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Commission
imposes 38 million fine on E.ON for breach of a seal during an inspection
The European
Commission has imposed a fine of 38 million. on E.ON Energie AG (E.ON) for
the breach of a Commission seal in E.ONs premises during an inspection. The
seal had been affixed to secure documents collected in the course of an
unannounced inspection in May 2006. When the Commission came back the next day,
the seal was broken. The inspection formed part of the Commission's enforcement
activities against allegations of anticompetitive practices on the German energy
markets.
The seal had
been affixed by Commission officials during an unannounced inspection carried
out in May 2006. The inspection concerned the suspicion of anticompetitive
practices on the German electricity market. It is the Commission's practice to
seal rooms when carrying out surprise inspections in order to make sure that no
documents can be removed by the company when the inspection team is absent (e.g.
at night).
The
Commission's seals are made of plastic film. If they are removed, they do not
tear, but show irreversible "VOID" signs on their surface. When the inspection
team returned in the morning of the second day of the inspection, it found that
such "VOID" signs were clearly visible on the entire surface of one of the seals
which had been affixed the evening before. Also pieces of glue were found around
the seal indicating that somebody had removed the seal and tried to fix it
again. The broken seal was intended to secure the room in which all documents
previously collected by the Commission, i.e. highly sensitive documents, were
stored. As these documents were not yet listed, the Commission was unable to
ascertain whether and which documents were taken by EON.
E.ON denied
breaking the seal and first argued that the Commission had the only key to the
room. However later it turned out that 20 keys were in circulation among E.ON
employees. E.ON also tried to argue that there might be other explanations for
the appearance of the "VOID" signs on the seal. E.ON's suggested explanations
were inter alia: vibrations caused by the preparation of a conference
next door, the use of an aggressive cleaning product, the age of the seal, and a
high level of humidity.
In order to
assess these arguments, the Commission carried out a very thorough
investigation, including the use of outside experts to test the seals, but came
to the conclusion that the arguments were not valid. Both the manufacturer of
the seal and the independent expert who tested the Commission's original seals
confirmed that the state of the seal as found in the morning of 30 May 2006
cannot be explained by any other reasons than by a breach of the seal. Indeed,
according to the manufacturer, similar seals have been in use for decades,
without any examples of malfunction.
The use of
seals is intended to prevent the possibility of evidence being lost during an
inspection, thus undermining the effectiveness of the inspection. Breaches of
seals are therefore a serious infringement of competition law. As regards the
level of the fine, Council Regulation 1/2003 (Article 23(1) (e)) provides that
the Commission can impose a fine of up to 1% of the company's total turnover for
a seal broken intentionally or negligently. When fixing the amount of the fine,
the Commission has, however, taken into account the fact that it was the first
time that a seal has been broken by a company subject to an inspection and that
a fine has been imposed under the provisions of Regulation No 1/2003 concerning
obstruction or interference with a Commission anti-trust investigation. [30
January 2008]
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Commission
has carried out inspections in the ship classification sector
The European
Commission can confirm that on 29 30 January 2008 Commission officials carried
out unannounced inspections at the premises of several providers of ship
classification services and an association of such providers. The Commission
has reason to believe that the companies and the association concerned may have
violated the competition rules of the EC Treaty and the EEA Agreement that
outlaw restrictive business practices. Providers of such classification services
certify whether ships are in conformity with technical standards for design and
maintenance.
The Commission
officials were accompanied by their counterparts from national competition
authorities. Commission officials also participated in unannounced inspections
at the premises of a provider of ship classification services that were carried
out by the EFTA Surveillance Authority (ESA).
Surprise
inspections are a preliminary step in investigations into suspected
anticompetitive business practices. The fact that the European Commission
carries out such inspections does not mean that the companies or association are
guilty of anti-competitive behaviour nor does it prejudge the outcome of the
investigation itself. The European Commission respects the rights of defence,
in particular the right of companies or associations to be heard in antitrust
proceedings.
There is no
strict deadline to complete inquiries into restrictive business practices.
Their duration depends on a number of factors, including the complexity of each
case, the extent to which the undertakings or associations concerned co-operate
and the exercise of the rights of defence. [30 January 2008]
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Commission
carries out inspections in the Central Processing Unit (CPU) and PC sector
The European
Commission has confirmed that on 12 February 2008, Commission officials carried
out unannounced inspections at the premises of a manufacturer of Central
Processing Units (CPUs) and a number of personal computer (PC) retailers. The
Commission has reason to believe that the companies concerned may have violated
EC Treaty rules on restrictive business practices (Article 81) and/or abuse of a
dominant market position (Article 82).
The Commission
officials were accompanied by their counterparts from the relevant national
competition authorities.
Surprise
inspections are a preliminary step in investigations into suspected
infringements of EC competition law. The fact that the European Commission
carries out such inspections does not mean that the companies are guilty of
anti-competitive behaviour; nor does it prejudge the outcome of the
investigation itself. The European Commission respects the rights of defence, in
particular the right of companies to be heard in antitrust proceedings.
There is no
strict deadline to complete such investigations. Their duration depends on a
number of factors, including the complexity of each case, the extent to which
the undertakings concerned co-operate and the exercise of the rights of defence.
[12 February 2008]
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Commission
considers collective redresses in European Competition Law
The Commission has been examining
the problems that consumers face in obtaining effective redress. One problem
which it has identified is that EU consumers who have small or scattered claims
refrain from bringing an individual court action because the cost of bringing
the action is likely to outweigh the amount of damages claimed. Collective
redress, both judicial and non-judicial, could be a means of addressing this
problem.
In its Consumer Policy Strategy
for 2007-2013 the Commission underlined the importance of effective mechanisms
for seeking redress and announced that it would consider action on collective
redress mechanisms for consumers.
One key priority for both the
European Commission and Member States is to take action to improve access to
justice by creating measures which simplify and help access to the courts,
particularly in cross border cases.
For this purpose the Commission
organised a brainstorming event on collective redress in Leuven on 29 June 2007.
Representatives of all stakeholders discussed the advantages, disadvantages and
underlying problems of collective redress schemes currently in place in the
Member States, as well as the likely consequences of a possible collective
redress mechanism at EU-level.
Also, the Portuguese Presidency
organised, with the support of the European Commission, a conference on
collective redress in Lisbon on 9 & 10 November 2007. The conference gathered
politicians, senior officials, representatives from consumer associations, the
industry and the retail sector, economists, legal practitioners and academics
from across Europe.
Finally, the Commission has
launched a study which will provide more information on the key problems faced
by consumers in obtaining redress for mass claims, and will analyse the
consequences of such problems for consumers, competitors and the relevant
market. The Commission will use the results of this study as well as the
information provided by stakeholders and interested parties in order to decide
whether, and if so, to which extent, an initiative on collective redress is
required at EU level. [14 February 2008]
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Commission
takes note of Microsoft's announcement on interoperability principles
The European
Commission takes note of today's announcement by Microsoft of its intention to
commit to a number of principles in order to promote interoperability with some
of its high market share software products. This announcement does not relate to
the question of whether or not Microsoft has been complying with EU antitrust
rules in this area in the past. The Commission would welcome any move towards
genuine interoperability. Nonetheless, the Commission notes that today's
announcement follows at least four similar statements by Microsoft in the past
on the importance of interoperability. In January 2008, the Commission initiated
two formal antitrust investigations against Microsoft one relating to
interoperability, one relating to tying of separate software products. In the
course of its ongoing interoperability investigation, the Commission will
therefore verify whether Microsoft is complying with EU antitrust rules, whether
the principles announced today would end any infringement were they implemented
in practice, and whether or not the principles announced today are in fact
implemented in practice. Today's announcement by Microsoft does not address the
tying allegations.
In its
Microsoft judgment of 17 September 2007 the Court of First Instance established
clear
principles for dominant companies with regard to interoperability disclosures
and the tying of separate software products. In January 2008 the Commission
initiated two formal antitrust investigations in order to verify whether
Microsoft is complying with the principles established by the Court.
One of these investigations
focuses on the alleged illegal refusal by Microsoft to disclose sufficient
interoperability information across a broad range of products, including
information related to its Office suite, a number of its server products, and
also in relation to the so called .NET Framework and on the question whether
Microsoft's new file format Office Open XML, as implemented in Office, is
sufficiently interoperable with competitors' products.
The second investigation concerns
allegations of tying of separate software products, including Internet Explorer,
to the Windows PC operating system.
Alcan has 8 weeks to reply
to the SO, after which it will have the right to be heard orally. It only signifies that the Commission will further investigate
the cases as a matter of priority.
[21 February 2008]
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Commission confirms sending a Statement of Objections to Alcan
The European
Commission can confirm that it has sent a Statement of Objections (SO) to Alcan
on 21 February 2008. The SO outlines the Commissions preliminary view that
Alcan has infringed EC Treaty rules on abuse of a dominant position (Article 82)
by tying its dominant aluminium smelting technology with handling equipment sold
by Alcan's subsidiary ECL. This behaviour, if proven, risks limiting innovation
in the aluminium production sector and affecting competition on the 70 billion
worldwide market for aluminium, an important input for many parts of European
industry.
Alcan, headquartered in Canada, is
the parent company of an international group involved in many aspects of the
aluminium, engineered products and packaging industries. Its activities include
bauxite mining, alumina refining, aluminium smelting, manufacturing, recycling
and related research and development. Following the acquisition of Alcan by Rio
Tinto in October 2007, the merged entities' aluminium business "Rio Tinto Alcan"
became the world's biggest aluminium producer. ECL, a wholly owned subsidiary of
Alcan, is the major producer of equipment used in aluminium smelters in the
world.
The SO concerns
Alcan's contracts for the sale of its aluminium smelting technology which
provide that purchasers must also buy ECL's handling equipment for aluminium
smelters, the so-called Pot Tending Assembly (PTAs). As a result of these
contractual provisions, Alcan's customers appear to be prevented from using PTAs
from other suppliers. It is the Commission's preliminary view that Alcan is
dominant on the market for aluminium smelting technology and that this
contractual tie might significantly harm its customers and ultimately end-users
of aluminium, through reduction in innovation and likely negative impact on the
aluminium prices.
Alcan has eight weeks to reply to
the SO, after which it will have the right to be heard.
If the preliminary views expressed in
the SO are confirmed, the Commission may require Alcan to cease the abuse and
may impose a fine. [22 February 2008]
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Commission
imposes 899 million penalty on Microsoft for non-compliance with March 2004
Decision
The European
Commission has imposed a penalty payment of 899 million on Microsoft for
non-compliance with its obligations under the Commissions March 2004 Decision
prior to 22 October 2007. Todays Decision, adopted under Article 24(2) of
Regulation 1/2003, finds that, prior to 22 October 2007, Microsoft had charged
unreasonable prices for access to interface documentation for work group
servers. The 2004 Decision, which was upheld by the Court of First Instance in
September 2007, found that Microsoft had abused its dominant position under
Article 82 of the EC Treaty, and required Microsoft to disclose interface
documentation which would allow non-Microsoft work group servers to achieve full
interoperability with Windows PCs and servers at a reasonable price.
The Commissions Decision of March
2004 requires Microsoft to disclose complete and accurate interoperability
information to developers of work group server operating systems on reasonable
terms.
Initially, Microsoft had demanded
a royalty rate of 3.87% of a licensee's product revenues for a patent licence
(the "patent licence") and of 2.98% for a licence giving access to the secret
interoperability information (the "information licence"). In a statement of
objections of 1 March 2007, the Commission set out its concerns regarding
Microsoft's unreasonable pricing. On 21 May 2007, Microsoft reduced its royalty
rates to 0.7% for a patent licence and 0.5% for an information licence, as
regards sales within the EEA, while leaving the worldwide rates unchanged.
Only as from 22 October 2007 did
Microsoft provide a licence giving access to the interoperability information
for a flat fee of 10,000 and an optional worldwide patent licence for a reduced
royalty of 0.4% of licensees product revenues.
Todays Decision concludes that
the royalties that Microsoft charged for the information licence i.e. access
to the interoperability information prior to 22 October 2007 were
unreasonable. Microsoft therefore failed to comply with the March 2004 Decision
for three years, thereby continuing the behaviour confirmed as illegal by the
Court of First Instance. Today's Decision concerns a period of non-compliance
not covered by the penalty payment decision of 12 July 2006 starting on 21 June
2006 and ending on 21 October 2007. The Decision does not cover the royalties
for a distinct patent licence.
The Commission has based its
conclusions as to the unreasonableness of Microsoft's royalties prior to 22
October 2007 on the lack of innovation in a very large proportion of the
unpatented interoperability information and a comparison with the pricing of
similar interoperability technology.
Paying this penalty will however not cure this infringement
of Article 82 of the EC Treaty
[27 February 2008]
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Commission
welcomes E.ON proposals for structural remedies to increase competition in
German electricity market
The European
Commission has welcomed structural remedies offered by E.ON to settle ongoing
antitrust cases in the electricity sector. E.ON proposes to commit to sell its
electricity transmission system network to an operator which would have no
interest in the electricity generation and/or supply businesses and to commit to
divest 4800MW of generation capacity to competitors. The Commission intends to
market test E.ON's proposals, with a view to adopting a decision under Article 9
of Regulation 1/2003. Under this procedure, the commitments would be made
legally binding by a decision of the Commission and the Commission would not
pursue the antitrust cases.
The Commission has conducted a
number of antitrust investigations into energy companies as a consequence of the
energy sector inquiry. Inter alia, the Commission has been investigating
two cases against E.ON in the electricity sector.
The Commission welcomes these proposed commitments in so far as they could
remedy the concerns that it has as regards E.ON. These proposals, if adopted,
would structurally change the electricity sector in
Germany and
could spur competition in the sector to the benefit of domestic and industrial
customers. The Commission will continue to conduct antitrust investigations in
the energy sector. [28 February 2008]
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Commission
calls on Greece to grant fairer access to lignite so as to improve competition
in the electricity sector
The European
Commission has adopted a decision finding that Greece has infringed Article 86
of the EC Treaty in combination with Article 82 by maintaining rights giving the
state-owned electricity incumbent Public Power Corporation (PPC) quasi-exclusive
access to lignite. As a result, despite liberalisation of the electricity
wholesale market which started in 2001, PPC continues to enjoy today a virtual
monopoly over access to lignite and Greece has protected PPC's dominant position
in the electricity market. With this Decision, the Commission calls on Greece to
propose and adopt remedies to ensure sufficient access to lignite by competitors
of PPC.
The Court of Justice has
previously ruled that when a state measure results in inequality of opportunity
between economic operators in favour of a dominant public undertaking, this
constitutes an infringement of Article 86 (1) of the Treaty, in conjunction with
Article 82. Article 86 (1) of the EC Treaty requires Member States to ensure
that public undertakings and undertakings to which Member States grant special
or exclusive rights to comply with EC Treaty rules, including the competition
rules. Article 82 of the EC Treaty prohibits abuse of a dominant market
position. The Commission has concluded that the measures adopted by Greece have
distorted competition in favour of state-owned PPC, the former monopoly for
electricity production, transport and supply.
Virtually all lignite deposits in
Greece are owned by the state, which grants exploration and exploitation rights
to undertakings. PPC has obtained 91% (in terms of volume of deposits) of the
current exploitation rights. PPC has also obtained exploration rights for two of
the three deposits for which exploitation rights are still to be allocated. It
is currently Greece's policy to continue to grant lignite exploitation rights
for electricity generation and it has indicated its intention to grant new
exploitation rights for the three remaining deposits in the near future.
In Greece, virtually all lignite
is used as a fuel for electricity generation in power plants situated close to
the mines. Lignite is abundant in Greece, and is the cheapest available fuel in
the country. Indeed, lignite-fired electricity generation currently represents
more than 60% of total generation and lignite-fired plants are by far the most
extensively used power plants in Greece.
Competitors of PPC in the
electricity market cannot currently compete efficiently with PPC in the Greek
market because they are denied access to sufficient quantities of lignite. The
very limited additional generation capacity that competitors have built since
the liberalisation of the market in 2001 is based on comparatively expensive
energy sources. As a result, PPC continues to produce more than 85% of the
electricity consumed in Greece. By maintaining quasi exclusive access to lignite
in favour of PPC, Greece has allowed PPC to maintain its dominant position in
the electricity wholesale market.
It is Greece's responsibility, in
the framework of its national energy policy, to identify concrete measures to
end the infringement. The Decision of the Commission indicates that competitors
would probably need to have access to a minimum of 40% of exploitable lignite
resources in order to create a level playing field in the electricity market.
This conclusion is valid irrespective of whether or not Greece maintains its
current national policy of allocating additional lignite reserves for
exploitation, bearing in mind the obligation to respect environmental and public
health objectives that must be met with regard to the exploitation of lignite.
