Publications / McDermott Newsletters / Brussels Brief - February 13, 2009

Brussels Brief - February 13, 2009

February 13, 2009

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KEY DEVELOPMENTS

Telecommunications – State Aid:  Commission Declares State Aid Received by British Telecom Unlawful

Leigh Smith

On 11 February 2009, the European Commission found that British Telecom plc had received unlawful State aid from the UK Government.  The Commission ordered recovery of the aid, which British Telecom had received since 2005.

The Commission’s investigation, which began in November 2007, related to the privatisation of British Telecom in 1984.  As part of this process, the UK Government guaranteed British Telecom’s pension liabilities.  The guarantee relates only to employees of British Telecom up to the time of privatisation and was found by the Commission to benefit only the employees themselves.  The guarantee itself does not therefore constitute State aid.

However, the Government guarantee also has the effect under UK legislation of exempting the guaranteed pension fund from certain obligations.  One such obligation is to pay a levy to the Pension Protection Fund, which was created in 2004.  The Commission found the fact that the pension fund for pre-privatisation employees of British Telecom was not required to pay this levy conferred a financial advantage on British Telecom.  This advantage could not be justified under EU State aid rules.

The UK Government is therefore required to recover the total unpaid levy from British Telecom, plus interest.  British Telecom is expected to appeal the decision.

 

Transport – Competition:  Roundtable between Competition Commissioner and Car Industry

Contact Philip Bentley

The EU Commissioner for Competition Policy, Neelie Kroes, has held a roundtable discussion with the car industry to discuss the future of the motor vehicle block exemption.  The block exemption exempts distribution agreements with car dealers and supply agreements with repairers from competition law by outlining what conditions would and would not be acceptable.  Commissioner Kroes noted that the manufacturers would like to see a more flexible regime while car dealers like the protection they receive from the current rules.  Commissioner Kroes highlighted the importance of independent repairers and noted their concern that any future regime should continue to assure access to technical information and spare parts.  Commissioner Kroes concluded that while the car sales market appeared to be working well, it remains important that it be provided with a solid competition law foundation.

 

State Aid:  Annulment of Commission Decision Approving Capital Injection of EUR 297.5 Million for La Poste

Vasilios Bousis

The Court of First Instance (CFI) has annulled the European Commission’s decision under EU State aid rules not to raise any objections to Belgium’s notification of a proposal to increase the capital of the public undertaking responsible for its universal postal operator, La Poste. 

The challenge to the Commission’s decision to approve the capital injection was brought by La Poste’s German competitor, Deutsche Post and its Belgian subsidiary, DHL International.  The CFI decided that, given the serious difficulty in assessing the compatibility of the increase in capital with the Common Market, the Commission should have initiated a detailed investigation, which would have allowed the claimants to submit their observations.

It was not for the CFI to rule at this stage of the procedure on whether aid exists or whether it is compatible with the Common Market.  The Commission has two months to appeal the ruling.

 

Competition:  Spain Adopts Fining Guidelines

Andrea Hamilton

For the first time, Spain’s National Competition Commission has approved fining guidelines for infringements of Spain’s competition law and EC competition law.  Under EC law, Member States are authorised to enforce both their own national competition laws and EC competition law rules, namely Articles 81 and 82 of the EC Treaty.

According to Spain's fining guidelines, the basic fine for infringements of competition law will vary between 10 and 30 per cent of the infringing company’s turnover in the affected markets during the period of the infringement.  The guidelines also permit individual fines to be imposed on the infringing company’s managers.  Finally, as regards duration, the guidelines indicate that the basic fine will first be calculated based on the infringing company’s turnover in the final year of the offence.  That amount may then be increased to reflect the length of the offence, but the relative weight of each additional year will be reduced by a given percentage.  This is distinct from the European Commission’s approach to fining, which multiplies the “last year turnover” by a percentage of up to 30 per cent and then multiplies by the number of years of the offence without any reduction.  This has led to staggering fines in recent years. 

To date, commentators view Spain’s fining guidelines as likely to produce proportionate fines and introduce greater legal certainty.

 

NEXT WEEK’S EVENTS

Monday 16 February – Friday 20 February 2009

 

COUNCIL MEETINGS

Education, Youth and Culture Council (EYC) (16 February 2009)

Transport, Telecommunications and Energy Council (TTE) – Energy (19 February 2009)

 

COURT OF JUSTICE

Judgments

External relations

C-228/06 Soysal and Others

 

Freedom of establishment

C-321/07 Schwarz

 

Law governing the institutions

C-308/07 P Gorostiaga Atxalandabaso v Parliament

 

Taxation

C-1/08 Athesia Druck

 

Opinions

Approximation of laws

C-489/07 Messner

 

New accessions

C-560/07 Balbiino

 

Social security for migrant workers

C-3/08 Leyman

 

State aid

C-520/07 P Commission v MTU Friedrichshafen

 

COURT OF FIRST INSTANCE

No judgments scheduled for next week.

 

 

McDermott Will & Emery

McDermott Will and Emery