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  1. 1. ISSN 1025-2266 COMPETITION POLICY EC COMPETITION POLICY NEWSLETTER NEWSLETTER Editors: 2006  Æ  NUMBER 2  Æ  SUMMER Kevin Coates Thomas Deisenhofer Published three times a year by the  Jean Huby Competition Directorate-General of the European Commission Address: European Commission, Also available online:  J-70, 04/226 Brussel B-1049 Bruxelles Tel.: (32-2) 295 76 20 Fax: (32-2) 295 54 37 World Wide Web: competition/index_en.html INSIDE: • Preserving and Promoting Competition: A European Response by Philip Lowe • OECD peer review • Sector inquiry in payment cards industry • Prokent/Tomra • T-Mobile Austria/tele.ring MAIN DEVELOPMENTS ON • Antitrust — Merger control — State aid controlEUROPEAN COMMISSION
  2. 2. Contents1 Preserving and Promoting Competition: A European Response by Philip LoweArticles7 OECD peer review gives positive assessment on competition policy and enforcement in the European Union by Sari SUURNÄKKI12 Preliminary results of Commission sector inquiry in payment cards industry raise competition concerns by Magdalena BRENNING-LOUKO, Tatyana PANOVA, Lukas REPA and Antonio Carlos TEIXEIRACompetition day15 From the Competition day in Vienna 19 JuneAntitrust19 Prokent/Tomra, a textbook case? Abuse of dominance under perfect information by Frank MAIER-RIGAUD and Dovile VAIGAUSKAITE25 REPSOL: Opening up the fuel distribution system in Spain by Philippe CHAUVE30 De Beers: commitments to phase out diamond purchases from the most important competitor by Harald MISCHE and Blaž VIŠNAR33 Multi-brand distribution and access to repairer networks under Motor Vehicle Block Exemption Regulation 1400/2002: the experience of the BMW and General Motors cases by Rainer BECKER and Iona HAMILTONMerger control41 Merger control: Main developments between 1 January and 30 April 2006 by Mary LOUGHRAN and John GATTI46 T-Mobile Austria/tele.ring: Remedying the loss of a maverick by Johannes LUEBKING51 Siemens/VA Tech: A case of bidding markets and minority stakes by Rainer BECKER, Claes BENGTSSON, Kay PARPLIES, Stephan SIMON, Walter TRETTON and Ulrich VON KOPPENFELS55 DONG/Elsam/E2: Remedying competition problems in an energy merger through infrastructure unbundling and gas release by Claes BENGTSSON, Peter EBERL, Kristóf KOVÁCS, Søren Bo RASMUSSEN and Walter TRETTONState aid59 Commission requests phasing out of Spain’s export related tax incentives by Marek HERM and Pierpaolo ROSSI63 Commission finds public participation in Austrian securitisation scheme is not State aid by Almorò RUBIN DE CERVIN and Volker ZULEGER65 State aid for biofuels by Anne Theo SEINEN and Johanna BERNSEL68 Forfeiting financing and the construction of the waste-fuelled power station (Müllheizkraftwerk) MHKW Rothensee GmbH by Joerg KOEHLI and Volker ZULEGER71 Information section73 Last Web developments© European Communities, 2006Reproduction is authorised, except for commercial purposes, provided the source is acknowledged.The content of this publication does not necessarily reflect the official position of the European Communities.Responsibility for the information and views expressed lies entirely with the authors.