The evolution of national policy in this regard, on environmental, health or
other grounds, is unaffected by today's decision. [5 March 2008]
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Commission carries out inspections in the international airline passenger sector
The European
Commission has confirmed that on 11 March 2008 Commission officials carried out
unannounced inspections at the premises of a number of international airline
passenger carriers. These airline carriers provide scheduled passenger air
transport services on long-haul routes between Europe and a third country. The
Commission has reason to believe that the companies concerned may have violated
EC Treaty rules on restrictive business practices (Article 81).
The Commission officials were
accompanied by their counterparts from the relevant national competition
authorities.
Surprise inspections are a
preliminary step in investigations into suspected cartels. The fact that the
European Commission carries out such inspections does not mean that the
companies are guilty of anti-competitive behaviour; nor does it prejudge the
outcome of the investigation itself. The European Commission respects the rights
of defence, in particular the right of companies to be heard in antitrust
proceedings.
There is no strict deadline to
complete cartel inquiries. Their duration depends on a number of factors,
including the complexity of each case, the extent to which the undertakings
concerned cooperate and the exercise of the rights of defence. [11 March 2008]
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Commission
fines providers of international removal services in Belgium over 32.7 million
for complex cartel
The European
Commission has imposed fines, totalling 32,755,500, on Allied Arthur Pierre,
Compas, Coppens, Gosselin, Interdean, Mozer, Putters, Team Relocations,
Transworld and Ziegler for fixing prices, sharing the market and bid rigging for
international removal services, in violation of the EC Treaty's ban on cartels
(Article 81). The cartel operated for almost nineteen years (from October 1984
to September 2003). Cartel members fixed prices, presented bogus quotes to
clients and compensated each other for lost bids. Allied Arthur Pierre's fine
was reduced by 50% because it cooperated in the investigation under the
Commission's 2002 Leniency Notice. The case was investigated on the Commission's
own initiative.
The Commission started an
investigation at its own initiative with surprise inspections, carried out at
the premises of Allied Arthur Pierre, Interdean, Transworld and Ziegler in
September 2003 in Belgium. The inspections proved particularly successful and
abundant evidence of cartel activities was obtained.
After the inspections, Allied
Arthur Pierre submitted a leniency application under the 2002 Leniency Notice
and provided the Commission with evidence of significant added value.
The cartel covered international
"door-to-door" removals to and from Belgium. The companies agreed on prices,
attributed removal contracts by way of bid rigging in the form of bogus quotes
called "cover quotes" and benefited from a system of financial compensation for
lost bids, called "commissions". These commissions were a hidden element of the
final price that the consumer had to pay.
From the mid 1980s to the
beginning of the 1990s the cartel operated on the basis of written price fixing
agreements. In parallel, arrangements on "commissions" and "cover quotes" took
place. Cartel members invoiced each other the lost bid commissions by way of
bills. They also cooperated in order to submit bogus quotes that made clients
falsely believe that they had a choice based on competition.
These practices constitute very
serious infringements of EC Treaty antitrust rules. In setting the fines, the
Commission took into account the duration and the gravity of the infringement.
Exel Investments Limited, a former
parent company of Allied Arthur Pierre, cannot benefit from the leniency granted
to Allied Arthur Pierre because Exel Investments Ltd. could have applied for
leniency but chose not to do so.
The Commission has seen no grounds
for reducing the amounts of the fines of four undertakings, who claimed their
inability to pay, but the Commission exceptionally took into account the
inability to pay and particular circumstances concerning the individual
situation of a fifth undertaking, Interdean, and reduced its fine by 70%. [11
March 2008]
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Commission
initiates formal proceedings against Visa Europe Limited
The European
Commission has decided to open formal antitrust proceedings against Visa Europe
Limited in relation to its multilateral interchange fees (MIF) for cross-border
point of sale transactions within the EEA using Visa branded consumer payment
cards, and the "Honour-All-Cards-Rule" as it applies to these transactions. The
proceedings will seek to establish whether these practices constitute
infringements of Article 81 of the EC Treaty and Article 53 of the EEA
Agreement, which forbid restrictive business practices such as price fixing.
This
initiation of proceedings does not imply that the Commission has proof of an
infringement. It only signifies that the Commission will conduct an in-depth
investigation of the case as a matter of priority.
There is no
strict deadline for the Commission to complete inquiries into anticompetitive
conduct. Their duration depends on a number of factors, including the complexity
of each case, the extent to which the undertakings concerned co-operate with the
Commission and the exercise of the rights of defence.
The
proceedings concern the Visa network rules relating to the MIF for cross-border
point of sale consumer payment card transactions within the EEA and, by default,
for certain domestic point of sale consumer payment card transactions within the
EEA, as well as the "Honour-All-Cards-Rule" as it applies to these transactions.
The MIF is a charge on each payment at a merchant outlet, retained by the
customer's bank (the "issuing bank") and charged to the merchant's bank (the
"acquiring bank"), which then takes this cost element on board in setting its
prices to merchants. The "Honour-All-Cards-Rule" obliges merchants to accept all
valid Visa-branded cards, irrespective of the identity of the issuer, the nature
of the transaction and the type of card being issued.
In 2002, the
Commission exempted the MIF proposed by Visa International after Visa
International offered substantial reforms. The Commission cleared Visa's
"Honour-All-Cards-Rule" in 2001. In the proceedings leading to the Commission
decision of 2002, Visa offered to progressively reduce the level of its MIF from
an average of 1.1% to 0.7% until the end of 2007 and to cap the MIF at the level
of costs for specific services. Visa also enhanced the transparency of fees and
allowed banks to reveal information about the MIF to businesses. The exemption,
however, expired on 31 December 2007 and Visa Europe Limited, which has taken
over responsibility from Visa International for the network rules applicable in
the EEA, has from that moment been responsible for ensuring that its system is
in full compliance with EU competition rules.
The legal
base of this procedural step is Article 11(6) of Council Regulation No 1/2003
and Article 2(1) of Commission Regulation No 773/2004.
Article 11(6)
of Council Regulation No 1/2003 provides that the initiation of proceedings
relieves the competition authorities of the Member States of their authority to
apply the competition rules laid down in Articles 81 and 82 of the EC Treaty.
Moreover, Article 16(1) of the same Regulation provides that national courts
must avoid giving decisions which would conflict with a decision contemplated by
the Commission in proceedings that it has initiated.
Article 2(1)
of Commission Regulation No 773/2004 provides that the Commission can initiate
proceedings with a view to adopting, at a later stage, a decision on substance
according to Articles 7-10 of Council Regulation No 1/2003 at any point in time,
but at the latest when issuing a statement of objections or a preliminary
assessment notice in a settlement procedure. In the case at stake, the
Commission has chosen to open proceedings before any such further steps. [26
March 2008]
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Commission
welcomes Court judgment wholly upholding margin squeeze decision against
Deutsche Telecom
The European
Commission welcomes today's judgment of the European Court of First Instance
(CFI), upholding in its entirety a 2003 Commission decision imposing a 12.6
million fine on Deutsche Telekom AG (DT) for abusing its dominant position on
the German telecommunications market. For more than 5 years DT charged unfair
prices for the provision of local access to its fixed telecommunications network
(local loops). This meant that alternative operators could not compete
effectively with Deutsche Telekom and German consumers were deprived of the
benefits of choice and price competition for more than five years. The CFI
ruling is important, not only for German consumers, but also because it confirms
that dominant operators who have a regulatory obligation to supply access to
their networks cannot evade this obligation through a margin-squeeze price
policy.
In its judgment, the Court of
First Instance rejects all pleas advanced by DT. The Court confirms that the
Commission correctly found that, from the beginning of 1998 to the end of 2001,
and from 2002 to the adoption of the decision, DT had sufficient scope to end or
reduce the margin squeeze, while complying with the price ceiling imposed by the
German Regulatory Authority (RegTP).
The Court of First Instance also
clarifies that the fact that DTs charges had to be approved by RegTP does not
absolve it from responsibility under competition law. As an undertaking in a
dominant position, DT was obliged to and had the possibility to submit
applications for adjustment of its charges as soon as those charges had the
effect of impairing genuine undistorted competition on the common market.
Furthermore, the Court of First
Instance upheld the method used by the Commission to establish a margin squeeze.
It notes that the abusive pricing policy of Deutsche Telekom was due to the
reduced spread between its prices for wholesale access and its retail prices.
The Commission was not therefore required to demonstrate that the retail prices
were, as such, predatory and abusive.
The Commission was also correct to
base its calculation of the margin squeeze on a comparison of wholesale access
with a weighted average of retail prices for all Deutsche Telekoms access
services (analogue, ISDN and ADSL).
The judgment recalls that at the
time of the adoption of the Commission decision in 2003, there was no
infrastructure in Germany other than DT's fixed network that would have enabled
its competitors to make a viable entry onto the market in retail access
services. A potential competitor who was just as efficient as DT could thus not
enter the retail access services market without suffering losses. This effect is
proven by the small market shares acquired by DTs competitors which show that
the abusive behaviour also had an impact on the market.
As regards the argument of DT that
the Commission had impinged on the competences of the German Regulatory
Authority, RegTP, the judgment observes that decisions of national authorities
do not in any way affect the Commissions power to find infringements of
competition law. The Court of First Instance underlines that the Commission
cannot therefore be accused of introducing double regulation of DT's pricing
practices by punishing DT for having failed to use its discretion in order to
end the margin squeeze.
In its decision of 21 May 2003 the
Commission found that DT charged new entrants higher fees for wholesale access
to the local loop than what DTs subscribers paid for fixed line subscriptions.
This discouraged new companies from entering the market and reduced the choice
of suppliers of telecoms services as well as price competition for consumers.
The Commissions action stemmed from complaints by numerous new entrants in the
German telecommunications market.
Since 1998 DT was legally obliged
to provide competitors access to its local loops. In spite of this clear
obligation, there was still very little effective unbundling of the local loops
and DT, with a market share of 95% in 2003, remained the dominant provider of
broadband and narrowband retail access. Many new entrants tried to compete with
the incumbent operator. None of them was able to reach significant market share,
not least because DT charged its competitors higher fees for local loop access
than its end users had to pay for broadband or narrowband access. This was
clearly harmful to consumers, because competition between operators is the best
means to bring overall prices down.
The local loop is the physical
circuit between the customer's premises and the telecommunications operator's
local switch. Traditionally it takes the form of pairs of copper wires. New
entrants on the telecommunications markets need access on fair and
non-discriminatory terms to the local loops (local loop unbundling) to be able
to offer retail services to end-customers, as it would be impossible to
replicate such a network built over a century.
Effective local loop unbundling is
key for the spread of electronic communications services. It was imposed on the
incumbent operators by way of legislation at EU level and, in some Member
States, such as Germany, also at national level. The regulatory framework was
not the only tool available to tackle the show take-up of local loop unbundling.
The conditions of local loop unbundling, such as pricing, were also subject to
scrutiny under EU competition rules.
In Germany, DT has offered local
loop access at two different levels for many years. Besides the retail
subscriptions to end customers, DT also offers unbundled access to the local
loop to competitors, which allows them direct access to end-users. DT was and is
thus active on the upstream market for wholesale local loop access to
competitors and on the downstream market for retail access services to
end-customers. Both markets are closely linked to each other.
DTs local access network is not
the only technical infrastructure allowing for the provision of wholesale access
services to competitors and of retail access services to end-users. But the
other alternatives, which include fibre-optic networks, wireless local loops,
satellites, power lines, and upgraded cable TV networks, were at least during
the infringement period not yet sufficiently developed and could not be
considered as equivalent to DTs local loop network. [10 April 2008]
Top
Mergers

Commission
approves proposed acquisition of Cognos by IBM
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of the Canadian company Cognos, an independent provider of business analytics
software, by IBM Corporation of the US. The Commission concluded that the
transaction would not significantly impede effective competition in the European
Economic Area (EEA) or any substantial part of it.
IBM provides
a wide range of information technology (IT) solutions comprising software,
hardware and services. Cognos offers business analytics software solutions which
corporate customers use to analyse, report and visualise data across their
organisation to gain better insight into their businesses.
The
Commission examined the effects that the proposed merger would have on the
business analytics sector and its various sub-divisions. In each instance, the
Commission found that the horizontal overlap between the parties' activities
would not give rise to competition concerns, since the parties' combined market
share would be moderate at EEA level. The combined IBM/Cognos entity would
continue to face several strong competitors and customers would find sufficient
alternative suppliers of such software products.
The
Commission's investigation found no significant risk that the merged entity
would be able to close off competitors from the market. IBM's and Cognos'
positions in their respective segments of enterprise application software (EAS)
would not provide sufficient incentives to prevent standalone business analytics
software vendors from integrating with their EAS platforms. [23 January 2008]
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Commission
opens infringement procedure against Spain for not lifting conditions imposed by CNE on acquisition of Endesa by Enel and Acciona
The European
Commission has formally requested Spain to explain why it has not withdrawn the
conditions imposed by the Spanish Energy Regulator (CNE), as modified by the
decision of the Spanish Minister of Industry and Tourism of 19 October 2007. The
Commission declared the conditions to be contrary to EU law in a decision
adopted on 5 December 2007 under Article 21 of the EU Merger Regulation. The
request takes the form of a letter of formal notice, which is the first step
of infringement proceedings under Article 226 of the EC Treaty. If there is no
satisfactory reply within 15 working days, the Commission may issue a formal
request to Spain to comply with its decision. This request would be in the form
of a reasoned opinion, the second stage of infringement proceedings.
On the basis
of the powers granted by Royal Decree-Law 4/2006, on 4 July 2007 CNE decided to
submit the Enel/Acciona/Endesa operation to a number of conditions. This
decision was adopted without prior communication to, or approval by, the
Commission.
On 19 October
2007, and following an appeal lodged by Enel and Acciona against CNE's decision
of 4 July, the Spanish Minister of Industry and Tourism adopted a decision
modifying some of the conditions imposed by CNE in its decision of 4 July 2007
and withdrawing others.
On 5 December
2007, the Commission adopted a decision declaring that the CNE decision, as
partially modified, breached Article 21 of the EU Merger Regulation because:
-
the
CNE took its decision without any prior communication to (and approval by) the
Commission and
-
Enels
and Acciona's acquisition of joint control over Endesa was subjected to to a
number of conditions that were contrary to the EC Treatys rules on the freedom
of establishment and the free movement of capital (Articles 43 and 56 of the EC
Treaty) and, partly, the free movement of goods (Articles 28 and 29 of the EC
Treaty).
The
Commission's decision of 5 December 2007 required Spain to withdraw by 10
January 2008 the conditions imposed by CNEs decision which had been declared
incompatible with EU law. To date the Spanish authorities have not informed the
Commission of any steps or measures taken in order to comply with the 5 December
decision. [31 January 2008]
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Commission
approves proposed acquisition of Berre Refinery by Basell
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of the refinery Compagnie de Distribution des Hydrocarbures SAS (Berre Refinery)
of France, currently controlled by Royal Dutch Shell plc. (Shell) of the
UK/Netherlands, by Basell Polythylne SAS (Basell) of Luxembourg, belonging to
Access Industries (Access) of the US. The Commission concluded that the
transaction would not significantly impede effective competition in the European
Economic Area (EEA) or any substantial part of it.
Basell is
active in the manufacture and sale of various chemical products, such as
polyolefins, polyolefin compounds and other specialty polyolefin products,
catalysts, ethylene and propylene and the development and licensing of
technology.
The Berre
Refinery is situated in the South of France and uses the fractional distillation
process to convert crude oil into various petrochemical products, including LPG,
naphtha, jet fuel, gasoline, heating oil, bitumen, fuel oil and gasoil. Basell
will also buy the infrastructure associated with the refinery (including
pipeline and terminals) and the contracts necessary for its operation.
Some of the
petrochemical products derived from the fractional distillation at the Berre
Refinery are used as feedstock in the polyolefins sector, in which Basell is
active, and therefore the Commission analysed the vertical relationships between
the parties
However,
given the parties' limited position on all the upstream and downstream markets,
the Commission concluded that the transaction would not strengthen either the
parties' incentive or their ability to close off the market to competitors. [4
February 2008]
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Commission
clears joint ventures between Aviva and Bank Zachodni in Polish insurance sector
The European
Commission has cleared under the EU Merger Regulation the proposed creation of
two new joint ventures in Poland (one for underwriting life assurance and one
for underwriting general insurance) between the UK's Aviva insurance group and
the Polish bank Bank Zachodni WBK S.A., controlled by the Allied Irish Banks
group. The Commission concluded that the operation would not significantly
impede effective competition in the European Economic Area (EEA) or in any
substantial part of it.
Aviva is an
international insurance group that is also active in long term savings and fund
management. Bank Zachodni WBK S.A. is a universal bank, offering services to
personal customers, small and medium enterprises, large corporate companies, as
well as a wide range of activities such as mutual funds, brokerage activities,
factoring and asset management.
The
Commission's investigation focused on the underwriting of insurance products in
the Polish market, where the two joint ventures will exclusively be active and
on a possible vertical relationship, as both parent companies are active in
asset and pension fund management.
The
Commission's investigation indicated that as far as the Polish insurance market
is concerned, the parties would have combined market shares below 15%.
