Brussels Brief - July 21, 2006
July 21, 2006
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KEY DEVELOPMENTS
Mergers: CFI Annuls Decision Authorising Creation of Sony BMG
Lara Kuehl
The Court of First Instance (CFI), in an action brought by Impala, has annulled the European Commission’s 2004 decision to clear the BMG/Sony merger. According to the CFI, the Commission had not demonstrated to the requisite legal standard that a collective dominant position did not exist before the merger. The CFI considered that the Commission had made an error of assessment in its theory that promotional discounts reduced the transparency of the market enough to prevent the existence of a collective dominant position. Also, the CFI observed that the lack of evidence that retaliatory measures had been used in the past was not conclusive, as such measures appeared to exist. As regards the possible creation of a collective dominant position after the merger, the CFI criticised the Commission for its extremely cursory investigation.
State Aid: Incompatibility of Luxembourg’s Preferential Tax Regime for Financial Holdings
Patrice Corbiau
The European Commission has decided that the preferential tax regime of 1929 in favour of Luxembourg’s financial holdings is no longer compatible with EC Treaty State aid rules. Under the 1929 law, exemptions from direct business taxation are granted to Luxembourg’s holdings that provide certain financial and capital-intensive services to related and unrelated business entities within a multinational group. Following an in-depth investigation, the Commission concluded that, even as amended by a law of 21 June 2005, this preferential regime distorts competition and trade. It encourages financial undertakings to create dedicated structures in Luxembourg to reduce their current tax liabilities, thereby distorting the level playing field. The Commission decision requires the scheme to be repealed by the end of 2006. For the existing holdings, the scheme must be definitively eliminated by the end of 2010.
VAT: German and Austrian Requests for Generalised Reverse Charge Mechanism Rejected
Geert Dierickx
The European Commission has rejected the derogation requests made by Germany and Austria for a general application of the “reverse charge” mechanism. This mechanism allows the supplier not to charge VAT to his customer. Consequently, the supplier does not account for the VAT to the Treasury; the obligation to do so is passed on to the customer. A derogation from the harmonised general VAT rules is only allowed if those derogations are targeted, restricted and proportionate. In the past, individual Member States have been authorised to apply “reverse charge”, but limited only to specific sectors. The reason why Germany and Austria made requests for a general derogation was to deal with the problem of businesses disappearing without paying their VAT liabilities. Their requests foresaw the introduction of a generalised use of the mechanism that would be applied to all business-to-business supply of goods or services where the invoice value exceeded EUR 5,000 and EUR 10,000 respectively.
Telecoms: ECJ Allows Fixed Maximum Prices for Transfer of Mobile Phone Numbers
Philip Torbøl
In a preliminary ruling, the European Court of Justice (ECJ) has established that national telecommunications regulators may fix maximum prices for the transfer of a mobile phone number from one operator to another. Such transfer of mobile number is the right of all subscribers of mobile services pursuant to the Universal Services Directive, Directive 2002/22/EC. The Directive confers a certain discretion on the national authorities to ensure that the price for the transfer of a phone number does not act as a disincentive. The ECJ found that in fixing a maximum price for the service, applicable to all operators, the Belgian national regulatory authority had not exceeded its discretion.
Competition: CFI Upholds Commission Decision in Endesa-Gas Natural Deal
Yannis Virvilis
The Court of First Instance (CFI) has confirmed the European Commission's decision, by which the European regulator declined jurisdiction in the case of the acquisition by the Spanish energy company Gas Natural of Endesa, a company active in the electricity sector. Gas Natural originally notified the transaction to the Spanish Competition Authority. Endesa complained to the European Commission, claiming that the operation should be notified at a European level. After the Commission dismissed Endesa’s complaint, Endesa contested the Commission’s decision at the CFI, claiming that the Commission had incorrectly calculated its turnover, notably by taking into account Spanish accounting standards instead of International Financial Reporting Standards. The CFI rejected all arguments brought by Endesa.
Competition: Commission Requests Italy to Comply with EU Rules on Electronic Communications
Maria Scimemi
Pursuant to Article 226 EC, the European Commission has sent a letter of formal notice to Italy requesting information about the compatibility of its broadcasting legislation with EU competition rules and the New EU Regulatory Framework for Electronic Communications. The Commission is concerned that, by providing that only existing analogue broadcasters can access experimentation of digital terrestrial transmissions, the Italian broadcasting legislation may preclude operators which are not active in analogue transmission from creating their own digital networks. Moreover, the law allows incumbents to maintain control over the frequencies and networks for analogue transmission, thus depriving their competitors of the benefits deriving from the enhanced capacity of digital networks. Italy now has two months to respond to the concerns expressed by the Commission.
Mergers: Omya’s Acquisition of J.M. Huber Cleared, Subject to Conditions
Andrea Hamilton
The European Commission has approved Omya AG’s acquisition of J.M. Huber’s calcium carbonate business, subject to conditions. Omya is a Swiss company that provides a range of industrial minerals to the paper-making industry, including precipitated calcium carbonate (PCC). Huber is a US company that also manufactures and supplies PCC for paper-making. Omya’s acquisition was referred to the Commission by Finland under Article 22(1) of the EC Merger Regulation. The Commission subsequently conducted an in-depth investigation, which revealed that the acquisition of Huber plants could harm the market for the supply of calcium carbonates for paper coating in the European Economic Area (EEA). To address these concerns, Omya and Huber have committed to divest a PCC plant in Finland, as well as PCC paper-coating technology. Subject to full compliance with these commitments, the Commission has concluded that the proposed transaction would not significantly impede effective competition in the EEA.
NEXT WEEK’S EVENTS
Monday 24 July – Friday 28 July 2006
COUNCIL MEETINGS
Justice and Home Affairs Council (JHA) (24 July 2006)
COURT OF JUSTICE
Judicial vacation of the Court of Justice from 17 July – 3 September 2006 inclusive
COURT OF FIRST INSTANCE
Judicial vacation of the Court of First Instance from 17 July – 3 September 2006 inclusive
