opinion on the 12th Report, and their
continuance is to be welcomed.

In connection with the 18th Report, it is interesting to note
that the border posts, whose abolition is envisaged by the
1984 _White Paper,_ are not the only 'barrier to entry' and
that advertising expenditure within or beyond an internal
frontier can also be regarded as a brake on free
competition.

It must also be noted that the idea of a merger analysis grid
could be used in implementing the expected Directive.

Moreover, in the case of many enterprises, and particularly
in countries which have recently joined the Community (as
well as in developing countries) technology transfer

contracts include leonine clauses preventing these enterprises from exporting or obtaining supplies where they
wish and from having free access to the market. This
delicate issue should be the subject of a research project, to
be included in the study programme, to decide whether
adequate competition-law procedures should be established.

The Committee hopes that the annual Competition Report
will assess the results of the independently completed
studies and the benefits reaped from them by the
Commission.

2.2.4.2. Regional policies and the agricultural sector

In practice, these mean above all subsidies for regional
purposes; the ESC Opinion on the 17th Report mentioned
these. Subsidies for agriculture are closely linked with CAP
subsidies. Some general measures may lead to distortions of
competition (EAGGF Guarantee Section). The result is that
the level of agricultural subsidies is sometimes significantly
underestimated. It was also asked whether instituting the
incomes subsidy had had beneficial effects. The 18th
Report confines its treatment of these issues to analysing
the subsidies granted by Member States, and refers to a
publication in the 'Green Europe' series; it gives no answer
to the question raised by the Committee.

The Committee feels it is very important for the
Community and its trading partners to work in GATT for
trade relations which lead to more balanced terms of

competition in the agricultural sector.

2.2.4.3. Comparison of prices

For the consumer, whose freedom to choose his purchases
is essential, 'domestic' competition policy holds out the
possibility of comparing quality/price ratios. For the time
being, prices, and especially large price disparities within
the EEC Member States, are important indicators for the
consumer as to whether competition is working.

The ESC's Opinion on the 17th Report sets great store by
this and the segmentation of national markets, separated by
the above-mentioned non-tariff barriers. The Committee

confirms its wish that the aspect be taken into consideration and that everything possible be done to ensure that
the Community's competition policy accords with the
above (see point 3 below).

3. Proposals for a necessary development of the Community's competition policy

3.1. In its successive Opinions, and latterly in examining
the economic situation of the Community in mid-1989, the

No C 62/16 Official Journal of the European Communities 12. 3. 90

Committee mentioned certain conditions in the development of competition policy.

3.1.1. Genuine competition needs to be preserved in the
Community in order to secure the advantages of the Single
Market. All citizens will undoubtedly gain from its cost
benefits. Thus the expected intensification of competition
and improvement in firms' productivity and ability to
innovate will come about naturally. On the other hand, the
European Community must be given legal powers to vet
concentrations of importance to the Community as a
whole. The powers to vet these mergers and the powers
provided by national legislation must be clearly demarcated under the Commission's authority. The Committee would refer to the its 1988 Opinion on this matter ( [1] ).
Once barriers to trade have been abolished, market
structures and the changes brought about by mergers will
also have to be assessed in a Community-wide context.
This would appear necessary when markets are open in
principle to the rest of the world, if Community industry is
to be capable of competing with the United States, Japan
and some highly efficient, newly industrialized countries.

3.2. Community and national authorities must pay
particular attention to small and medium-sized enterprises
which are worse off than large firms with regard to
information and planning. Public information and advisory services can help to offset these disadvantages. The
Committee welcomes the steps taken by the Commission in
helping to set up EC information and advice services in all
Member States. In addition, support for cooperation
between firms is important for the reduction of small and
medium-sized enterprises' competitive disadvantages.

_3.3._ In the introduction to its 18th Report, the Commission states that 'Community competition policy has
reached a crossroads'. This observation is of fundamental

importance.

3.3.1. It should be noted at this point that neither the
_White Paper_ on the Single Market nor the Single Act
involve Treaty amendments or decisive new prospects in
the development of competition policy, which now appears
to have lost its initial 'institutional lead' over the other

Community policies.

3.3.2. It must now take account not only of commercial
transactions between Member States but also of those

within each of the Member States and of those with third

countries.

3.3.3. DG IV must remain the driving force, and
continue its work with the help of the relevant Government
departments of Member States (including that of the
customs services for commercial transactions with third
countries) ( [1] ).

(!) OJ No C 208, 8. 8. 1988, p. 11.

3.3.4 The approach must be a global one since, in the
overall Community context, competition policy acts as a
jack-of-all-trades and represents the highest common
denominator of the various policies which help to create
EEC economic policy.