Regarding
asset and pension fund management Aviva and Bank Zachodni would have combined
market shares between 20% and 30%. However, the market investigation did not
indicate any competition concerns.
[5 February 2008]
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Commission
approves proposed acquisition of Katop by De Weide Blik
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of Katop International S.A., a French fruit and vegetable importer and
wholesaler, by De Weide Blik N.V. of Belgium. After examining the operation, the
Commission concluded that the transaction would not significantly impede
effective competition in the European Economic Area (EEA) or any substantial
part of it.
De Weide Blik
is controlled by CVC Capital Group s.a.r.l., a private equity firm. It is active
in the production, import, export, packaging, handling and logistics of fresh
fruit, vegetables, flowers, flower bulbs, plants and convenience meals. Its main
activities are concentrated in the Benelux region and Germany.
Katop is a
French group active in the production, import, export, packaging and
distribution of citrus, exotic and off-season fruits. In Europe, the UK and
France are by far its two most important sales areas.
The
Commissions examination of the proposed transaction showed that the horizontal
overlaps between the activities of the two companies and their combined position
on the concerned markets for fruits and vegetables on the import, producer and
wholesale level are limited. For all markets concerned, the combined firm would
continue to face several competitors. [8 February 2008]
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Commission
approves proposed acquisition of various Hagemeyer and Rexel assets by Sonepar
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of the Dutch company Hagemeyer' s subsidiaries in Austria and Sweden, plus six
Hagemeyer outlets in Germany by Sonepar of France. In a second decision, the
Commission has also cleared the proposed acquisition of the French company
Rexel's German and Luxembourg businesses by Sonepar. The Commission concluded
that none of the transactions would significantly impede effective competition
in the European Economic Area (EEA) or any substantial part of it.
Sonepar,
Hagemeyer and Rexel are mainly active in the wholesale distribution of
electrical products and installation material as well as the wholesale of
heating, ventilation and air-conditioning products and household and consumer
electronics in some Member States.
Sonepar and
Rexel entered into an agreement pursuant to which Rexel would launch a public
takeover bid over Hagemeyer. This latter transaction is still subject to the
Commissions scrutiny under the Merger Regulation. Subject to a successful
outcome of the takeover bid and the Commission's clearance, Rexel would transfer
parts of Hagemeyer to Sonepar. Moreover, Sonepar and Rexel agreed that all of
Rexel's activities in Germany and Luxembourg would be transferred to Sonepar,
subject to the successful outcome of the takeover bid.
The
Commission examined in a first case the effects of the proposed acquisition by
Sonepar of Hagemeyer's assets in Austria and Sweden, six Hagemeyer outlets in
Germany as well as part of Hagemeyer activities outside the EU (in the United
States, Mexico, Canada, Australia, China, Singapore, Malaysia, Thailand and
Switzerland). The Commission found that the horizontal overlap between the
parties' activities would not give rise to competition concerns, since the
parties' combined market share would be moderate in the Austrian market for the
wholesale distribution of electrical products. In Sweden, where the proposed
transaction would reinforce the pre-existing leading market position of
Hagemeyer on the market for the wholesale of purely electrical products, the
combined entity would continue to face effective competition from other
wholesalers.
The
Commission examined in a second case the effects of the proposed transaction
whereby Rexel would transfer all of its activities in Germany and Luxembourg to
Sonepar. The Commission found that, despite the significant position the merged
entity would hold in some local areas, competitors that are already present in
those areas or potential entrants from neighbouring areas would be able to
exercise competitive constraints on the merged entity. [8 February 2008]
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Commission
approves proposed acquisition of former ICI's adhesives and electronic materials
businesses by Henkel
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
by Henkel KGaA of Germany of the entire adhesives and electronic materials
business (the "A&E Businesses") that Akzo Nobel N.V. of The Netherlands recently
acquired, when it bought Imperial Chemical Industries PLC of the UK (ICI). After
a market investigation, the Commission concluded that the operation would not
significantly impede effective competition in the European Economic Area (EEA)
or any substantial part of it.
Henkel is
listed on the Frankfurt stock exchange and on all of Germanys regional
exchanges. The company is active in the production and supply of laundry and
home care products, cosmetics and toiletries, adhesives, sealants and surface
treatment products.
The A&E
Businesses, which comprise all assets and liabilities relating to industrial
adhesives and electronic materials as well as certain industrial surface
treatment products, currently form part of the National Starch division of ICI,
which is now controlled by Akzo.
The parties'
activities overlap in three areas: industrial adhesives, electronic
adhesives/materials and, to a limited extent, industrial surface treatments.
Concerning
industrial adhesives (as opposed to consumer or DIY adhesives) the Commissions
examination of the proposed transaction focused on the markets for automotive
adhesives, bookbinding adhesives, non-woven hygiene adhesives, non-woven
textiles adhesives and adhesives for disposable medical products.
The
Commission's market investigation showed that the transaction would not raise
competition concerns due to the fact that several alternative suppliers would
remain active after the merger, both at EEA level and on potential national
markets, and that barriers to entry are relatively low.
The
transaction would not lead to competition concerns in the market for electronic
adhesives either. Electronic adhesives are specifically designed for the
manufacture of electronic components and systems. The Commission found that the
market for electronic adhesives is global and that several large competitors are
active on the market. Also, a majority of customers confirmed that they do
business with several suppliers for electronic adhesives, rather than depending
on a single supplier. [15 February 2008]
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Commission
clears acquisition of Reuters by Thomson subject to conditions
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of the UK-based Reuters Group by Thomson Corporation of Canada, subject to
conditions and obligations. The Commissions in-depth investigation, opened in
October 2007, indicated that the concentration, as originally notified, could
have led to a substantial impediment of effective competition in several markets
of the financial information sector. The parties submitted commitments which
have removed the Commissions competition concerns and are suitable to restore
effective competition in the Single Market.
Both Thomson
and Reuters are leading financial information providers. The companies source,
aggregate and disseminate real-time and historical market data and other type of
financial content to respond to the needs of financial professionals, such as
traders and sell-side people in the on-trading floor space, of investors on the
buy-side and of analysts in the off-trading floor space within banks, investment
funds and corporations. In addition, Thomson is active in legal, fiscal,
accounting and scientific research markets, whereas Reuters is best known as one
of the largest international news agencies.
The
Commission's market investigation assessed Thomson's and Reuters' respective
positions in the various markets in the financial services sector. The main
areas of overlap concerned the off-trading floor space (i.e. the research and
asset management area), given Thomson's marginal presence in the on-trading
floor area. The in-depth investigation showed that the concentration, as
originally notified, would have raised competition concerns in the markets for
the distribution of aftermarket broker research reports, of earning estimates,
of fundamental financial data of enterprises and of time series of economic
data.
Aftermarket
broker research reports analyse securities, industries or markets. This market
comprises the sale of the reports after an initial "embargo" period of around
two weeks, prior to which they are only accessible to selected customers.
Earning estimates are predictions by analysts about future earnings of
companies. Fundamentals databases contain company-specific data, such as
financial statement data, financial ratios or earnings per share data. Time
series of economic data comprise data on macroeconomic variables, such as GDP,
unemployment rates, etc. collected over long periods of time to allow an
analysis of trends. These databases are predominantly used in off-trading floor
activities of financial institutions.
The proposed
transaction would have eliminated rivalry between the two main suppliers of such
databases in the marketplace, both at the worldwide and EEA level, leaving
financial institutions and customers of such products with a reduced choice, the
likelihood of price increases and a severe risk of discontinuation of
overlapping products.
The proposed
transaction would also have had a negative impact on providers of desktop
products which obtain and integrate the types of content described above into
their own offerings to customers. The merged entity would have had the ability
and the incentive to close off such competitors, thereby adversely affecting
competition at the downstream level.
To remove the
Commissions competition concerns, the parties committed to divest copies of the
databases containing the content sets of such financial information products,
together with relevant assets, personnel and customer base as appropriate to
allow purchasers of the databases and assets to quickly establish themselves as
a credible competitive force in the marketplace in competition with the merged
entity, re-establishing the pre-merger rivalry in the respective fields. The
parties can also continue to use these databases in the future to commercialise
the respective data to their own customers. With the remedies, customers of such
financial information products therefore would continue to have sufficient
alternatives post-merger.
The
Commission's investigations, and negotiations of remedies, were undertaken in
parallel with the examination of the case by the US Department of Justice. The
process involved close co-operation between the two authorities, including
exchanges of views on analytical methods and of detailed information, plus joint
meetings and negotiations with the parties. [19 February 2008]
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Commission
approves proposed acquisition of Arysta by Permira
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of the Japanese company Arysta LifeScience Corporation by Permira Holdings
Limited of the Channel Islands. After examining the operation, the Commission
concluded that the transaction would not significantly impede competition in the
European Economic Area (EEA) or any substantial part of it.
Arysta is
primarily active in the supply of agrochemicals that protect crops against
damage by weeds, insects and disease. Permira is a private equity firm. Among
its investments, Permira has an interest in Cognis, a German specialty chemicals
company, which produces adjuvants which are raw materials used in the production
of agrochemicals.
The
Commission's examination of the proposed transaction showed that it would not
give rise to competition concerns in any horizontally affected markets as Arysta
and Permira's existing portfolio companies, including Cognis, are not active in
the same markets. The investigation therefore focused on the potential vertical
issues arising from the proposed transaction given that Cognis produces
adjuvants that are used downstream in the manufacture of agrochemicals, where
Arysta is present.
The
Commission concluded that the proposed transaction would not give rise to
vertical competition concerns. Firstly, Arysta is one of many companies active
in the manufacture of agrochemicals and the types of adjuvants produced by
Cognis are also used beyond agrochemical applications. Competitors of Cognis
would therefore still have access to a sufficiently large customer base in
agrochemical and other markets should Arysta choose to purchase all of its
adjuvant requirements from Cognis after the transaction. Secondly, Cognis would
not have the ability to restrict Arysta's competitors' access to adjuvants given
the presence of alternative suppliers of these materials. [25 February 2008]
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Commission
clears proposed joint control of Spanish online travel agency Rumbo by
Telefnica and Orizonia
The European
Commission has approved, under the EU Merger Regulation, the proposed
acquisition by the Spanish travel operator Orizonia Corporation (via its
subsidiary Turmed) of joint control of online travel agency Rumbo ("Red
Universal de Marketing y Booking Online") with Spanish telecommunications
company Telefnica, S.A. The Commission further approved the integration of the
travel agencies Terra Business Travel (belonging to Telefnica) and Viajar.com
(belonging to Orizonia) into Rumbo. The Commission concluded that the proposed
transaction would not significantly impede effective competition in the European
Economic Area (EEA) or any substantial part of it.
Orizonia is
active in a wide range of tourist services, including tour operating and travel
agency services via its subsidiaries Viajar.com and Viajes Iberia. Telefnica
operates via Terra Business Travel both online and traditional travel agency
services. In 2000, Telefnica and Amadeus IT Group S.A. founded the online
travel agency Rumbo, which offers travel agency services mainly in Spain.
The proposed
acquisition would combine Orizonia's and Telefnica's activities in the Spanish
market for travel agency services. The Commission's investigation showed that
this would not give rise to any competition concerns, given the small combined
market share of the companies and the number of active competitors. Although
Orizonia holds a strong position in the upstream market for tour operating
services, the Commission found it would not adversely affect competition as
Orizonia's relationships with travel agencies are non exclusive and there are
sufficient competitors in the market. The Commission concluded that post-merger
Orizonia would have no incentive to either favour its own integrated travel
agencies or to increase its prices for tour operator services sold to competing
travel agencies. [28 February 2008]
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Commission
approves proposed acquisition of Foseco by Cookson subject to conditions
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of Foseco by Cookson, both located in the UK, subject to commitments to divest
Foseco's business of isostatically pressed products ("IPP") and to divest
Cookson's foam filter business. In view of the remedies proposed by the parties,
the Commission concluded that the operation would not significantly impede
effective competition in the European Economic Area (EEA) or any substantial
part of it.
Cookson is,
through its wholly-owned subsidiary Vesuvius, a supplier of advanced
refractories (non-metallic ceramics which resist extremely high temperatures) to
the iron and steel producing industry. Foseco is active in the supply of
consumable products, in particular filters (technical ceramics used during the
casting of molten metal to reduce impurities and inclusions in castings) mainly
for use in the foundry industries.
During its
investigation, the Commission identified competition concerns relating to the
markets for IPP and foam filters.
As regards
IPP, Cookson would have become by far the market leader after the merger, and
the limited number of remaining competitors would not have been able to counter
the new entity's market power. Concerning filters, an area where Foseco has a
strong market position, the merger would have combined the existing market
leaders and closest competitors in terms of quality, service and innovation. Due
to insufficient pressure from competitors, the Commission concluded that the
transaction, as initially notified, would have threatened to impede effective
competition on this market.
To address
the Commission's concerns Cookson made the commitment to divest its filter
business and, with the exception of a smaller plant in Asia, Foseco's IPP
business. The commitments entirely remove the overlaps in the parties'
activities in both areas of concern. After market testing these commitments, the
Commission concluded that they would be suitable to eliminate its concerns. [4
March 2008]
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Commission
clears acquisition of Maxit by Saint-Gobain subject to conditions
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of Maxit Holding AB of Sweden by Compagnie de Saint-Gobain of France, subject to
commitments to divest two subsidiaries of Maxit active in the production and
sale of gypsum-related products. In view of the remedies proposed by the
parties, the Commission concluded that the operation would not significantly
impede effective competition in the European Economic Area (EEA) or any
substantial part of it.
Saint-Gobain
is active in the production of glass, ceramics, plastics and building materials,
such as mortars and gypsum products. Saint-Gobain is also active in the
distribution of building materials.
Maxit is
active in the production of mortars and gypsum- products. Maxit is currently
wholly-owned by HeidelbergCement Group, a German cement producer.
The
activities of Maxit and Saint-Gobain overlap for two types of products: premix
mortars and gypsum products. Premix mortars are construction products commonly
employed for masonry, tile fixing and faade rendering. Gypsum is a raw material
used in the production of cement, ceramics and plasters.
With regard
to premix mortars, the Commission's investigation confirmed that Saint-Gobain
and Maxit have a complementary product range, Maxit - contrary to Saint-Gobain -
focusing on low value, high volume mortars, and a different geographic focus,
Saint-Gobain being mostly present in France, Italy and Spain and Maxit in the
Benelux, Germany and Scandinavia. The Commissions investigation showed that the
horizontal overlaps in mortar markets, whether at national or local level, are
generally limited and that the combined firm would continue to face numerous
competitors, in fragmented and competitive markets characterised by low barriers
to entry.
The
Commission also assessed the vertical relationship due to Saint-Gobain's
presence in the distribution of building materials. The Commission concluded
that the addition of Maxit's mortar activities to Saint-Gobain's would not lead
to a risk of closing off competing distributors' access to premix mortars supply
or competing mortar suppliers' access to distribution channels, due to the
absence of market power of the combined entity in both markets.
However, the
Commission identified serious competition concerns in several markets related to
gypsum, namely natural gypsum in Germany, natural anhydrite in Austria,
gypsum-based semi-finished products in Austria, Belgium, Germany and The
Netherlands and gypsum-based plasters for ceramics in the EEA. The proposed
transaction would have led to the creation of monopolies or near-monopolies,
depriving customers from competing alternatives.
To address
the Commission's concerns, Saint-Gobain offered to divest two Maxit
subsidiaries, Sdharzer Gipswerk GmbH and Maxit Baustoffe GmbH & Co KG, which
would remove the entire overlap between Saint-Gobain and Maxit on these markets.
Finally, the
Commission investigated the potential impact of the transaction on the market
for External Thermal Insulation Composite Systems ("ETICS"), an external wall
insulation technique primarily used in Northern and Central Europe. Maxit and
Saint-Gobain are both producers of ETICS and Saint-Gobain is also active in the
manufacturing of some ETICS components (insulation materials and glass fibre
mesh). The Commission concluded that the parties' would have a limited market
share for ETICS and that there would be no risk that the new entity would close
off rival ETICS producers from access to ETICS components. [4 March 2008]
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Commission
clears proposed acquisition of Telelogic by IBM
The European
Commission has approved under the EU Merger Regulation the proposed acquisition
of Telelogic of Sweden by IBM of the US. Both companies are suppliers of
software development tools, that is software used to develop software. The
Commission's in-depth investigation, opened on 3 October 2007, has shown that
the transaction would not significantly impede effective competition within the
European Economic Area (EEA) or a substantial part of it.
IBM is active
worldwide in the development, production and marketing of a variety of
information technology ("IT") products, software and services. As part of its
diverse software activities, IBM develops and sells software development tools.
Telelogic is a Swedish software company.
The
activities of IBM and Telelogic mainly overlap in the markets for modelling and
requirements management tools. Modelling tools are designed to help software
developers model the software before developing it. The software's functions are
mapped out by creating visual models as well as by generating data definitions,
programming specifications and ultimately the software code itself. Requirements
management tools are designed to streamline and document a development team's
analysis of new software's requirements.
