Brussels Brief - September 23, 2005

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KEY DEVELOPMENTS

Mergers:  ECJ Upholds Negative Decision in Gas-Electricity Merger

Javier Berasategi

The European Court of Justice (ECJ) has upheld the European Commission’s negative decision on the joint acquisition of Gas de Portugal (GDP) by Energias de Portugal (EDP) and the Italian Utility Eni.  The merger would have brought together the gas monopoly and the dominant electricity supplier in the Portuguese market.  Interestingly, the ECJ ruled that the Commission was wrong to discount the future liberalisation of the gas market in order to conclude that GDP’s monopoly would be strengthened.  However, the ECJ agreed with the Commission that the remedies offered by the parties were not sufficient to address the anticompetitive effects of the merger in the electricity market and this alone justified a negative decision.  This case shows how a bad antitrust strategy may kill a deal:  Had Eni been excluded from the deal, the merger would have been notifiable only in Portugal and might well have been approved (possibly with conditions).

Competition:  CFI Reduces Fine on Daimler-Chrysler

Yannis Virvilis

In 2001, the European Commission found that the German-US group DaimlerChrysler had infringed Community rules on competition and imposed a heavy fine of EUR 71.8 million.  The fine was for anti-competitive practices in Germany, Spain and Belgium:  In Germany, DaimlerChrysler gave its agents instructions to sell the E-class vehicles only in their own territory.  German agents and Spanish dealers were prevented from supplying cars to leasing companies where no customers were identified.  In Belgium, agreements were put in place restricting the granting of discounts.  DaimlerChrysler subsequently brought an action for the annulment of the Commission decision.  The Court of First Instance (CFI) annulled the Commission decision regarding the anti-competitive behaviour of the company in Germany and Spain, thus reducing the fine to only EUR 9.8 million.  The CFI found that the German agents should be assimilated to employees of the company and that the understanding between the company and these agents constituted only unilateral conduct of the group.  With respect to Spain, the CFI found that the obligation to identify customers was imposed by national legislation.

State Aid:  Public Consultation to Direct State Aid Toward Innovation

Alana Tervo

The European Commission is consulting stakeholders on targeting State aid at technological innovation and SMEs.  Following the consultation the Commission will decide which State aid measures can be authorised on the basis of existing rules.  Although competition is recognised as the best tool to stimulate innovation, State aid is seen as a way of tackling the market failures that prevent the natural delivery of innovation.  The Communication presents six concrete measures to support innovation: support for innovative start-ups; flexibility for risk capital; expanding current State aid rules for R&D; subsidies for SMEs to buy services from innovation intermediaries; SME recruitment of highly qualified researchers and engineers; and the development of poles of excellence.  Stakeholders have until 21 November 2005 to respond.

Information Society:  Publishing in the Information Society

Anthony Seymour

On 20 September 2005 the European Commission launched a public consultation on the challenges facing publishing in the digital age.  The socio-economic importance of the industry is beyond doubt.  Not only does it account for 0.5 per cent of European GDP providing for around 750,000 EU jobs, but it also plays a vital cultural role in the spread of knowledge and ideas, especially the press.  The consultation runs until mid-November and aims to encourage the discussion of various policy initiatives designed to develop an online market place in which the publishing industry can thrive, notably by tapping into new opportunities for generating advertising revenue.  However, it is equally important that the commercial and editorial freedom of the media is not undermined.  This is the primary concern of the Task force on Media Affairs set up by Commissioner Reding which will be meeting with numerous editors-in-chief to discuss the challenges to be overcome if the industry is to truly embrace the digital revolution.

Trade:  EU Reaches an Agreement with the US on Trade in Wine

Michal Cieplinski

After nearly 20 years of negotiations the European Union and the United States have reached an agreement on trade in wine.  The agreement, once ratified by the parties, will protect an additional list of EU wine names thereby securing their most important and valuable export market.  Pursuant to the agreement, the US Administration will make a proposal to Congress to change the status of EU wine names Burgundy, Champagne, Chablis, Chianti, Claret, Haut-Sauterne, Hock, Madeira, Malaga, Moselle, Port, Retsina, Rhine, Sauterne, Sherry and Tokay, that are currently considered as semi-generic terms in the US.  Further to the agreement the US and the EU explicitly recognise each others’ wine names as "names of origin".  The US will also exempt the EU wines from US certification requirements and accept the main principles of EU labelling rules.  The US will be allowed to use 14 EU traditional wine labelling expressions for a limited time and under certain conditions.  The agreement will be followed by a second phase of negotiations that will include “geographical indications”, semi-generic names, low alcohol wines, certifications and wine-making practices.

Telecommunications:  New Requirements for Data Retention in Communications Networks

Iveta Mikelsone

In order to combat crime and terrorism, the European Commission has adopted a proposal for a new Directive on retention of data processed in connection with the provision of public electronic communication services.  As a result, the providers of publicly available electronic communications and public telecommunications networks may in future be obliged to retain traffic data relating to the usage of mobile and fixed telephony for one year and traffic data relating to internet communications for six months.  The proposal requires Member States to provide for reimbursement of network providers, for the additional costs arising out of the new data retention obligations.  It should be emphasised that the proposal does not apply to the contents of communications.

Competition:  Microsoft Files New Suit against European Commission

Patrice Corbiau

Microsoft has filed a new lawsuit against the European Commission before the European Court of First Instance (CFI) to prevent the source code of its server communication protocols from entering the public domain.  The issue arises out of a decision rendered by the European Commission in March 2004 finding that Microsoft abused the dominant position held by the Windows operating system.  This decision, which was confirmed by the CFI in December 2004, obliges Microsoft to disclose sensitive interface documentation which would allow competitors to achieve full interoperability with Windows PCs and servers.  In principle, Microsoft has accepted the disclosure of the information.  However, it refuses to allow competitors to distribute software products developed with the help of its protocols under an open-source licence.  Microsoft considers that such open-source licence is not covered by the March decision and would allow rivals access to its intellectual property.

Transport:  Commission Consults on Airport Capacity Shortages

Elena Kostadinova

The European Commission has launched a stakeholders consultation on “Airport capacity, efficiency and safety” to address concerns about increasingly congested EU airports.  The Commission has proposed concrete promotional and regulatory actions in three areas: (i) the relationship between airports and other modes of transport; (ii) improving the infrastructure and traffic management of individual airports; and (iii) relationships between airports.  The Consultation Paper, which has taken account of existing initiatives such as the guidelines on aid to regional airports (see Brussels Brief of 9 September 2005) and grants for intermodal transport, is an attempt to foresee and regulate future market developments.  Stakeholders are invited to comment on the need for regulatory intervention in the air transport market by 15 November 2005.

NEXT WEEK’S EVENTS

Monday 26 September – Friday 30 September 2005

COUNCIL MEETINGS

No Council meetings scheduled for next week

COURT OF JUSTICE

Judgments

Environment and consumers

C-251/03 Commission v Portugal

Opinions

Agriculture

C-274/04 ED & F Man Sugar

ELSJ

C-341/04 Eurofood IFSC

Free movement of capital

C-213/04 Burtscher

Taxation

C-210/04 FCE Bank

COURT OF FIRST INSTANCE

Judgments

Customs union

T-26/03 Geologistics v Commission

Joined Cases T-134/03, T-135/03 Common Market Fertilizers v Commission

Intellectual property

T-123/04 Cargo Partner v OHMI (CARGO PARTNER)