Brussels Brief - September 19, 2008
September 19, 2008
Full Printable Version in PDF Format
(Adobe Acrobat Reader required, available for free download here)
KEY DEVELOPMENTS
Technology – Trade: Commission Proposes Major Update to IT Trade Pact
Bróna Heenan
The European Commission has presented the World Trade Organisation (WTO) with its proposal to update and expand the Information Technology Agreement (ITA). According to EU Trade Commissioner, Peter Mandelson, the ITA needs updating to take account of developments in this sector during the intervening 12 years. The ITA was first signed in 1996, with the goal of expanding trade in IT and telecommunication products by eliminating tariffs on an agreed range of products. The Commission’s proposal takes account of new products that have entered the market since 1996 and are not covered by the existing agreement. Non tariff barriers are also up for consideration in the proposal as well as problems caused by the non-functioning of some of the mechanisms and procedures provided for in the current ITA. The Commission believes that a change in ITA criteria should be achieved through consensus of the signatories rather than through litigation. However, the United States, Japan and Chinese Taipei have recently taken the litigation route by requesting a WTO dispute settlement panel against the European Union regarding its tariffs on certain IT products.
Energy: European Parliament Approves Proposed Renewable Energy Targets
Leigh Smith
On 11 September 2008 the European Parliament’s Committee on Industry, Research and Energy approved an amended proposal for a directive promoting the use of energy from renewable sources. The proposed directive sets several renewable energy targets for Europe, including sourcing 20 per cent of Europe’s energy from renewable sources by 2020. Each Member State has been set an individual target, based on the current amount of energy it consumes from renewable sources. In order to meet these targets, the proposal includes financial penalties and incentives for Member States. Also included is a 10 per cent target for the use of biofuels and other renewable sources in the transport sector. The proposal will now be considered by the European Council, with the aim of adopting the legislation in the first half of 2009.
Consumer Electronics – Mergers: Joint Control to Sole Control Approved in Sony BMG
Mélanie Bruneau and Laura Zadunayski
The European Commission has cleared the acquisition by Sony Corporation of America of the 50 per cent share held by Bertelsmann AG (Germany) in Sony BMG. Sony BMG is a recorded music company jointly owned by Sony and Bertelsmann. The creation of the joint venture Sony BMG in 2004 has had a chequered legal history. The Commission’s approval of the transaction was challenged by Independent Music Publishers and Labels Association (Impala) before the European Court of First Instance (CFI). In 2006 the CFI annulled the Commission’s decision for lack of reasoning and manifest error of assessment. Bertelsmann and Sony appealed to the Court of Justice which, in July of this year, annulled the CFI’s judgment and referred the matter back to the CFI for retrial. Now, under this new transaction, Sony will obtain sole control and the company will be renamed Sony Music Entertainment Inc.
The Commission found that the transaction would not lead to any horizontal overlaps in the music recording markets as Sony has no other music recording activities in the European Economic Area. As regards vertical effects, the Commission concluded that Sony would continue to have the incentive to sell its music to as many customers of portable music devices, mobile phones, video games and films as possible, and would not therefore restrict competitors’ access to its music catalogue. Sony would also have the incentive to purchase music for its devices from various sources. Having investigated whether this operation could have a detrimental effect on the joint licensing of publishing and recording rights vis-à-vis online music retailers, the Commission concluded that online retailers would continue to have access to a sufficiently large portfolio of music rights from alternative suppliers. Finally, the Commission's investigation showed (in line with its 2004 and 2007 decisions approving the creation of Sony BMG), that the transaction would be unlikely to induce coordinated effects between music companies.
Pharmaceuticals – Competition: ECJ Rules Pharmaceutical Companies Can Take Action to Prevent Parallel Trade in EU
Benoît Keane
The European Court of Justice (ECJ) has ruled that pharmaceutical companies can take measures to ensure that their commercial interests are not threatened by parallel traders within the European Union. However, the pharmaceutical companies will not be able to stop supplies to wholesalers completely – instead they must continue to meet supplies which are “not out of the ordinary”.