The
Commission's in-depth investigation, which included a detailed analysis of
win/loss data, revealed that IBM and Telelogic's modelling and requirements
management products are not close substitutes, as they generally address
different types of customers and different needs. Therefore, the removal of the
competitive constraints between IBM and Telelogic as a result of the proposed
transaction would not allow the merged entity to increase prices post merger.
The
Commission's in-depth investigation also indicated that competition between IBM
and Telelogic has not been a major force for innovation in the recent past.
Instead innovation in the software development industry has primarily been
spurred on by customers' increasing demands and by improved open standards.
Finally,
although it would be technically possible for IBM to thwart interoperability
between its software and those of third parties, the in-depth investigation
revealed that the merged entity would have no incentive to engage in such a
strategy, as the potential costs would by far outweigh the potential benefits.
[5 March 2008]
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Commission
clears proposed acquisition of Respironics by Philips
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of Respironics, located in the US, by Philips of The Netherlands. The Commission
concluded that the operation would not significantly impede effective
competition in the European Economic Area (EEA) or in any substantial part of
it.
Philips
manufactures a wide range of electronic products, including lighting products,
domestic appliances, consumer electronics and medical systems. Respironics
manufactures medical devices used primarily for the treatment of patients
suffering from sleep and respiratory disorders. Its products are mainly used in
homes, hospitals, alternative care facilities and emergency medical settings.
The proposed
acquisition would result in some overlaps in the parties' activities in the
markets for light boxes and soothers (dummies) and create vertical links
between, on the one hand, Respironics' OEM capnography components and Philips'
critical care monitors and, on the other hand, between Philips' critical care
monitors and Respironics' ventilation equipment used in hospitals.
Light boxes
are lighting appliances that produce light with the intensity and quality of
natural daylight, used for both light therapy and normal lighting. The
Commission's market investigation confirmed that the proposed acquisition would
be unlikely to raise competition concerns as the combined market share of
Philips and Respironics would not exceed 25% in any national market.
Regarding the
soothers markets where Philips is active, the proposed acquisition would only
lead to a marginal increment to Philips' market share. There would be no overlap
in the parties' activities if the soothers market would be split into separate
markets for the retail sale of "normal" soothers and the sale of "specialty"
soothers (for example. soothers for preterm babies) to hospitals, as Philips
does not sell "specialty" soothers.
As regards
the potential vertical relationships between the parties, the proposed
acquisition would not give rise to competition concerns, considering, in
particular, the respective market position of the parties and the presence of a
sufficient number of alternatives to the parties' products on the market. [5
March 2008]
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Commission
approves proposed acquisition of joint control of Prisma and OeKB-V by Euler
Hermes and OeKB
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of joint control of Prisma Kreditversicherungs AG and OeKB Versicherung
Aktiengesellschaft (OeKB-V), both of Austria by Euler Hermes Kreditversicherungs-AG
of Germany and Oesterreichische Kontrollbank AG (OeKB) of Austria. After
examining the operation, the Commission concluded that the transaction would not
significantly impede effective competition in the European Economic Area (EEA)
or any substantial part of it.
Euler Hermes
is an insurance company active in the credit insurance sector. OeKB is a bank
active in export financing, capital markets and the management of state
guarantees for exporters. Prisma and OeKB-V are specialised insurance companies
mainly offering credit insurance policies, in particular delcredere insurance
(which covers risks emanating from customers who are unable to pay for goods
supplied or services provided as a result of their insolvency) and capital goods
credit insurance in Austria.
OeKB
currently controls both OeKB-V and - jointly with Euler Hermes - Prisma. The
proposed transaction would therefore lead to a limited structural change,
through which Euler Hermes would acquire joint control - together with OeKB -
over OeKB-V.
The
Commissions examination of the proposed transaction showed that it would not
give rise to competition concerns in the markets for credit insurance (delcredere
or capital goods credit) in Austria and that, for all products concerned, the
joint venture would continue to face several strong, effective competitors with
significant market shares.
Additionally,
despite the concentration of this relatively small market, the nature of the
market would not allow any coordination of behaviour between the competing
suppliers of credit insurance. [5 March 2008]
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Commission
welcomes Court judgment on Spain's failure to withdraw illegal conditions
imposed on E.ON / Endesa merger
The European
Commission welcomes todays judgment by the European Court of Justice (case
C-196/07) on an infringement case against Spain. The Court found that Spain
failed to comply with the Commission's decisions requiring the withdrawal of
certain conditions imposed on E.ONs bid for Endesa. Some of the conditions were
imposed by the Spanish Energy Regulator (CNE) in July 2006, others by a
Ministerial decision of 3 November 2006. The conditions in question were
declared illegal under Article 21 of the EU Merger Regulation by Commission
decisions adopted on 26 September 2006 and 20 December 2006 respectively. When
Spain failed to withdraw the conditions, the Commission referred the case to the
Court in March 2007. The Court ruling confirms that Member States cannot deprive
businesses and consumers of the benefits of the Single Market. Today's
judgement confirms that the Commission can and should continue to monitor
national measures in order to ensure that Member States do not impose
unjustified restrictions on cross-border mergers that are the exclusive
competence of the Commission.
The European
Commission approved the proposed E.ON bid for Endesa on 25 April 2006 under the
terms of the EU Merger Regulation. However, in July 2006 the Spanish energy
regulator CNE adopted a decision imposing a number of conditions on the E.ON
bid, which were then modified by a decision of the Spanish Minister of Industry
on 3 November 2006. Both these decisions were found by the Commission, on 26
September 2006 and on 20 December 2006 respectively, to be in breach of Article
21 of the EU Merger Regulation. The Commission decisions required Spain to
withdraw the conditions which had been declared incompatible with EU law.
Since the
Spanish Government did not withdraw the illegal measures, the Commission decided
to open an infringement procedure under Article 226 of the EC Treaty. Despite
the letters of formal notice and the reasoned opinion, the Spanish authorities
did not comply with the Commission decisions. Therefore, the Commission decided
to refer the case to the European Court of Justice.
Today's
judgment is of material significance because it confirms the Commissions
position that Member States should comply with the Commission's decisions
requesting the withdrawal of State measures that have been declared illegal
because they negatively affect mergers of a Community dimension and are not
necessary and proportionate for the protection of a legitimate public interest.
Finally, the
Court clarified that, contrary to what the Spanish authorities argued during the
proceedings, the fact that EON's public offer failed does not render the action
devoid of purpose or interest and does not make it absolutely impossible to
implement the Commission's decision. [6 March 2008]
Top
Commission
approves proposed acquisition of Emap by Apax Partners Worldwide and Guardian
Media Group
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of joint control over Emap plc, the UK media services company, by Apax Partners
Worldwide LLP (APW) and Guardian Media Group Plc (GMG) of the UK. After
examining the operation, the Commission concluded that the transaction would not
significantly impede effective competition in the European Economic Area (EEA)
or any substantial part of it.
Following the
recent divestment of its consumer media and radio divisions, Emap is active in
the provision of business to business media services delivered through multiple
platforms such as print and online publications, events organisation and online
information products. APW is an adviser to private equity funds. GMG is a
publisher of newspapers and magazines and a radio broadcaster.
The
Commissions examination of the proposed transaction showed that the horizontal
overlaps between the activities of Emap, GMG and APW, including its portfolio
companies, are minimal and that, after the transaction, Emap would continue to
face several strong, effective competitors with significant market shares for
all products concerned.
The
Commission also investigated the vertical relationship between Emap and Trader
Media Group Ltd. (TMG), a company jointly controlled by APW and GMG. Emap
provides automotive datasets to TMG for the use in online classified vehicle
advertising. Automotive datasets contain details of the manufacturer, model and
specifications of a car. Datasets are provided to help customers accurately
identify the specification of vehicles they may be selling/buying, and to
compare and configure new vehicles based on specification parameters. Datasets
enable users who wish to sell their vehicles to automatically fill in required
information fields. The Dataset includes a code that links the relevant data
automatically to a vehicle registration mark put in by the website user.
The
Commission concluded that the vertical relationship would not give rise to
competition concerns. Emap would not be able to restrict TMG's competitors'
access to automotive datasets in the UK, given the presence of alternative
suppliers. Conversely, competitors of Emap would still have access to a
sufficiently large customer base should TMG choose to exclusively purchase from
Emap after the transaction. [7 March 2008]
Top
Commission
approves proposed acquisition of Scottish & Newcastle assets by Carlsberg
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of certain assets of the UK-based brewer Scottish & Newcastle (S&N) by the
Danish company Carlsberg. After examining the operation, the Commission
concluded that the transaction would not significantly impede competition in the
European Economic Area (EEA) or any substantial part of it.
S&N is a
public company with interests in the production and distribution of beer, soft
drinks and mineral water in a number of countries around the world. Its beer
brands include 'Kronenbourg' and 'Grimbergen'.
Carlsberg is
active worldwide in the production and distribution of beer and other beverages.
Its main beer brands are 'Carlsberg', 'Tuborg' and 'Holsten'.
Carlsberg and
S&N are currently partners in a joint venture, Baltic Beverages Holding AB ('BBH')
which produces and distributes beer and other beverages in Estonia, Latvia,
Lithuania, Russia and several other CIS members.
On 25 January
2008, a consortium formed by Carlsberg and Heineken announced a public bid for
the entire share capital of S&N. If the bid is successful, it would lead to the
division of S&N between Carlsberg and Heineken. The consortium's bid is
considered to give rise to two distinct concentrations: one in respect of those
S&N assets to be acquired by Carlsberg and a second covering those assets to be
acquired by Heineken.
Under the
terms of the public bid, Carlsberg would acquire S&N's 50% interest in BBH as
well as S&N's businesses in France and Greece. Today's decision concerns only
the merger that would result from Carlsberg's acquisition of certain S&N assets.
Heineken's proposed acquisition of the remaining assets of S&N, which was
notified to the Commission on 1 February 2008, is currently under review.
The
Commission's examination of the proposed transaction showed that it would not
lead to competition concerns in any of the markets considered. As BBH is an
existing joint venture between Carlsberg and S&N, the only effect of the
proposed transaction in those markets where BBH is active would be the change
from joint to sole control. The proposed transaction would not result in any
significant change in France and Greece either, as Carlsberg is currently not
active in these markets. As regards other EEA countries, the S&N brands to be
acquired by Carlsberg only have minor sales via imports and would not change
Carlsberg's existing positions.
[7 March
2008]
Top
Commission
approves proposed acquisition of Continental's cooling fans and electric motor
drives business by Brose
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of the cooling fans and electric motor drives business of Continental AG by
Brose Fahrzeugteile GmbH & Co. KG, both of Germany. After examining the
operation, the Commission concluded that the transaction would not significantly
impede effective competition in the European Economic Area (EEA) or any
substantial part of it.
Brose is a
supplier of door and seat systems for vehicles as well as of components for such
systems. Continental acquired most of the targeted business in November 2007
from Siemens VDO.
By the
proposed transaction, Brose would enlarge its activities as a supplier to the
automotive industry and integrate its current supplier of electric motors for
vehicle windows.
The
Commission's investigation revealed that, despite Brose's relatively high market
share for electric window motors and door systems at the EEA level, the merged
entity would not be in a position to close off access to the market by
competitors. Competitors that are not already vertically integrated would still
be able to source electric motors from alternative suppliers or turn to in-house
production. In addition, suppliers of door systems may be limited in the choice
of their supplier of electric motors to be integrated into the door systems by
their customers, the vehicle manufacturers, who often specify the origin of such
key components. [10 March 2008]
Top
Commission
clears proposed acquisition of Galvex by ArcelorMittal
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of the galvanised steel business of the Estonian Galvex Group by ArcelorMittal,
a leading global steel company based in Luxembourg. The Commissions
investigation found that the proposed transaction would not impede effective
competition in the European Economic Area (EEA) or any substantial part of it.
ArcelorMittal
is the parent company of the ArcelorMittal group, the world's largest steel
producer, also active in the distribution of various steel products. Galvex
Estonia specialises in the manufacture and sale of galvanised steel products,
used in applications where corrosion resistance is required. This includes the
construction, automobile, domestic appliance and metal furniture industries.
Through the proposed transaction, ArcelorMittal would de facto acquire all
operating businesses of the Galvex group.
The proposed
merger would create an overlap in the market for galvanised strip and coils,
where both ArcelorMittal and Galvex are active. However, the Commission's
investigation found that the operation would not give rise to competition
concerns in this market, as Galvex's share in the EEA market is very low (0.5%)
and a number of other significant competitors are active on this market.
Moreover, in 2008, several of these competitors plan capacity increases that
would exceed the additional capacity to be acquired by ArcelorMittal as a result
of the merger. Imports into the EEA market for galvanised strips and coils are
also increasing (from 10% in 2006 to 15% in 2007) and are expected to continue
to grow providing a further competitive constraint on the merged entity.
The merger
would also create vertical relationships: the first between the market of cold
rolled carbon steel flat products (where ArcelorMittal is active) and the market
for galvanised strip and coils (with Galvex galvanising cold rolled carbon steel
flat products supplied by steel producers). The second vertical relationship
would arise between Galvex's production of galvanised strips and coils and
ArcelorMittal's distribution activities of these products. However, the
transaction is unlikely to result in supply problems for competitors of the
merged entity, particularly as Galvex is a very small player both as a consumer
of cold rolled steel and as a producer of galvanised strip and coils. [10 March
2008]
Top
Commission clears proposed acquisition of DoubleClick by Google
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of the online advertising technology company DoubleClick by Google, both of the
US. The Commissions in-depth investigation, opened in November 2007, concluded
that the transaction would be unlikely to have harmful effects on consumers,
either in ad serving or in intermediation in online advertising markets. The
Commission has therefore concluded that the transaction would not significantly
impede effective competition within the European Economic Area (EEA) or a
significant part of it.
Google
operates an internet search engine that offers search capabilities for end users
free of charge and provides online advertising space on its own websites. It
also provides intermediation services to publishers and advertisers for the sale
of online advertising space on partner websites through its network "AdSense".
DoubleClick
mainly sells ad serving, management and reporting technology worldwide to
website publishers and to advertisers and agencies. Such technology allows
internet publishers and advertisers to ensure that advertisements are posted on
the relevant websites and to report on the performance of such advertisements.
The
Commission's in-depth market investigation found that Google and DoubleClick
were not exerting major competitive constraints on each other's activities and
could, therefore, not be considered as competitors at the moment. Even if
DoubleClick could become an effective competitor in online intermediation
services, it is likely that other competitors would continue to exert sufficient
competitive pressure after the merger. The Commission therefore concluded that
the elimination of DoubleClick as a potential competitor would not have an
adverse impact on competition in the online intermediation advertising services
market.
The
Commission also analysed the potential effects of non-horizontal relationships
between Google and DoubleClick following concerns raised by third parties in the
course of the market investigation. These relationships concern DoubleClick's
market position in ad serving, where Google, by controlling DoubleClick's tools,
could allegedly raise the cost of ad serving for rival intermediaries, and
Google's market position in search advertising and/or online ad intermediation
services, where Google could allegedly have required purchasers of search ad
space or intermediation to also purchase DoubleClick's tools.
The
Commission found that the merged entity would not have the ability to engage in
strategies aimed at marginalising Google's competitors, mainly because of the
presence of credible ad serving alternatives to which customers
(publishers/advertisers/ad networks) can switch, in particular vertically
integrated companies such as Microsoft, Yahoo! and AOL. The market investigation
also found that the merged entity would not have the incentive to close off
access for competitors in the ad serving market, mainly because such strategies
would be unlikely to be profitable.
The
Commission's decision to clear the proposed merger is based exclusively on its
appraisal under the EU Merger Regulation. It is without prejudice to the merged
entity's obligations under EU legislation in relation to the protection of
individuals and the protection of privacy with regard to the processing of
personal data and the Member States' implementing legislation. [11 March 2008]
Top
Commission
approves proposed acquisition of UBI Vita by Aviva Italia
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of UBI Vita, the life insurance branch of UBI S.c.p.a. , by Aviva Italia Holding
S.p.A. both of Italy. After examining the operation the Commission concluded
that the transaction would not significantly impede effective competition in the
European Economic Area (EEA) or any substantial part of it.
Aviva Italia
is active in the insurance sector in Italy and belongs to the UK-based Aviva
group, which is also active in the insurance sector and in the long term savings
and fund management business around the world. UBI Vita is active in the life
insurance sector.
The
Commissions examination of the proposed transaction showed that the horizontal
overlaps between the activities of Aviva Italia and UBI Vita would not result in
high market shares on any market. Furthermore, the combined firm would continue
to face several strong, effective competitors with significant market positions.
The examination also showed the absence of competitive risks in vertically
related markets, given the low share in the market for distribution of insurance
products hold by Aviva Italia and UBI Vita. [11 March 2008]
Top
Commission
approves proposed acquisition of CICA by ACE
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of Combined Insurance Company of America (CICA) by ACE Limited of the Cayman
Islands. The Commission concluded that the operation would not significantly
impede effective competition in the European Economic Area (EEA) or in any
substantial part of it.