3.3.5. But the essential monitoring of compliance with
the rules of competition and harmonization of subsidies
policy are not enough. Account must also be taken of:

(a) protection of the environment (constraints of an
environmental policy and duties imposed on producers
should be identical and have an equal effect on cost
prices within the Single Market);

(b) equality of consumers, who must reap the benefits of
healthy competition and obtain equal advantages for
comparable services;

(c) the workers who help to keep the EEC economy going
are entitled to improved remuneration and social
security at levels such that their impact on costs of
production or services is likely to improve the terms of
competition even further and encourage fair competition;

(d) this statement refocusses attention on the risks attached
to work carried out and paid illegally, already
mentioned in the Opinion on the 17th Report; this is a
special case, similar to the practice of non-invoiced sales
in the commercial sector;

(e) the introduction to the 18th Report states: 'It would
seem that economic operators are making increasing
provision in their forward planning for the need to
adapt to the new market conditions of 1993'; accordingly, it should be ascertained whether, in the present
state of legislation (Directives and Regulations) there is
sufficient response to the need for such adaptation:

— in the various fields of application of Community
instruments,

— in the internal legislation of Member States;

(f) in this connection it should also be stressed that 'The
prohibition principle is translated, under Articles 85 and
86 of the EEC Treaty, into prohibition decisions which
can comprise heavy fines'. (Introduction to the Report,
p. 12). This raises the issue of whether the fairness of
contracts and markets could perhaps be facilitated by
more positive measures.

4. Conclusions

4.1. In the Committee's view, the abolition of barriers
within the Community should lead the Commission to

12. 3. 90 Official Journal of the European Communities No C 62/17

consider an amendment — now essential — of the Treaty
provisions covering the implementation of a healthy
competition policy within the Common Market.

4.2. In this context, the Committee would ask the
Commission to take up and implement the suggestions and
practical proposals contained in this Opinion.

4.3. It is therefore important for the Commission to ask
the Council to give it the resources needed to ensure that its
departments are in a position — both in terms of

Done at Brussels, 19 December 1989.

manpower and work organization — to achieve this
objective.

4.4. The Committee takes the view that the maximum

effort must be made to strengthen competition policy
within the EEC, so that a state of competition may be
perpetuated both within the Community and in relation to
third countries which will contribute to the prosperity of
all. The future growth of the Community's prosperity and
that of its citizens will depend to some extent on the success
of Community competition policy.

_The Chairman_

_of the Economic and Social_ _Committee_

Alberto MASPRONE

Opinion on the communication from the Commission to the Council and to the European
Parliament on completion of the internal market and approximation of indirect taxes

(90/C 62/08)

On 23 October 1989 the Commission decided, in accordance with Article 198 of the Treaty
establishing the European Economic Community, to ask the Economic and Social Committee for
an Opinion on the communication from the Commisson to the Council and to the European
Parliament on completion of the internal market and approximation of indirect taxes.

The Section for Economic, Financial and Monetary Questions, which was responsible for the
preparatory work on the matter, adopted its Opinion on 5 December 1989. The Rapporteur was
Mr Delia Croce.

At its 272nd Plenary Session (meeting of 19 December 1989), the Economic and Social Committee
adopted the following Opinion by a substantial majority, with three dissenting votes and
11 abstentions:

1. Introduction

1.1. The Commission's purpose is to amend its
Communication of 4 August 1987 and the accompanying
draft Directives [COM(87) 320-328] relating to completion
of the internal market through the approximation of
indirect tax rates and structural harmonization.

The 1987 proposals had prompted considerable doubts and
concern in the Council and the Member States and within

various specialist study groups.

1.2. In this connection, reference should be made to the
eight ESC Opinions adopted on 7 July 1988 0). The
Opinions broadly endorse the idea of harmonizing indirect
tax rates while highlighting the shortcomings of the
proposals and stressing the need for substantial changes.

(!) OJ No C 237, 12. 9. 1988.

The Commission Communication implicitly takes account
of these ESC Opinions but contains no specific reference.

1.3. Attention is also drawn to the Committee's

statement in Opinion CES 739/88 on the Commission's
Global Communication on Completion of the Internal
Market that it 'fully endorses the aim of removing all
frontiers and all border checks by 1 January 1993'.

This Opinion held that tax convergence in the broad sense,
i.e. encompassing direct taxes and parafiscal charges, could
not be considered as an absolute prerequisite for the
establishment of the Single Market but only as one
component of a global strategy embracing, for instance,
macroeconomic back-up policies.

It is also clear that the current wide differences in VAT rates

could generate sharp distortions of competition in a