Case C-468/06 Lelos and Others v. GSK concerned a dispute between the Greek subsidiary of GlaxoSmithKline (GSK) and a number of Greek wholesalers. Greece is subject to price controls on pharmaceutical products which are significantly lower than other EU Member States leading to parallel trade to other Member States. When supplies to hospitals became threatened, GSK stopped supplying wholesalers and instead made the supplies directly itself. Once the situation had stabilised GSK put in place a new sales policy to counter parallel trade by limiting the amount of sales to wholesalers to what it considered necessary to meet demand (plus additional supplies). The ECJ was asked whether this conduct constituted an abuse of a dominant market position contrary to EU competition law.
The ECJ ruled that a dominant company cannot stop supplies completely to stop parallel exports for its own commercial reasons. However, the ECJ stated that a producer of pharmaceutical products must be in a position to protect its own commercial interests if it is confronted with orders that are “out of the ordinary in terms of quantity” or “out of all proportion” to volumes previously sold.
The case is being hailed by the European Commission as validating its position that dominant companies cannot prevent parallel trade. However, it is pharmaceutical companies who will take heart from a ruling which means they do not have to provide a limitless supply of products to parallel traders.
Transport – State Aid: Olympic Airlines Privatisation Plan Given Green Light
Emanuel De Duonni
On 17 September 2008 EU regulators accepted the Greek Government’s plan to privatise Olympic Airlines and Olympic Airways Services. The privatisation plan will involve the bundling of assets of Olympic Airlines and Olympic Airways Services to a new company in a manner which does not involve State aid provided they are sold at market value. In this manner, the new company will not inherit the State aid liabilities of Olympic Airlines and Olympic Airways Services.
In a separate but related investigation, the Commission found that the Greek flag-carrier had received further State aid exceeding EUR 850 million, deemed incompatible with Community law, since its last investigation. It is likely that the State aid liabilities will be written off in the liquidation process. The Commission has partially closed this investigation.
The Commission will monitor the privatisation process closely, appointing an independent trustee to ascertain the sale takes place at market prices in an open bidding process. The objective is that the new company will be completely privately owned by 2009.
The Greek Government has spent years seeking investors to buy into the financially crippled airline, but has been hindered by the Commission's demands to repay illegal State aid. This privatisation plan approved by the Commission is therefore designed to unblock the standstill. EU Transport Commissioner Antonio Tajani stated that he wanted the approval of the privatisation plan to be a “definite break from the past”. This decision follows other controversial airline restructuring cases and demonstrates the Commission’s willingness to compromise in order to ensure the long-term viability of the European airline industry.
NEXT WEEK’S EVENTS
Monday 22 September – Friday 26 September 2008
COUNCIL MEETINGS
Justice and Home Affairs Council (25 – 26 September 2008)
Competitiveness Council (25 – 26 September 2008)
COURT OF JUSTICE
Opinions
Competition
C-202/07 P France Télécom v Commission
Social policy
C-388/07 The Incorporated Trustees of the National Council for Ageing
Taxation
C-281/07 Bayerische Hypotheken- und Vereinsbank
Joined Cases C-278/07, C-279/07, C-280/07 Josef Vosding Schlacht-, Kühl- und Zerlegebetrieb
COURT OF FIRST INSTANCE
Judgments
Commercial policy
T-45/06 Reliance Industries v Council and Commission
Intellectual property
T-248/05 HUP Uslugi Polska v OHMI - Manpower (I.T.@MANPOWER)
T-179/07 Anvil Knitwear v OHMI - Aprile e Aprile (Aprile)
T-116/06 Oakley v OHMI - Venticinque (O STORE)
State aid
T-20/03 Kahla v Thüringen Porzellan / Commission