ACE is a
holding company active in global property, casualty insurance and reinsurance in
more than 140 countries. In Europe it offers a broad range of non-life insurance
products. CICA provides life insurance, accident and health insurance products
primarily to individuals in the US, EU, Canada and Asia Pacific.
The
Commission's investigation concluded that the horizontal overlaps between the
activities of ACE and CICA on European markets would be minimal, with the
exception of the underwriting of insurance products in Ireland, where the merged
entity would increase its market share on the sub-segment of individual accident
and health insurance. However, the Commission's analysis showed that this
increase would not raise competition concerns as the combined firm would
continue to face strong competitors. [11 March 2008]
Top
Commission
approves proposed acquisition of Transfesa by Deutsche Bahn
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of Transportes Ferroviarios Especiales (Transfesa) of Spain by Deutsche Bahn
(DB) of Germany. The Commission concluded that the proposed transaction would
not significantly impede effective competition in the European Economic Area (EEA)
or any substantial part of it.
DB is a
state-owned German-based railway company providing rail passenger transport and
rail freight transport in Germany, The Netherlands and Denmark, through its
subsidiary Railion and in the UK and France through its recent acquisition of
EWS. DB also provides freight forwarding by all modes of transport, logistics
and ancillary services worldwide through its subsidiary Schenker. DB is active
in finished vehicle logistics services and car components logistics via its
subsidiaries ATG and SAR respectively.
Transfesa
delivers freight forwarding and logistics services, mainly within, from and to
Spain. Transfesa is primarily active in rail and road freight forwarding and
logistics services for vehicle parts and components and finished vehicles,
through its subsidiary Semat. Transfesa also operates two rail axle changing
stations between France and Spain.
DB and
Transfesa's activities mainly overlap with regard to freight forwarding services
provided to car manufacturers. These overlaps would only be significant for
rail-based finished vehicles and car components logistics. In these areas the
merged entity might have a competitive advantage due to the ownership of certain
transport equipment which would be particularly suitable for the transport of
cars and component parts.
However, the
Commission's investigation found that the market is characterised by the
existence of current and potential competitors, by competitive constraints from
road and sea and by a limited number of large customers with very specific needs
and considerable know-how in logistics. The Commission therefore concluded that
the proposed transaction would not lead to competition concerns in the finished
vehicles logistics market. It also concluded that competition concerns in the
car components logistics sector would be similarly outweighed by competitive
constraints from other competitors, general cargo logistics and road transport.
[19 March 2008]
Top
Commission
approves proposed acquisition of Getrnke Essmann by Radeberger
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of Getrnke Essmann by Radeberger (Oetker), both of Germany.
After examining the operation, the Commission concluded that the transaction
would not significantly impede effective competition in the European Economic
Area (EEA) or any substantial part of it.
Radeberger belongs to the Oetker
Group and is one of Germany's largest breweries. Radeberger is also active in
the wholesale of alcoholic and non-alcoholic beverages. Getrnke Essmann is
mainly active in the wholesale distribution of beverages in the Federal States
of Lower Saxony, Bremen, North Rhine Westphalia and Saxony-Anhalt and, to a very
limited extent through its subsidiary Phoenix, in the production of beer.
The Commission's investigation
found that concerning the production of beer, the proposed merger would bring
about only a very modest increment in the merged entity's market share, which
would have hardly any influence on Radeberger's market position.
Through the proposed transaction,
Radeberger would strengthen its activities in the wholesale of beverages.
However, the parties' combined market share would only be slightly above 15% in
Lower Saxony and Bremen and in the other Federal States where Essmann is active
it would be below 15%. Customers could therefore have a choice of alternative
suppliers after the merger. [27 March 2008]
Top
Commission
approves proposed acquisition of Aearo by 3M
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of Aearo, a US producer of protective equipment, by the US company 3M. After
examining the operation, the Commission concluded that the transaction would not
significantly impede effective competition in the European Economic Area (EEA)
or any substantial part of it.
3M is a
US-based diversified technology company active in a number of areas, including
safety, security and protection services. Aearo is a producer of personal
protective equipment, such as hearing protection and protective eyewear, and
also supplies speciality composites, in particular thermal acoustic systems.
The
Commission examined the competitive effects of the proposed merger in the area
of personal protective devices, in particular hearing protection devices, where
the parties have the most overlapping activities in Europe. Hearing protection
devices are earplugs or earmuffs which protect the wearer from outside noise.
They are used by workers in a number of industries.
The
Commission's investigation revealed that the merged entity would face several
competitors who would be able to effectively compete and expand on the market,
while customers would continue to be able to source hearing protection products
from a number of alternative suppliers. As overlaps in other markets such as
head, eye and face protection products were minimal, the Commission concluded
that the transaction would not lead to any adverse effects on competition. [28
March 2008]
Top
Commission
opens in-depth investigation into Nokia's proposed acquisition of Navteq
The European
Commission has opened a detailed investigation under the EU Merger Regulation
into the proposed acquisition by Finnish company Nokia of Navteq, a US company.
Nokia produces mobile phone handsets and Navteq is one of two producers of
navigable digital maps, a crucial input for navigation services that can be
distributed via mobile handsets. The Commission's initial market investigation
has indicated that the proposed merger raises serious doubts with regards to
vertical competition concerns. A decision to open an in-depth inquiry does not
prejudge the final result of the investigation. The Commission now has until 8
August 2008 to take a final decision on whether the proposed transaction would
significantly impede effective competition within the European Economic Area (EEA)
or a significant part of it.
Nokia is
active in the provision of navigation services and manufacturing of mobile phone
handsets where it is the world market leader. The US company Navteq is one of
only two producers of navigable digital maps which offer complete coverage of
Europe and North America (the other producer is the Dutch firm Tele Atlas).
After a
preliminary review, the Commission has identified serious doubts about the
compatibility with the Common Market of the acquisition by Nokia of Navteq
because it might, in the light of the duopoly market for navigable digital maps
and Nokia's strong position on the market for mobile handsets, lead to a
significant impediment of competition within the EEA. The Commission's in-depth
investigation will focus, inter alia, on assessing whether the transaction would
increase the costs of navigable digital map for other companies providing
navigation services on mobile handsets or limit their access to these maps, and
as a consequence harm consumers.
This
operation raises some issues similar to another vertical merger, involving the
proposed acquisition of Tele Atlas by TomTom, a Dutch company manufacturing
portable navigation devices and selling navigation software for mobile phones.
The proposed TomTom/Tele Atlas transaction is currently under review by the
Commission. [28 March 2008]
Top
Commission
clears proposed acquisition of Moeller by Eaton
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of the whole of Moeller Group, a German manufacturer of electrical engineering
components and devices, by Eaton Corporation of the US. The Commission concluded
that the operation would not significantly impede effective competition in the
European Economic Area (EEA) or in any substantial part of it.
Eaton is a diversified industrial
company. Its electrical division manufactures electrical products serving the
industrial, utility, commercial, residential, IT and original equipment
manufacturer markets worldwide. Moeller is a manufacturer of electrical
components and devices focusing on four core business areas, namely command and
control devices, motor starters and drives, circuit breakers and building
automation.
As Moeller is notably active in
the production and distribution of low voltage electrical equipment and
components, the main horizontal overlaps in the activities of the parties would
be on a number of national markets for low voltage equipment and components,
such as final panel boards, circuit breakers (MCBs and MCCBs) and earth leakage
protection devices. The proposed acquisition would also lead to a number of
vertical relationships between the parties' activities since Moeller
manufactures several low voltage components (in particular circuit breakers and
earth leakage protection devices) that are part of the final products
manufactured by Eaton (distribution boards, final panel boards and medium-high
UPS (uninterruptible power supply) devices).
The Commission's market
investigation confirmed that the proposed acquisition would be unlikely to raise
competition concerns as the parties would continue to face strong competition
from internationally active vertically integrated competitors such as Siemens,
ABB, Schneider, Hager, Legrand and GE. As regards the vertical relationships
between the parties, the proposed acquisition would not give rise to competition
concerns, considering, in particular, that both upstream and downstream
sufficient alternatives exist and competitors do not face capacity constraints.
[2 April 2008]
Top
Commission
approves Heineken's acquisition of Scottish & Newcastle assets in Belgium,
Finland, Portugal and UK; refers acquisition of Irish assets to Irish
Competition Authority
The European
Commission has approved under the EU Merger Regulation the proposed acquisition
by the Dutch company Heineken of the businesses of UK-based brewer Scottish &
Newcastle in Belgium, Finland, Portugal and the United Kingdom as it found that
the transaction would not significantly impede effective competition on these
markets. At the same time, the Commission has referred Heineken's proposed
acquisition of Scottish & Newcastle's business in Ireland to the Irish
Competition Authority following the latters request under the EU Merger
Regulation. After a preliminary investigation, the Commission found that the
proposed transaction threatens to significantly affect competition in the beer
markets in Ireland. Those aspects of the transaction will now be examined by the
Irish Competition Authority under national law.
Scottish & Newcastle (S&N) is a
public company with interests in the production and distribution of beer, soft
drinks and mineral water in a number of countries around the world. Its beer
brands include Foster's, Kronenbourg and Grimbergen.
Heineken is active worldwide in
the production and distribution of beer and other beverages. Its principal
international beer brands are Heineken and Amstel.
On 25 January 2008, a consortium
formed by Carlsberg and Heineken announced a public bid for the entire share
capital of S&N. If the bid were successful, it would lead to the division of S&N
between Carlsberg and Heineken. The consortium's bid is considered to give rise
to two distinct concentrations: one in respect of those S&N assets to be
acquired by Carlsberg and a second covering those assets to be acquired by
Heineken. The first concentration was cleared by the Commission on 7 March 2008.
In its request for referral, the
Irish Competition Authority claims that the transaction threatens to affect
significantly competition in the Irish beer markets, in particular with regard
to lager.
This was confirmed by the
Commissions preliminary market investigation. The Commission found indications
that the beer markets in Ireland are currently characterised by two strong
players Heineken and Diageo, and that S&N, via its Irish subsidiary Beamish &
Crawford, constitutes an important challenger. The removal of S&N as a
competitor in Ireland risks eliminating competitive pressure on Heineken and
Diageo and potentially harming consumers.
Furthermore, based on its
preliminary investigation, the Commission could not exclude the existence of
competition problems for stout on a regional level.
Against this background and given
that the Irish Competition Authority in the Commission's view is best placed to
investigate the effect of the transaction on the Irish market, the Commission
has referred the assessment of the Irish part of the transaction to the Irish
Competition Authority.
With regard to other national
markets, the transaction will not bring about any sizeable overlap of
activities. Consequently, the Commission has concluded that the proposed
transaction will not give rise to any significant reduction of competition on
these markets. [3 April 2008]
Top
Commission
approves proposed acquisition of AvtoVaz by Renault and Russian Technology
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of joint control over AvtoVaz of Russia by Renault SA of France and Russian
Technology of Russia. After examining the operation, the Commission concluded
that the transaction would not significantly impede effective competition in the
European Economic Area (EEA) or any substantial part of it.
Renault is a diversified
automotive group which produces and sells passenger, commercial and light
commercial vehicles under the brands Renault, Dacia and Samsung Motors. In
addition, Renault has two strategic shareholdings in AB Volvo and Nissan.
Russian Technology is a state corporation managing the participations of the
Russian state in companies not related to the car industry. AvtoVaz is a
Russian-based passenger car manufacturer operating under the brand Lada. It is
predominantly active in the Russian Federation.
The Commissions examination of
the proposed transaction showed that it would not give rise to competition
concerns in the EEA in any of the markets concerned. The proposed transaction
would bring about only a very minor increment in market share, which would have
hardly any influence on Renault's market position in the EEA. [9 April 2008]
Top
Commission
clears proposed joint venture between ArcelorMittal and BE Sverige
The European
Commission has cleared under the EU Merger Regulation the proposed joint venture
between ArcelorMittal Steel Service Centres SAS (AMSSC) belonging to the
ArcelorMittal group, a leading global steel company based in Luxembourg, and the
Swedish company BE Sverige AB). The joint venture would combine the steel
service centre activities of the parties in Sweden. The Commissions
investigation found that the proposed transaction would not impede effective
competition in the European Economic Area (EEA) or any substantial part of it.
AMSSC is specialised in flat
carbon steel processing and logistics and is active on the Swedish market
through its wholly owned subsidiary Arcelor SSC Sverige AB. AMSSC is ultimately
controlled by the steel group ArcelorMittal.
BE Sverige AB, which belongs to BE
Group AB, a leading trading company in the steel sector in Northern Europe, is a
steel distribution company on the Scandinavian market and is active in the steel
service centre (SSC) sector in Sweden. Steel service centres specialise in the
finishing and processing of steel for the purpose of fabricating, plating or
moulding steel parts.
The joint venture (JV) would
combine the steel service centre activities of both parties in Sweden. The JV
would only be active in the distribution of flat carbon steel. It would be
jointly controlled by AMSSC and BE Group.
The Commission generally considers
the steel service distribution market to be national. On the Swedish market for
steel distribution centres, the predicted market shares of the JV measured in
volume would remain below 15%, based on the parties' current market shares.
Moreover, the JV would face competition from a number of major players such as
Dickson/Tibnor, Ruukki, GA Industri AB and Norsk Stal. On a hypothetical larger
market including Norway, the parties' share on the steel service distribution
market share would be even lower. ArcelorMittal has market shares above 25% in
markets such as the sale of hot-rolled carbon flat products (excluding quarto
plates), cold-rolled carbon flat products and galvanised steel products, which
are all used as supply in steel service distribution. However, due to the
presence of alternative suppliers for steel service centres and the fact that
the joint venture would in any event be unable to absorb a large part of
ArelorMittal's steel products, the proposed transaction would increase neither
ArcelorMittal's ability nor incentives to prevent other steel service centres in
the area from accessing steel products. [10 April 2008]
Top
Commission
approves proposed acquisition of Trane by Ingersoll-Rand
The European
Commission has cleared under the EU Merger Regulation the proposed acquisition
of Trane by Ingersoll-Rand, both US-listed companies. Ingersoll-Rand is in
particular active in solutions to transport, preserve, and display
temperature-sensitive products, whereas Trane provides air conditioning systems
and related products. The Commission concluded that the operation would not
significantly impede effective competition in the European Economic Area (EEA)
or any substantial part of it.
Ingersoll-Rand is active in three
core areas: climate control, providing solutions for customers to transport,
preserve, and
display
temperature-sensitive products, industrial technologies to enhance customers'
industrial and energy efficiency, and security technologies.
Trane provides air conditioning
("AC") equipment, including refrigerant compressors, services and solutions for
the commercial, residential, institutional and industrial AC industry. Trane is
also active in the associated aftermarket services to the AC industry which
include replacement parts and retrofit products, maintenance services for its
own and other manufacturer's commercial products, and contracting services for
the installation, upgrade, and replacement of commercial building AC systems
featuring its products.
The Commission's investigation
found that the parties' activities do not overlap but that there is a potential
vertical issue concerning refrigerant compressors. Refrigerant compressors,
produced by Trane, are used to raise the pressure of refrigerant gas in the
process of temperature control, whereas air compressors, manufactured by
Ingersoll-Rand, cannot be used in temperature control units because the seals
and compression ratios are significantly different in refrigerant applications.
Refrigerant compressors are used in AC systems for buses and trams and in
refrigeration equipment, where Ingersoll-Rand is active.
However, Trane's activities with
regard to refrigerant compressors are very limited. Trane only sells compressors
to third party dealers or end customers for the purpose of repairing and
maintaining its own AC systems but not to original equipment manufacturers
(OEMs). The Commission therefore concluded that the proposed transaction would
not raise any competition concerns. [10 April 2008]
Top
Commission
opens in-depth investigation into proposed acquisition of BarcoVision by Itema
The European
Commission has opened a detailed investigation under the EU Merger Regulation
into the proposed acquisition of BarcoVision of Belgium by the Italian company
Itema. Itema produces textile machinery while BarcoVision manufactures sensors
and other inputs for the textiles market. The Commission's initial market
investigation indicated that the proposed merger raises serious doubts as to its
compatibility with the Single Market as there are potential competition concerns
due to the vertical relationship between the parties, in particular on the
market for winders for stocking unwoven yarn, which might increase the cost or
affect the quality of sensors purchased by other winder producers. A decision to
open an in-depth inquiry does not prejudge the final result of the
investigation. The Commission now has 90 working days, until 26 August 2008, to
take a final decision on whether the concentration would significantly impede
effective competition within the European Economic Area (EEA) or a substantial
part of it.
Itema is active in the production
and sale of machinery for textile manufacturing. Itema is one of the three main
companies supplying textile mill owners with winders, which are machines used to
stock yarn before it is woven or knitted.
