Brussels Brief - February 16, 2007
February 16, 2007
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KEY DEVELOPMENTS
Taxation: Swiss Cantons’ Tax Incompatible with EU – Swiss Agreement
The European Commission is challenging certain Swiss tax regimes under the 1972 EU – Swiss Agreement. These regimes fully or partially exempt profits generated abroad from cantonal and municipal company tax, and encourage multinationals to establish their headquarters in cantons such as Zug and Schwyz. As most of these multinationals are active in the EU, these tax regimes may affect trade between the EU and Switzerland, and as such the Commission reviewed their compatibility with the State aid clause in the 1972 EU – Swiss Agreement. Although the Commission is not against tax competition, it cannot accept schemes that treat domestic and foreign source income differently. Switzerland is requested to amend these tax schemes to bring them in line with the terms of the Agreement. In addition, the Commission has asked the Council for a mandate to start negotiations with Switzerland in order to find a mutually acceptable solution.
Mergers: Public Consultation on Draft Non-Horizontal Merger Guidelines
Mélanie Bruneau
The European Commission has launched public consultations on draft Guidelines for the assessment of mergers between companies that are in a vertical or conglomerate relationship, also known as “non-horizontal” mergers. Such mergers are aimed at broadening a company's activities either by merging with a company at another level of the supply chain (vertical merger) or with a company active in a separate but related or complementary market (conglomerate merger). The Guidelines will provide guidance to companies envisaging such types of merger. Interested parties are invited to submit their comments on the draft Guidelines by 12 May 2007. Following the consultation, the Commission will adopt the definitive version.
Competition: Commission Dawn Raids Power Transformer Companies
Philip Torbøl
The European Commission has confirmed that it has carried out unannounced inspections at the premises of several power transformer producers in France, Germany and Austria. Power transformers are key components in electricity transmission and distribution networks. The Commission states that it has reason to believe that the companies concerned may have engaged in unlawful cartel activities in violation of Article 81 EC. Although the Commission did not disclose the names of the targeted firms, Siemens AG and the ABB Group have revealed that they are among the companies involved in the probe. The Commission will now examine the documents collected during the dawn raids. It may take months or even years before the Commission decides whether or not to open formal proceedings in the case.
Financial Services: EU Supports US Plans for Rules on Deregistration from Capital Markets
Elena Kostadinova
The European Commission has sent a letter to the US Securities and Exchange Commission (SEC) to express its support for the amendment of US rules concerning deregistration from US capital markets. Currently, a non-US company who wants to deregister from US capital markets must fulfil certain criteria based on the number of its US investors. The new rules will focus on a comparison between the non-US company’s average daily trading volume (ADTV) on the US market and that on its primary market. The Commission recommends that the SEC increase the threshold for the US ADTV from its current level of five per cent and compare it with the worldwide ADTV, rather than the primary market ADTV. If adopted, the new rules may result in greater interest for EU companies to enter US capital markets because it would be easier to leave those markets.
Competition: ECJ Upholds Danone Fine in Belgian Beer Cartel Case
Yannis Virvilis
The European Court of Justice (ECJ) has rejected the appeal filed by Danone by which the French group sought to reduce the fine that was imposed on it for participating in a cartel. A fine of EUR 44 million was imposed on Danone by the European Commission for participating in a cartel on the Belgian beer market. Danone was held responsible both for its own participation in the cartel and for the participation of one of its subsidiaries, Alken-Maes. The third cartel member was Interbrew, the largest Belgian beer supplier. The case was subsequently brought to the Court of First Instance (CFI), which reduced the fine to EUR 42.4 million. Upon Danone’s appeal to the highest European Court, the ECJ confirmed the CFI’s ruling and also the wide discretion of the Commission in assessing elements such as the gravity of an infringement in cartel cases.
State Aid: Commission Decides that Italian Regional Tax Incentives Constitute Incompatible State Aid
Juan Gutiérrez
In September 2005 the European Commission opened a formal investigation into two fiscal incentive schemes adopted by Sicily. These schemes propose a five-year exemption from Italian tax on regional production activities (IRAP) for companies active in tourism, hotels, cultural goods, agricultural feed, information technology or craft activities. The schemes also propose a so-called “Euro-Mediterranean Centre of Finance and Insurance Services”. Subsidiaries of financial and insurance companies that operate within the Centre would be able to benefit from a 50 per cent reduction on the rate of IRAP. The Commission has concluded that these fiscal incentives schemes are incompatible with the EC State aid rules because they selectively favour certain categories of undertaking.
State Aid: France, Ireland and Italy to Partially Recover Energy Product Tax Breaks
Andrea Hamilton
The European Commission has ordered France, Ireland and Italy to partially recover tax exemptions on energy products that constitute illegal State aid. Beginning in the 1990s, these three Member States provided tax breaks on mineral oil use in the production of alumina, which, in practice benefit only one company per Member State. In 2005, the Commission ordered a partial repayment of tax exemptions granted up until 2003, but extended its investigation into tax breaks granted from 2004, given the entry into force in that year of the Energy Tax Directive, 2003/EC/96. The Commission ultimately found that the post-2004 tax exemptions (i) fall outside the Directive’s scope, and (ii) constitute incompatible State aid. France, Ireland and Italy must now recover 20 per cent of the value of the exemptions granted since 1 January 2004.
Internal Market: New Reforms to Boost Trade of Goods in EU
Benoît Keane
The European Commission has put the functioning of the Single Market back on the agenda. It has announced a broad range of packages to facilitate the free movement of goods within the European Union. The Commission has targeted complicated national technical rules as a particular barrier to trade within the EU because they discourage companies from venturing outside their national territories. The Commission suggests that the burden of proof should shift so that it is now the public authorities that will have to justify why a product which is legally marketed in another Member State cannot be sold in their national market. The proposal also envisages greater co-operation with national standard bodies to enhance trust in the “CE” mark and greater market surveillance to protect consumers. The package will be submitted to the European Parliament and the EU Council for further discussion.
Mergers: Schneider Electric Divests to get Merger Through
Morten Nissen
The European Commission has approved the proposed acquisition of American Power Conversion Corporation (APC) by the French group Schneider Electric. This is conditional upon the divestment of Schneider Electric's business related to small uninterruptible power supply (UPS) devices. Both companies are major suppliers of a broad range of UPS devices which clean power signals and provide back-up power in case of power cuts. The Commission’s investigation concluded that without divestment the proposed acquisition could significantly reduce competition on the market for small UPS devices which are used mainly to protect individual computers and devices for small businesses.
Monday 19 February – Friday 23 February 2007
COUNCIL MEETINGS
Competitiveness Council (19 February 2007)
Environment Council (20 February 2007)
Employment, Social Policy, Health and Consumer Affairs Council (22 February 2007)
COURT OF JUSTICE
No cases scheduled for next week
COURT OF FIRST INSTANCE
No cases scheduled for next week