BarcoVision focuses on the
production and sale of sensors for textile machinery as well as software systems
specifically designed for the textile industry. BarcoVision is one of the two
main companies currently producing sensors for winders, an essential device for
ensuring textile quality.
The Commission's preliminary
investigation revealed that BarcoVision has a strong position as a supplier of
sensors for winders. In view of Itema's position on the market for winders, the
Commission has serious concerns that the proposed transaction might increase the
cost or affect the quality of sensors purchased by other winder producers.
The Commission's in-depth
investigation will therefore in particular focus on ascertaining whether the new
entity would have an incentive to negatively influence the availability of
sensors. [14 April 2008]
Top
State aid

Commission
investigates funding of major Spanish film studio complex
Following
complaints from two major players in the European film sector, the European
Commission has launched an in-depth investigation under EC Treaty state aid
rules into the funding of the Ciudad de la Luz film studio complex near Alicante
in Spain. The investigation should enable the Commission to determine whether
the funding by the Valencia Regional Government constitutes illegal state aid
which distorts competition between European film studios. The Commission
welcomes comments from interested parties and, in particular, from competing
film studios. The opening of an in-depth investigation does not prejudge the
outcome of the investigation.
Designed to
accommodate the largest film productions, the Ciudad de la Luz complex has been
under construction since 2002 and opened for filming in 2005. One of the films
made at the complex was "Astrix and the Olympic Games".
The assets of
the complex are owned by Ciudad de la Luz SAU, which is entirely owned by the
Valencia Regional Government via 'Sociedad Proyectos Temtico de la Comunidad
Valenciana'. According to their published accounts, over 200 million of public
funds have been invested in the complex. As construction is still in progress,
the final figure may be significantly higher. The Spanish authorities have also
informed the Commission of significant discounts which had been offered to
attract film productions to the complex.
The complaints
were received in February and July 2007 from unrelated companies in two
different Member States. They allege that the market for large film studios in
Europe is very competitive, and increasingly so following EU enlargement and the
setting up of major studios in new Member States. In this competitive scenario,
they doubt that the decision to invest in Ciudad de la Luz can be the result of
normal commercial considerations.
The Spanish
authorities primarily claim that the public support was not state aid as a
private investor would have invested on the same terms.
However, after
examining Ciudad de la Luz' business case, the Commission doubts that a private
investor would have provided 100% funding for such a new, large scale entrant in
a competitive market. As a result, at this stage, the Commission considers that
state aid may be involved and doubts that this would be compatible with the EU
state aid rules. [13 February 2008]
Top
Commission
refers Italy to Court of Justice for failure to recover illegal aid from Nuova
Mineraria Silius and circumvention of the Commission decision
The European
Commission has decided to initiate proceedings before the European Court of
Justice in view of Italy's failure to comply with the Commission's decision of
21 February 2007 ordering Italy to recover 98.36 million illegal and
incompatible state aid granted by the Region of Sardinia to the mining company
Nuova Mineraria Silius SpA.
In February
2007 the Commission adopted a negative decision stating that a 98.36 million
aid the Region of Sardinia (Regione Autonoma Sardegna, hereinafter RAS)
granted to support the mining company Nuova Mineraria Silius (NMS), which is
fully owned by RAS, is not compatible with EC Treaty state aid rules and must be
recovered. The Commission found that each year since 1997 RAS has transferred
public funds in order to cover the recurrent losses of NMS, keeping in business
a company that otherwise would have gone into bankruptcy. Since no restructuring
has taken place, the measures constitute illegal operating aid that confers an
unfair advantage to NMS with regard to its competitors who did not receive any
aid.
In the
meantime the assembly of NMS has decided to initiate bankruptcy procedure under
Italian bankruptcy law. Moreover, RAS awarded the concession of the mine "Genna
Tres Montis", formerly managed by NMS, to the newly created company Fluorite di
Silius SpA (FdS), fully owned by RAS and transferred all former NMS workers and
part of the remaining assets to FdS. The Commission has reason to believe that
the creation of FdS involved the injection of further public funds in violation
of Article 88 (3) EC Treaty and therefore on 11 December 2007 initiated a formal
investigation under Article 88 (2) of the EC Treaty.
One year after
the Commission's decision, Italy has still not recovered the illegal and
incompatible aid, and the measures so far undertaken have not led to an
immediate and effective result. Furthermore, the Commission found that the
manner in which FdS has been created and operates, and the economic logic of
this operation, hamper the recovery process and lead to a circumvention of the
Commission's recovery decision. The Commission therefore concluded that the
implementation of the Commission's recovery decision by Italy was not
satisfactory.
This strict
approach is in line with the State Aid Action Plan presented in June 2005, which
is designed to ensure the effectiveness and credibility of state aid controls
through the implementation of Commission decisions. [13 February 2008]
Top
Commission
approves Spanish corporate tax credit to promote R&D
The European
Commission has authorised, under EC Treaty state aid rules, a Spanish corporate
tax credit for revenues from patents, designs, models, plans, secret formulas
and processes. The Commission concluded that this tax credit is a general
measure rather than targeted at a particular type of company or region and
therefore does not constitute state aid.
In August
2007, Spain notified a proposal to grant a corporate tax credit of 50% for
revenues stemming from patents, designs, models, plans, secret formulas and
processes. The Commission has assessed the measure, which is part of the
Corporate Tax Law, on the basis of the Commission Notice on fiscal aid.
In particular,
the Commission found that the tax credit would be open to all companies,
irrespective of their size or sector, that there would be no restriction
concerning the location of the eligible activities, and that the public
administration had no discretion in applying the measure as the criteria are
objective and defined ex-ante in the implementing regulation. Moreover,
the overall budget to be spent by the state for the measure is not limited and
the scheme constitutes a reduction of the tax base rather than a reduction of
the tax rate. Therefore, the Commission concluded that the tax credit was in the
logic of the Spanish tax system and that it would provide an incentive for
companies to invest in R&D. [13 February 2008]
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Commission
concludes that 170 million support for Lithuanian gas-fired power plant does
not constitute state aid
The European
Commission has concluded that the planned grant of 170 million from the
Ignalina International Decommissioning Support Fund (IIDSF) to support the
construction of a 400 MW gas-fired power plant in Lithuania does not constitute
state aid. First, Lithuania will at no stage acquire control over the resources
allocated to the project. Second, the decision to support the project and on the
amount of the grant is not taken by Lithuania, but by the governing body of the
IIDSF, following a proposal from the European Bank for Reconstruction and
Development (EBRD), who manages the IIDSF. The EU is the largest contributor to
the IIDSF.
The project
was notified by Lithuania in December 2007 and consists in the construction of a
400 MW cogeneration gas-fired power plant based on up-to-date technology
(Combined Cycle Gas Turbine) on an existing power generation site operated by
the state-owned company AB Lietuvos elektrinė. The plant will supply electricity
to the grid and heat to the nearby agglomeration. The 170 million grant from
IIDSF represents approximately 70% of the expected total costs. The remaining
part of the costs will be financed by AB Lietuvos elektrinė.
The IIDSF has
been set up in order to pool contributions from international donors to provide
support to Lithuania for the decommissioning of the Ignalina nuclear power plant
and to set up the new power generation capacities necessary to compensate for
that closure. In accordance with the conditions for Lithuania's EU accession,
Unit 1 of the Ignalina power plant was closed down in 2005 and the shutdown of
Unit 2 is due for 2009.
The IIDSF is
managed by the EBRD, which is responsible for submitting project proposals to
the governing body of the fund and implementing its decisions. The largest share
of the fund's resources comes from the EU budget. In recent years, the European
Union has in fact been the only contributor to the fund.
The Commission
concluded that the resources allocated from the fund to the construction project
cannot be regarded as resources of the Lithuanian State. The money will not
transit through the Lithuanian authorities or through AB Lietuvos elektrinė, but
will be directly paid by the EBRD to the contractor upon execution of the work.
The fund is
not operated in such a way that a global envelope would be provided to Lithuania
which could use it with a certain margin of discretion. Instead, each project
potentially eligible for support by the fund is assessed in detail by the EBRD.
The EBRD then presents a proposal to the governing body of IIDSF, who takes the
final decision. [14 February 2008]
Top
Commission
opens in-depth investigation into guarantee scheme of the German Land Saxony
The European
Commission has opened a formal investigation under EC Treaty state aid rules
into a guarantee scheme run by the German Land of Saxony. The Commission has
doubts as to the compatibility of the proposed scheme with the EC state aid
rules. In particular, the Commission has concerns about the absence of
exceptional circumstances that could warrant the granting of operating aid and
about the proportionality of the measure. The opening of an in-depth
investigation gives interested parties the possibility to comment on the
proposed measure. It does not prejudge the outcome of the procedure.
According to
the EU Guidelines on National Regional Aid for 2007-2013 ("RAG"), operating aid
must be exceptional and can only be granted in areas with an abnormally low
standard of living and serious underemployment (assisted regions in the sense of
Article 87 (3) (a) of the EC Treaty) and only under strict conditions. In
particular, such aid has to be well targeted and proportional to the handicaps
it seeks to alleviate. It must also be temporary and gradually reduced over
time.
The Land of
Saxony proposes to introduce operating aid via a guarantee scheme for working
capital loans. Saxony intends to tackle its low economic growth and thus, to
promote its regional development, by facilitating companies' access to finance.
The scheme will be open to all companies with an economic activity in Saxony and
applies to all sectors, except fisheries, coal, steel, shipbuilding and
synthetic fibres.
The Commission
has concerns that the scheme might not be targeted to specific handicaps of the
Land of Saxony. It also doubts whether the guarantee scheme is proportional to
the handicaps it seeks to alleviate, since other state aid instruments already
address the same regional issues. Finally, the Commission doubts that the scheme
is temporary and gradually reduced over time, as it would extend a predecessor
scheme that has been in force from the beginning of the 90s until 2006. [14
February 2008]
Top
Commission
launches probe into state bail-outs of IKB and Sachsen LB
The European
Commission has opened under EC Treaty state aid rules an in-depth investigation
into state support measures in favour of the German banks IKB and Sachsen LB. As
a consequence of investments in US sub-prime markets, both banks ran into
financial difficulties. During the summer of 2007, the state owned bank
Kreditanstalt fr Wiederaufbau (KfW) provided a risk shield of around 9 billion
to IKB and a group of Landesbanken granted liquidity assistance of around 17
billion to SachsenLB. Without these and several subsequent measures the banks
would not have been able to continue their business. The Commission has to
assess whether these measures constitute state aid and, if so, whether they can
be found compatible with EU rules for rescuing and restructuring firms in
difficulties. The opening of an investigation is common for state interventions
of this magnitude and gives interested parties a possibility to submit their
comments. It does not prejudge the outcome of the procedure.
In January
2008 Germany notified the measures and the Commission needs to assess whether
they constitute state aid and, if so, whether such aid can be found compatible
with the Single Market. Germany maintains that the measures comply with the
market economy investor principle and do not constitute state aid.
On the basis
of the information provided, the Commission will investigate whether the
measures would have been acceptable for a market economy investor and that they
can therefore be considered free of aid.
Should the
Commission come to the conclusion that the measures constitute state aid, such
aid could be found compatible if it fulfils the conditions of the EU guidelines
on state aid for rescuing and restructuring firms in difficulty. The Commission
will in particular investigate whether the envisaged restructuring is capable of
restoring the long-term viability of the banks, whether the state support is
limited to the minimum necessary, and what kind of compensatory measures would
be suitable to minimise potential distortions of competition created by the aid.
IKB Deutsche
Industriebank AG is a medium-sized German bank with a balance-sheet total of 52
billion, based in Dsseldorf. IKB's main shareholder is Kreditanstalt fr
Wiederaufbau (KfW), a state-owned German development bank.
IKB provided
several liquidity facilities to Rhineland Funding Capital Corporation and
invested in Rhinebridge Funding, corporations which were exposed to the US
subprime crisis. On 30 July 2007, KfW provided a guarantee for 8.1 billion of
liquidity for one of IKB's special investment funds and protected the bank
against 1 billion of losses resulting from other subprime investments. Three
German banking associations agreed to take over 30% of the risks involved. On 30
November 2007 KfW and the banking associations covered additional risks
estimated at 350 million. In January 2008 the first two measures proved to be
insufficient. On 13 February 2008, the German federal government mandated KfW to
inject additional 2.3 billion of capital into IKB in order to allow the bank to
carry on its business. The banking associations agreed to participate in the
renewed support.
Landesbank
Sachsen Girozentrale (Sachsen LB) is based in Leipzig, with a group
balance-sheet total of 67.8 billion. Sachsen LB is the central institution for
the savings banks in Saxony and acts as their link to the global financial
markets. The shareholders of Sachsen LB are the Land of Saxony and
Sachsen-Finanzgruppe, a holding company linking eight Saxon savings banks.
Sachsen LB
faced a serious liquidity problem in August 2007 when it was no longer able to
refinance one of its special investment funds, the Ormond Quay conduit, which
was exposed to the US sub-prime crisis. A banking pool consisting of the sister
Landesbanken and the savings banks association committed to buy Ormond Quay's
commercial papers of up to 17.1 billion.
One week later
Sachsen LB realised further losses of 250 million through two hedge funds.
Since Sachsen LB's equity approached the minimum regulatory capital
requirements, the owners of Sachsen LB had to find a sustainable solution for
the bank. On 26 August 2007 an agreement to sell Sachsen LB to Landesbank
BadenWrttemberg (LBBW) was concluded.
A structured
investment portfolio of 17.5 billion, including Ormond Quay, was excluded from
the sale and transferred into a newly created special investment vehicle, the
"Super SIV". The Super SIV's financing is provided by LBBW and the member banks
of the Guarantee Fund of the Landesbanken. In order to enable the Super SIV's
financing the Free State of Saxony granted a guarantee over an amount of 2.75
billion to the Super SIV. The opening of a formal investigation procedure does
not prejudge whether the measures concerned are in line with the EU state aid
rules. However, a final decision is a necessary step to ensure legal certainty
for the aid beneficiaries and their business partners. [27 February 2008]
Top
Commission requests Romania to
recover 27 million unlawful aid from Automobile Craiova
The European
Commission has closed its in-depth investigation under EC Treaty state aid rules
into the privatisation of Automobile Craiova. The investigation, opened in
October 2007, found that Romania had imposed conditions on the sale that aimed
at ensuring a certain production and employment level, accepting in exchange a
lower sales price. The higher production and employment level achieved for
Craiova through the conditional sale and the lower revenue Romania had
conversely earned constitute state aid. In order to avoid that companies receive
unfair advantages over competitors, aid can only be granted under strict
conditions. None of these conditions applied to the privatisation and the aid is
therefore incompatible with the Single Market. In order to redress the
distortion of competition caused by the unlawful aid, the Romanian Government
must recover 27 million from Automobile Craiova.
In May 2007,
the Romanian privatisation agency, AVAS, announced the sale of its participation
of 72.4% in Automobile Craiova. The Romanian authorities attached specific
conditions to the privatisation, in particular the achievement of a minimum
production level of 200,000 cars in the fourth year after the privatisation, a
minimum level of investments and the maintenance of all 3,900 former employees
of Automobile Craiova and its subsidiary Daewoo Romania. Ford was the only
company willing to make an offer under these conditions. It offered a purchase
price of 57 million and won the tender.
The Commission
opened an investigation in October 2007 as it had concerns that the
privatisation of Automobile Craiova through a conditional tender might have
resulted in a lower sales price and therefore involved state aid.
The
Commission's investigation revealed that the conditions had lowered the sales
price. The market value of Romania's 72.4% stake in the core industrial assets
bought by Ford was estimated at 84 million. Consequently, Romania, in imposing
several non-economic conditions on the tender, forewent 27 million of revenue.
Since the conditions ensured the achievement of a certain production, employment
and investment level, the conditional tender gave an economic advantage to
Automobile Craiova and Daewoo Romania. This advantage was financed by the
revenue that the state foregoes through the sale.
The granting
of the aid was not conditional on the achievement of any of the many common
interest objectives for which aid can be authorised in the EU; in particular the
aid did not meet the criteria for compatible restructuring aid or compatible
regional aid. The Commission has therefore ordered a full recovery of the aid.
[27 February 2008]
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Commission closes investigation
into financing of Flemish public service broadcaster VRT
The European
Commission has closed its investigation under EC Treaty state aid rules into the
financing regime for VRT, the public service broadcaster in the Flemish
community of Belgium in light of formal commitments by the Belgian authorities
to amend the current regime. The modifications will clarify inter alia the
definition and entrustment of the public service remit and introduce mechanisms
to ensure the proportionality of the public funding. The Commission has
concluded that these commitments would be suitable to ensure compliance with EU
state aid rules. Belgium now has twelve months to implement the commitments.
In 2004, the
Commission received complaints against various aspects of the financing regime
for VRT (Vlaamse Radio- en Televisieomroep). Private competitors argued that
there was no proportionate relationship between the public funding VRT receives
for the fulfilment of its public service tasks and the net costs of carrying out
these tasks. The complainants also claimed that the definition of the public
service remit was not sufficiently precise and that there were no effective
control mechanisms.
In July 2006
the Commission initiated a preliminary investigation and requested Belgium to
clarify a number of points, in particular concerning the definition of the
public service remit, including its relation to new media services, the
effective supervision and control of VRTs fulfilment of its public service
obligations as well as the prevention of overcompensation for public services
activities.
The Belgian
authorities have submitted a number of commitments to allay the Commission's
concerns. The proposed amendments aim to more clearly define what the public
service remit is and an appropriate entrustment of VRT to fulfil public service
tasks. The public service character of new services not covered by the current
management contract, will be subject to an 'ex ante' evaluation involving an
independent advisory body and third parties, and lead to a proper entrustment
of the new activities.
A Framework
for merchandising and related activities will also help to clarify which
services are commercial and therefore outside the public service remit. The
fulfilment of the public service obligations will be supervised by an
independent body. A public consultation on VRT's public service remit will be
carried out every five years, before a new management contract is signed between
the Flemish Government and VRT. Moreover, corrective measures, aimed at ensuring
that the state financing does not exceed what is necessary to fulfil the public
service mission will be introduced or strengthened, including an adequate
control of possible overcompensation.
Belgium now
has 12 months to implement the proposed amendments. The Commission will monitor
the implementation of the commitments at national level. [27 February 2008]
Top
Commission
welcomes proposed changes to financing of Irish public service broadcasters and
closes investigation
The European
Commission has decided to close its investigation under EC Treaty state aid
rules into the financing regime of the Irish public service broadcasters RT and
TG4 following commitments from Ireland to amend the current regime. The main
modifications concern the clarification of the public service remit, the
entrustment of new activities, the transparency of accounts, supervision and
control. The Commission concluded that the commitments were suitable to bring
the regime in line with the state aid rules and ensure the necessary
transparency and proportionality of funding. Ireland has now until December 2008
to implement these commitments in national law.
The Commission
initiated the procedure concerning the financing of the Irish public service
broadcasters in March 2005, following a complaint from a private competitor. The
complainant argued that the public service remit of the public broadcasters was
not sufficiently precise and that they were not properly entrusted with public
service obligations. Furthermore, the complainant claimed that the use of public
funds lacked the necessary transparency to verify that the level of funding was
proportionate and to make sure that public funds were not used for commercial
activities.
Following
discussions between the Commission and the Irish authorities, Ireland submitted
in January 2008 commitments aimed at ensuring compliance with the state aid
rules. The Commission's decision identifies the requirements for the future
funding system to be in line with the state aid rules and concludes that the
commitments proposed by Ireland are adequate to remove the competition concerns.
The amendments
aim at ensuring that the scope of the public service remits of the public
service broadcasters RT (Radio Teilifs ireann) and TG4 (Teilifs na Gaeilge)
is sufficiently precise. In a number of circumstances, public value and sectoral
impact assessments will be introduced and an explicit entrustment will be
required for new activities. The fulfilment of the public service tasks will be
supervised by an independent body. Transparent accounts and enhanced controls
will be introduced to prevent overcompensation and cross-subsidisation of
commercial activities. Finally, there will be safeguards to ensure that public
broadcasters carry out their commercial activities on market terms. As in other
cases, the Commission will monitor the implementation of the commitments at
national level. [27 February 2008]
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Commission
orders reimbursement of loans for 17 R&D projects in the aeronautical sector in
Italy
The European
Commission has formally requested Italy, under EC Treaty state aid rules, to
ensure that loans granted under Law 808/85 in favour of R&D activities in the
aeronautical sector are fully reimbursed. The Commission's in-depth
investigation, opened in 2003 following a complaint, concluded that loans worth
more than 450 million granted to 17 individual research and development (R&D)
projects are not in line with the applicable EU rules on state aid to research
and development and need to be modified. The conditions imposed by the
Commission and accepted by Italy will ensure that the loans are fully reimbursed
within two months of the decision date. The main beneficiaries of the loans are
the group Finmeccanica and the Italian company Avio.
In 2003, following a complaint,
the Commission opened a formal investigation into six Italian R&D projects in
the aeronautical sector because of doubts as to their compatibility with the
applicable EU rules on state aid for R&D. In particular, the Commission had
concerns about the nature of the activities and the incentive effect of the aid.
In December 2004, the Commission issued an information injunction and
subsequently extended the scope of the investigation to the entire application
of Law 808/85 to individual projects of significant importance and the
instrument used to grant the aid.
Law 808/85 is an Italian scheme to
promote R&D in the aeronautical sector and had been previously approved by the
Commission under the condition that support projects of a certain size would be
individually notified to the Commission to verify their conformity with the
applicable R&D rules (depending on the date of granting of the aid, the R&D
Framework of 1986 or of 1996 apply to the projects). These rules allow fixed
percentages of aid for certain research and development activities where and
inasmuch such aid is necessary to undertake a project.
The Commission's investigation
established that under law 808/85, Italy had granted a total of more than 450
million of soft loans with a zero interest rate to 17 individual R&D projects,
none of which had been notified.
The projects covered by the
decision concern:
-
Helicopters: A109DEF, A109X and
A119 Koala, beneficiary Agusta
-
Airframes: DO328, DO328 Panels
and DO328 EC, beneficiary Aermacchi; ATR72, ATR42-500, MD11 (2 projects), MD
95, Pressurised cabins and Falcon 2000, beneficiary Alenia; and Falcon 2000
beneficiary Piaggio
-
Engines: GE90B, GE90Growth and
LPTPW308, beneficiary Avio.
For the six projects on which the
Commission raised doubts in its 2003 decision (A109X, A109DEF, MD11, MD95, DO328
Panels and DO328 EC), the information submitted by Italy alleviated the
Commission's initial concerns about the nature of the activity and the incentive
effect of the aid. However, in its 2005 decision, the Commission extended the
scope of the investigation because of new concerns about the aid instrument and
intensity for all large individual projects supported by the scheme.
For all projects, the aid consists
of interest free loans, the aid element being the price of such a loan on the
financial markets. In line with the normal practice in the aeronautical sector,
the loans have a very long duration, on average almost twenty years.
In cooperation with the Italian
authorities, the Commission defined a methodology to measure the aid with regard
to the applicable EU R&D Framework. The Commission concluded that in ten cases,
in order to respect the maximum allowable aid intensity, Italy has to ensure
immediate reimbursement of the entire outstanding amount of the loans (more than
170 million) plus compound interest (more than 100 million).
Six other projects are still
within the allowed aid intensities and the loans will be reimbursed according to
a fixed schedule, with full reimbursement by 2010 for most cases and by 2018 for
the last. One loan was found to meet all the conditions of the Framework and had
already been paid back by the beneficiary.
Today's decision closes the
investigation for the part concerning the 17 above listed R&D projects and is
conditional on the respect of the above conditions.
The Commission will monitor
closely all reimbursements until the complete repayment of the loans.
The Commission's investigation
will continue for the two helicopter projects A139 and BA609 (beneficiary Agusta)
on which the Commission in its 2005 decision raised doubts about their military
nature. These projects raise the issue of the application of Article 296 of the
EC Treaty (concerning the arms industry). This investigation does not cover a
recent decree approved by the Italian Parliament involving ENEA and Finmeccanica.
The Commission will examine these transactions separately. [11 March
2008]
Top
Commission
endorses 3.5 million training aid to Volvo Cars Gent
The European
Commission has concluded that 3.54 million aid, the Flemish Region intends to
grant to support training at Volvo Cars Gent ("VCG") is compatible with EC
Treaty state aid rules. The Flemish Region notified in May 2007 a 6.02 million
aid project. The Commission opened an in-depth investigation, as it had concerns
that part of the aid might serve to finance training activities which VCG would
have carried out in any event, even without aid. Such operating aid distorts
competition between assembly plants and is in principle prohibited. Following
the Commission's concerns, Belgium has modified its project, so as to target
only training activities that would not be organised without aid.
In May 2007, Belgium notified a
project of the Flemish Regional Government to grant 6.02 million for a training
programme. The beneficiary of the grant would be Volvo Cars Gent, which is part
of the Ford Motor Company. The plant employs 4.800 people and produced 240,000
Volvo cars in 2006. The company is introducing a new production platform, which
will become the standard within the Ford group for mid-size vehicles and which
will allow the production, in addition to Volvo cars, of Ford and Jaguar models.
Part of the training programme is directly related to this investment.
On 12 September 2007, the
Commission opened an in-depth investigation because it had doubts about the
compatibility of the grants with the EU rules on state aid for training. To
introduce a new production platform, a plant's workforce has to be trained in
the new techniques and work methods. The Commission therefore questioned whether
the aid would lead to the company incurring additional training activities,
which is the objective of training aid. The Commission needed to verify that the
aid would not simply subsidise costs that the company would have had to incur in
any event in the course of its daily operations. Such aid would have advantaged
one company, Volvo, at the expense of its competitors.
In the course of the
investigation, Belgium acknowledged that part of the training would be carried
out even without aid, since it was necessary to operate the new platform.
Belgium however submitted that part of the programme would go beyond what is
necessary to operate the new platform and would not be carried out without the
aid. Consequently, Belgium reduced the project's budget to 3.54 million to
support only the latter part, notably basic training on general subjects aimed
at strengthening the qualification of the employees).
The Commissions decision found
that Belgium has correctly divided the training programme between activities
that would be undertaken on the basis of the market forces alone and activities
that would be carried out only if aid is granted. Since Belgium intends to
support only the latter part of the programme, the aid would genuinely be
necessary to trigger additional training activities and does therefore not
distort competition. [11 March 2008]
Top
Commission
authorises aid of 99 million to France for QUAERO R&D programme
The European
Commission has decided not to raise any objections under the EC Treaty state aid
rules to the financial aid of 99 million granted by France to the QUAERO
research and development (R&D) programme. QUAERO, which involves a consortium of
23 partners headed by the Thomson group, is concerned with the automatic
processing of digital multimedia content.
The QUAERO R&D programme will
represent a total cost of 199 million over five years. It will focus on
technologies for the automatic processing of words, language, music, images and
video. QUAERO will create new or much higher-performing solutions for carrying
out automatic searches and interpreting digital multimedia and multilingual
information in various different formats.
The programme is being coordinated
by the Thomson group, a world player in the field of image technologies. Several
French and German subsidiaries of the Group are collaborating with 22 other
partners. QUAERO will ultimately enable Thomson to enhance its commercial range
of internet protocol audiovisual content distribution platforms (IP-TV, video on
demand, etc.) and of digital multimedia content management systems. The clients
targeted by Thomson are chiefly IP network operators, content distributors and
film production studios.
On 19 April 2006 the programme was
selected by the former French Industrial Innovation Agency, which on 1 January
2008 merged with OSEO, a French public body which finances and supports small
and medium-sized enterprises. The Industrial Innovation Agency's aid scheme had
been authorised by the Commission on 19 July 2006 subject to the requirement
that aid under the scheme that exceeds certain thresholds must be notified
individually to the Commission. On 10 August 2007 France therefore notified its
intention to grant aid of 99 million to the QUAERO programme.
Following an in‑depth examination,
the Commission takes the view that the measure meets the conditions set out in
the Community framework for state aid for R&D and innovation. In particular, it
considers that QUAERO brings positive externalities for the Community as a
whole. But the implementation of the project is not spontaneously underpinned by
the market owing to divergent interests within the consortium and to
uncertainties regarding the project's chances of success. Furthermore, in the
Commission's opinion, any distortions in competition produced by the aid should
be limited since Thomson should not acquire any market power and its competitors
are expected to maintain their investments in R&D. The support of the Industrial
Innovation Agency is therefore an appropriate means of encouraging Thomson and
its partners to manage the QUAERO programme.
The programme was launched as part of
the work carried out by the Franco-German "economic cooperation" task force,
which was set up by the German and French Economic Affairs Ministers on
26 October 2004, specifically by the "research and innovation" sub-group. Since
the field covered is extensive and given the differing perception by the two
consortia of the thematic priorities, it was decided to launch two independent
programmes, QUAERO and THESEUS. QUAERO has retained the Franco-German dimension
in that the programme involves German research enterprises and bodies aided by
France. In addition, the teams of the QUAERO and THESEUS programmes have agreed
to maintain a consultation structure and to collaborate on a case‑by‑case basis
when the opportunity arises. The Commission approved the aid scheme set up by
Germany on 17 July 2007 to support the THESEUS programme. [11 March 2008]
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Commission
requests Italy to recover 123 million of unlawful fiscal aid from nine
privatised banks
The European
Commission has closed its in-depth investigation under EC Treaty state aid rules
into the provision of Italys 2004 Finance Law that allowed former public-owned
banks to release hidden capital gains matured during their privatisation by
paying a nominal tax of 9% instead of the ordinary company tax of 37.25%. The
investigation, opened in May 2007, found that this tax scheme favoured a select
group of Italian banks without objective justification under the tax system for
company reorganisations in Italy. To redress the distortion of competition
caused by the aid unlawfully granted, the Italian Government must recover the
aid from its beneficiaries. On the basis of the circumstances of the case the
Commission has limited the recovery to the difference between the tax actually
paid and the tax the beneficiary banks would have had to pay, had they applied a
general tax revaluation scheme provided for by the same Finance Law of 2004. The
aid to recover is estimated to a total of 123 million among the nine
beneficiaries.
Under Law 218/1990 on the
privatisation of the Italian banking system, a major reorganisation of formerly
state-owned banks took place in Italy in the 1990s. Article 2 (26) of Law
350/2003 (Italys Finance Law for 2004) provided that hidden gains resulting
from these privatisations, that had remained frozen as capital reserves, could
be released by paying a 9% substitute tax on such gains, in lieu of the ordinary
company tax of 37.25%. This provided the banks concerned with an economic
advantage, in particular by increasing their attractiveness and their economic
value both for investors and corporate acquirers. Law 350/2003 also authorised
the payment of the substitute tax in three instalments (50% in 2004, 25% in 2005
and 25% in 2006), without interest.
The Commission has found that nine
banking groups realigned the value of their assets to the underlying gains
realised following the banking reorganisations, pursuant to the scheme. The
global capital gains recognised amounted to more than 2 billion. The
corresponding difference between the tax ordinarily payable and the tax actually
paid, amounts to over 586 million.
The Commission has concluded that
the said difference provided an advantage in favour of these banks, which
constitutes incompatible state aid. The Commission found that the tax scheme is
not justified by the principles on tax neutrality relating to company
reorganisations. Moreover, none of the exceptions invoked by Italy to gain state
aid approval were applicable, as the tax scheme in review was evidently not
aimed at promoting new business reorganisations but solely at favouring a select
number of banks resulting from prior reorganisations.
Italy did not notify the scheme to the Commission before its implementation and
the aid unlawfully granted must therefore be recovered from its beneficiaries.
Based on the comments received from interested parties, the Commission decided,
however, that the recovery order should be limited to the difference between the
tax effectively paid and the tax the beneficiary banks would have paid had they
applied a general tax revaluation scheme provided for by Article 2 (25) of the
same Finance Law of 2004. The Commission therefore demands to recover an
estimated amount of 123 million from the nine beneficiaries. [12 March 2008]
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Commission
refers Italy to Court of Justice for failure to recover illegal state aid
The European
Commission has decided to refer Italy to the Court of Justice for failing to
comply with a Commission decision of 14 December 2004 declaring tax incentives
in favour of companies taking part in trade fairs abroad incompatible with the
Single Market and ordering their recovery from the recipients. More than three
years after the decision, the Italian authorities have not yet achieved an
effective and immediate execution of the recovery order.
This approach is in line with the
State Aid Action Plan presented by the Commission in June 2005, which advocates,
among other things, a close monitoring and follow-up of the Commissions
decisions to ensure effective and credible state aid control.
On 14 December 2004 the Commission
found an aid scheme adopted by Italy in the form of direct tax incentives in
favour of companies taking part in trade fairs abroad incompatible with EU state
aid rules and ordered Italy to recover the illegal and incompatible aid from the
beneficiaries. The Italian authorities issued recovery injunctions to the
identified beneficiaries and the aid has been partially paid back. However, all
outstanding payment injunctions have been appealed and, in several cases,
national courts decided to suspend their execution.
Against this background, the
Commission concluded that the measures adopted by the Italian authorities were
not sufficiently effective to ensure compliance with the negative Commission
decision in this case.
The suspension of the execution of
payment orders by national courts is a common feature in several Italian
recovery proceedings that significantly delays the recovery process. Hence, the
Commission has decided to refer Italy to the Court already in three cases for
failure to comply with a recovery decision. [12 March 2008]
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Commission
authorises Italian aid scheme to promote biodiesel
The European
Commission has authorised, under EC Treaty state aid rules, an Italian tax
reduction to stimulate the production and use of biodiesel.
The measure modifies and prolongs a previously approved scheme and
introduces a supply obligation for biofuels. The coexistence of a supply
obligation and a tax reduction is a novelty and it cannot be predicted at this
stage how it will affect the market. Despite these uncertainties there was no
risk of overcompensation because the proposed tax reduction would only apply to
part of the released biodiesel and would cover only part of the difference in
production costs The aid was therefore found compatible with the Single Market.
Under the notified scheme an
annual quota of 250,000 tonnes of biodiesel would benefit from an excise duty
rate of 20% of the rate applicable to diesel oil used as automotive fuel. Any
producer of biodiesel in the EU would be able to enrol in the programme and be
eligible for the excise duty reduction. The tax-reduced quota would be shared
among producers in proportion of their actual production figures, so that only a
fraction of each producer's total biodiesel output would benefit from the tax
reduction. The budget for the tax reduction over the scheme's total duration of
four years (2007-2010) is estimated at 384 million.
The Italian authorities also
introduced a supply obligation for biofuels: any supplier of petrol and diesel
fuel to the Italian market would be obliged to release a minimum proportion of
biofuels. As from 1 January 2008, the proportion is 2% of the previous year's
total supply volume and non-compliance is subject to penalties. The excise
reduction is a temporary measure to facilitate the transition into a pure supply
obligation regime after 2010.
The Commission has consistently
authorised support schemes for biofuels where it could be demonstrated that the
aid did not exceed the difference between the cost of producing the biofuel
(including a normal profit margin) and the market price of the corresponding
fossil fuel. This method is considered to ensure the absence of
overcompensation.
However, in the notified measure,
the tax reduction coexists with a supply obligation. It could be argued that, if
fuel suppliers are obliged to put a certain amount of biodiesel on the market,
biodiesel is no longer in direct competition with fossil diesel, and therefore
the fossil fuel price is no longer the appropriate benchmark and could lead to
overcompensation
In the specific circumstances of
this case, the Commission concluded that the risk of overcompensation could be
ruled out because the proposed tax reduction did not cover the full difference
between the biodiesel production costs and the market price of ordinary diesel.
Moreover, only a part of a given producer's biofuel output would benefit from
the tax reduction. The Commission has also taken into account the scheme's
limited duration to 2010 and the prospect of a transition to a system of pure
supply obligation. [12 March 2008]
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Commission
authorises French tax scheme reducing solidarity tax on wealth with a view to
promoting investment in SMEs
The European
Commission has decided not to raise any objections under the EC Treaty rules on
state aid to the French tax-relief to a taxpayers' scheme in respect of the
solidarity tax on wealth (ISF) for those who invest in SMEs. Relief will be
conditional upon investments being made in SMEs.
The scheme is part of the fiscal
package adopted by France in August 2007. It proposes relief on ISF up to a
maximum of 50 000 per year for any investment made directly or indirectly in an
SME. The reduction in ISF is proportional to the investment made and varies
according to the method of investment. There is a proportionately lower rate of
relief for investments made through investment funds. The estimated cost of the
scheme is 445 million in 2008, but the scheme is expected to stimulate new
investment in SMEs of the order of 635 million.
The scheme was notified on 11
October 2007 to the Commission, which analysed it in the light of the Guidelines
on state aid to promote risk capital investment in SMEs, which encourages aid in
the form of tax incentives. Given the specifics of the scheme, which includes
aid to medium-sized enterprises undergoing expansion, the Commission carried out
a detailed examination.
The scheme promotes the activity
of SMEs by encouraging investors to provide them with risk capital. It also aims
to promote the activities of business angels in France and thus to support the
risk capital market. The Commission has assured itself that the distortions in
competition caused by the scheme will be limited since it creates near-market
conditions by offering a variety of investments, all of which are eligible for
tax benefits. ISF taxpayers can invest either directly in an SME, via an
investment fund or via holding companies such as investor clubs. Moreover, the
scheme is part of a wider package of measures to promote SME activity.
The tax package introduced relief
on ISF for investments in SMEs and for charitable donations. The measure
relating to charitable donations remains subject to the de minimis
Regulation, providing aid up to 200 000 with no requirement of prior
notification. [12 March 2008]
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Commission opens in-depth investigation into 47 million aid to BVG in Poland
The European Commission has opened a formal investigation under EC Treaty state
aid rules into public funding of over 47 million for an investment project by
BDN Sp. z o.o. Sp.k. belonging to the German-based BVG Medien Beteiligungs GmbH
("BVG").
The investment is intended to fund a new rotogravure printing plant in
Nowogrodziec, south-west Poland. The Commission has doubts as to the
compatibility of the project with the EU rules on regional aid, especially
regarding the extent of production capacity created by the project. The opening
of an in-depth investigation gives interested parties the possibility to comment
on the proposed measure. It does not prejudge the outcome of the procedure.
BVG is setting up a new plant in
the Polish region of Lower Silesia for the printing of magazines, commercial
catalogues and inserts with rotogravure technology. Lower Silesia is an area
with an abnormally low standard of living and high unemployment, eligible for
regional aid under Article 87 (3) (a) of the EC Treaty. BVG's investment in the
region would amount to 160 million.
Poland intends to support the
project through corporate tax exemptions of up to 47 million, in the framework
of an authorised scheme for regional development. However, because of the large
size of the investment project, it had to be individually notified to the
Commission, to ensure that the aid is in conformity with the EU rules on
regional aid for large investment projects, in particular as regards the market
share of the beneficiary and the capacity increase resulting from the project.
Regions with structural
disadvantages, like Lower Silesia, are in general entitled to grant investment
aid to compensate for the regional handicap. However, large aid amounts present
a higher risk of distorting competition, and large-scale projects often suffer
less from regional handicaps and therefore need less aid. The EU rules on
regional aid to large investment projects therefore reduce the aid intensities
for large investments with regard to the general regional aid ceiling and limit
the amounts of aid that can be given to companies with a market share of over
25% or for projects which increase capacity in a non-growing sector by more than
5%. [13 March 2008]
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Commission
endorses aid to Rolls-Royce Germany
The European
Commission has authorised, under EC Treaty State aid rules, financial support
Germany intends to grant to Rolls-Royce Deutschland Ltd. & Co KG. The aid will
be given for the experimental development of a new jet engine. The Commission
found the aid to be in line with the criteria laid down in its Framework for
Research and Development and Innovation (R&D&I Framework). The Commission's
assessment showed that the aid would address a genuine market failure, namely
the private sector's reluctance to provide sufficient risk-sharing capital for
such projects, due to imperfect and asymmetric information. The Commission also
found that the aid amount, as well as its repayment depending on the success of
the project, would ensure that it is appropriate and limited to the minimum
necessary. The amount of aid involved is a business secret.
The aid would stem from European
Recovery Programme-funds and would be granted in the form of an interest-bearing
loan. The reimbursement of the loan would depend on the project's successful
outcome, i.e. when a prudently predefined sales target is met.
The major part of the development
project is carried out in Rolls-Royce Deutschland's site in Dahlewitz, in the
German Federal State Brandenburg. The new engine will be designed to propel
next-generation business and regional jets. First customer orders have been
booked and the first engines are expected to leave assembly lines in 2011. The
project would be the first complete development of a new engine under
Rolls-Royce Deutschland's responsibility since its integration into the
Rolls-Royce Group in 2000 and would constitute a significant and sustainable
upgrade of the Brandenburg site. The project will also have an international
dimension, as 19 companies in the EU and two in the US are involved.
After scrutinising the planned aid
measure, the Commission found that the private capital market is reluctant to
provide sufficient risk sharing capital for projects of such size, scope and
duration. The Commission therefore concluded that the aid would address a
specific market failure. Moreover, the loan's amount, repayment conditions and
effectiveness in proportion to the project's success will ensure that, only the
minimum necessary is given and that the aid is appropriate to reach its
objective.
The Commission took into account
that the engine development project would bring about positive spill-over in the
region, notably through new employment and an upgrade of the local supplier
structure. Further, the Commission established that Rolls-Royce Deutschland's
competitors are engaged in parallel civil projects as well as national defence
programmes. All competitors are large and their past investments are locked in
to few and long-term R&D&I trajectories. This is why the Commission found that
competitors would not be discouraged from investing. Beyond that, Rolls-Royce
Deutschland is facing the strong buyer power of aircraft manufacturers and the
Commission found evidence that purchasers would seek to preserve sufficient
competition in the market. Thus, the aid would not enable Rolls-Royce
Deutschland to use market power to the detriment of consumers, e.g. by
influencing market prices.
On balance, the Commission found
that the aid corresponds to what R&D&I state aid rules are intended to achieve -
it is aimed at a relevant market failure and the distortion of competition
cannot considered being contrary to the common interest.
Not least, the Commission welcomes
that the new generation engine would emit 4% less NOX, more than 4% less CO2,
and would be 5 db less noisy than the current model. [14 March 2008]
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Commission
opens inquiry into UK state financing of capital costs of digital switchover of
Channel 4
The European
Commission has launched an investigation under EC Treaty state aid rules into
state aid proposed by the UK authorities for Channel 4 to help it meet the
capital costs of digital switchover. The Commission will investigate whether
this subsidy threatens to distort competition in the Single Market. The
investigation will provide interested parties with the opportunity to comment on
the planned measures. The opening of a formal investigation procedure does not
prejudge the final outcome.
In October 2007, the UK
authorities notified to the Commission their proposal to grant 14 million of
aid to Channel 4 to assist it to meet the capital costs of digital switchover.
Channel 4 is a broadcaster incorporated as a public corporation with no
shareholders and entrusted with a public service remit. It is the core channel
of Channel 4 Corporation (C4C) and is run on a commercial basis only (all
revenue is derived from advertising and other commercial activities, with no
public funding). Already in August 2006, the Commission had received a
complaint by a UK commercial broadcaster which objected to any kind of possible
financial assistance toward Channel 4 on the grounds that C4C has ample and
sufficient cash reserves to meet the costs of digital switchover without any
need for public support.
The Commission has serious doubts
as to whether the proposed aid to Channel 4 meets the criteria of the
Commission's 2001 Broadcasting Communication that is, that the aid is necessary
and proportional and does not overcompensate Channel 4. In particular, the
information provided so far by the UK does not enable the Commission to assess
whether, given the costs of its digital switchover obligations, and taking into
account its commercial revenues, C4 will have in the short term a net public
service cost which would allow it to receive state aid. The opening of the
formal investigation procedure will allow the Commission to evaluate the
notified measures in more detail and will offer interested parties an
opportunity to submit comments. [2 April 2008]
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Commission
launches in-depth investigation into UK restructuring aid package for Northern
Rock
The European
Commission has launched an in-depth investigation under the EC Treatys rules on
state aid into the UK authorities' package of measures to support the
restructuring of Northern Rock, the UK mortgage bank. The Commission received
the notification of these measures on 17 March 2008. The opening of an in-depth
investigation gives interested parties the possibility to comment on the
proposed measures but it does not prejudge the outcome.
Northern Rock plc, based in
Newcastle-upon-Tyne, was the UK's 5th largest mortgage bank with a balance-sheet
total of 101 billion (then 150 billion) as of 31 December 2006. Northern
Rock's core activity is residential mortgage lending, which represents more than
90% of all outstanding loans made by the bank.
On 5 December 2007 the Commission
authorised state aid measures the UK had taken in favour of Northern Rock on 17
September and 9 October 2007, finding that they complied with the rescue aid
provisions of the Community Guidelines on state aid for rescuing and
restructuring firms in difficulty. Today's decision also authorises another
rescue aid measure taken on 18 December 2007.
Rescue aid must be temporary and
reversible. It must not be given for a duration exceeding 6 months, unless it is
converted into restructuring aid through the submission of a restructuring plan.
The notification of the Northern Rock restructuring plan on 17 March 2008 (six
months after the first rescue aid measure) means that the rescue aid measures
for Northern Rock may remain in place while the Commission examines the
restructuring plan. The notified aid measures may be declared compatible with
EC law if they comply with the Guidelines on rescue and restructuring aid. This
requires notably three conditions: i) restoration of long-term viability without
further state support ii) aid limited to the minimum necessary to implement the
restructuring and iii) avoidance of undue distortions of competition.
The plan submitted by the UK
authorities provides for a reduction in Northern Rock's lending operations and
in the size of its balance sheet. Over the period of the plan, the bank would
repay the loans made by the Bank of England and the UK Government guarantees on
its funding operations in the deposit and wholesale funding markets would
gradually be phased out. The bank would need to find funding from other
sources, notably by rebuilding the level of its retail deposits.
Not all details of the plan have
been communicated to the Commission and today's decision requests further
information from the UK authorities. The decision also invites third parties to
comment on whether the plan's proposals for avoiding undue distortions of
competition are adequate.
As a consequence of the ongoing
turbulence in the worlds financial markets, a significant rationing of funds in
the sterling money markets occurred in August and September 2007 and the
mortgage securitisation market virtually closed. This created severe liquidity
difficulties for Northern Rock whose business model was particularly reliant on
frequently raising finance in these markets
The recent turbulence in the
financial market has caused problems for other institutions which in some cases
have also prompted public authorities to intervene. On 27 February 2008 the
Commission opened state aid investigations concerning the state bail-outs of IKB
and Sachsen LB in Germany. It is important to stress that the three cases each
present important differences, reflecting the different operations of the
institutions concerned and the way in which the conditions in the financial
markets have therefore affected them.
[2 April 2008]
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Commission
requests France to recover unlawful aid from Arbel Fauvet Rail
The European
Commission has decided under EC Treaty state aid rules that the French
authorities must recover illegal state aid received by Arbel Fauvet Rail, a
manufacturer of railway wagons. The aid took the form of lower interest charged
on two loans together worth 2 million granted to the company by French local
authorities. The Commission's investigation found that the loans were granted at
an interest rate lower than the rate the company would have been able to obtain
on the market. This difference in interest gave an unfair advantage to Arbel
Fauvet Rail over its competitors and constitutes incompatible aid. The precise
amount of the aid to be recovered will have to be determined by the French
authorities.
Arbel Fauvet Rail is a
manufacturer of railway wagons for industrial use established in Douai in
Northern France. In 2005, the company was granted two loans totalling 2 million
from the Rgion Nord-Pas-de-Calais and the Communaut d'agglomration du
Douaisis.
Under EU state aid rules,
interventions by public authorities in companies carrying out economic
activities can be considered compatible with the Single Market, if they are
undertaken on terms that a private entity operating under market conditions
would have accepted.
However, the Commission's
investigation found that the two loans in question were granted at the interest
rate then in force for financially sound undertakings. Arbel Fauvet Rail was in
economic difficulties at the time and so would have been charged a higher rate
of interest on the private credit market.
The reduced interest applied by
the local authorities gives rise to a subsidy which conferred an unfair
advantage on Arbel Fauvet Rail over its competitors. The advantage equals the
difference between the interest due at the reduced rate and the interest that
the company would have been required to pay at market rates. The exact amount
will have to be determined by the French authorities which are required to
recover the aid from Arbel Fauvet Rail. [4 April 2008]
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Commission endorses proposed 83
million aid to Progroup for large investment project in Germany
The European Commission has
authorised, under EC Treaty state aid rules, 83 million of aid, which the
German authorities intend to grant to Propapier PM 2 belonging to the German
Progroup for the construction of a paper mill in Eisenhttenstadt, in the
Brandenburg-Nordost region. The Commission's assessment found the measure to be
compatible with the requirements of the Regional Aid Guidelines 2007-2013. The
investment project of 640 million by Progroup will significantly contribute to
the diversification of Eisenhttenstadt's economy, which is currently focused on
the metal industry, thus benefiting the further development of the region.
Progroup's investment project is
aimed at setting up a paper mill and a related power plant to produce corrugated
case material, a base paper to manufacture corrugated board which is in turn
used to produce corrugated packaging. The majority of the production of the new
plant will be used within Progroup to produce the downstream product, i.e.
corrugated board. The investment project involves eligible costs of 640 million
and an aid amount of 83 million.
The project is to be carried out
in the region of Brandenburg-Nordost, a disadvantaged area eligible for aid
under Article 87(3)(a) of the EC Treaty as a region with an abnormally low
standard of living and high unemployment. The project intends to create about
150 direct jobs as well as over 450 indirect jobs.
The aid would be granted under
existing aid schemes covered by the regional block exemption regulation.
However, due to the large amounts of aid involved, the aid to Progroup had to be
notified to the Commission for individual assessment and clearance.
The Commission's assessment of
regional aid to large investment projects aims to verify whether the market
share of the beneficiary and the production capacity created by the investment
remain below the thresholds set in the Regional Aid Guidelines. In case the
thresholds are not exceeded, the effect of the aid on competition is deemed to
be outweighed by its positive contribution to regional development.
The Commission found that
Progroup's share would remain significantly below the 25% threshold on the
relevant markets for corrugated case material and for corrugated board, both
before and after the planned investment. The Commission also verified the
capacity increase generated by the project. The Commission's thorough market
analysis concluded that, despite contrary claims by several complaints, the
additional production capacity created through the project would remain below 5%
of the apparent consumption of the product concerned in the EEA. [4 April 2008]
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