  3. 3. Competition Policy NewsletterPreserving and Promoting Competition: A European Response (1)Philip LOWE, Director-General, Directorate-General for CompetitionCompetition is not an end in itself, but an instru- Commission () shows that competition plays anment designed to achieve a certain public interest even greater role in harnessing benefits of globali-objective, consumer welfare. At the same time, sation than the well-known effects of increasedcompetition policy can contribute to other objec- international division of labour and comparativetives: in the EU context, for example, it can work advantage. Globalisation enhances the level oftowards the success of the strategy for growth and competition; the increase in competition in turnjobs, and form part of the public debate about the lowers prices and increases demand for labour androle of state intervention and regulation in indus- capital. This has particularly beneficial effects fortry. Only competition, and not economic national- the real income of workers both directly and indi-ism of whatever overt or covert form, allows the rectly via higher investment, with the additionalemergence of firms capable of succeeding in glo- income gains estimated at around 8% over the nextbal markets. If preserving competition is the letter half century. In absolute terms this would translateof competition law enforcement, making markets into over € 2 000 annually in 2004 prices for everywork better is the leitmotiv of an active competi- EU citizen, over € 5 000 for every EU household.tion policy. Competition policy must therefore use its wholeCompetition Policy and potential for the benefits of growth and jobs. Tothe EU Economy do so, we need to go beyond preserving competi- tion through our traditional enforcement action.The Commission proposed a Partnership for We must also actively promote competition. ThisGrowth and Jobs () as the core of the renewed is an extension of the traditional work of a compe-Lisbon Strategy. The renewed strategy () is much tition agency, but I believe an increasingly impor-more focused. The tools are reduced and sharp- tant one.ened: there are 25 national reform programmes() plus the Community Lisbon programme ().There is only one programme per Member State The Developing Role of Competitionand only one programme at EU level. The division Policyof responsibilities is thus much clearer than before.Everybody can be held accountable for the goals It is therefore important to enforce a rigorous com-achieved — or not achieved — under their own petition policy through anti-trust, merger controlprogramme. and the state aid rules. That is the core businessCompetition policy has a substantial role to play of an effective enforcement agency, and requiresin that process. Effective competition is an impor- focus, resources and determination. But it is not intant driver of the growth and jobs strategy, both itself sufficient.s­ tatically by removing restrictions and exces-sive market power and dynamically by fostering Aside from merger control and some parts of Stateinnovation. In fact, a recent study realised for the aid control, enforcement intervenes ex post. It sets important precedents, but it sometimes comes(1) This article is based on a speech delivered at the St Gallen too late; harm has been done, and remedying that Competition Law Forum on 11 May 2006. harm can be quite difficult. Establishing the liabil-(2) Working together for growth and jobs — A new start for ity for harm is laborious, and once that is done, the Lisbon Strategy Communication to the Spring Euro- pean Council — COM (2005) 24, Brussels, 2 February 2005 designing an effective remedy for the future based on the precedent of EU decisions is even more en.pdf challenging; if companies have exited the market(3) Conclusions of the Spring European Council 22-23 March it may be impossible. The economy may be better 2005 off if we sometimes intervene much earlier in the process. We need more advocacy of competition docs/pressData/en/ec/84335.pdf(4) Published at approaches and market-based solutions. Common Actions for Growth and Employment: The (6) THE EU ECONOMY 2005 REVIEW, Rising Internatio- Community Lisbon Programme — COM(2005) 330 final nal Economic Integration, Opportunities and Challenges: en.pdf pean_economy/2005/ee605/ee605en.pdfNumber 2 — Summer 2006
  4. 4. Better Regulation right once and for all. Second, the inquiry identi-At the same time, we have to be aware that in our fied the lack of transparency as one of the mainenthusiasm to find ex-ante solutions, we do not sti- barriers to competition in the sector. This is alsofle competition through overregulation. The con- an important input for the ongoing review to deal with potential excessive market power At least partly in response to DG Competition’sby sector-specific regulation may be appropriate interest in the question, the Florence Forum ()(for example in telecoms or energy), but has a cost has discussed the issue and Eurelectric (the elec-in the medium to long term. What is described as tricity suppliers association), the transmission sys-transitory tends to be provisionally forever. Once tem operators and the regulators have producedregulations are in place, will they or the incum- detailed proposals to strengthen the transparencybents they are looking after ever be parted from obligations. Furthermore from April 2006 the foureach other? largest generators in Germany have voluntarily started to publish aggregated generation figures.We have said that we will undertake a more sys- In relation to concerns about investment in inter-tematic competition screening of EC legislation (), connection, some operators have also mentionedand we are doing so. Competition concerns must plans to extend interconnection, and are, part of the balancing exercise whenlooking at new legislation: other legitimate policy Competition advocacy is perhaps even moreobjectives may well require solutions which restrict important at the national level, as national regu-or limit competition, but the aim is that these are lation may also introduce or maintain barriersproportionate and the overall balance is weighed. to competition. DG Competition thus tries to encourage a more systematic competition-inputFor example, we are currently providing input into into national legislation. This input can be eitherthe Commission’s potential clearing and settlement hard or soft. The area of professional services isdirective, to help identify a market-based, demand- probably the best known example of the latter. Asdriven solution. We are also working very closely you know, we published a report in February 2004with our colleagues of DG Information Society on as part of a long running programme of advocacythe proposal to regulate roaming prices, so that and reform. The discussions with Member Statesany distortive effects of the proposed price regu- and professional bodies in order to modernise thelation are minimised. We are sharing our market applicable rules are ongoing.knowledge to provide the best empirical basis forthe upcoming regulation, regulation which raises Beyond Advocacyan interesting question: is the threat of regulation,rather than regulation, the more effective instru- The Commission has also more stringent powersment for market correction? at its disposal if discussions do not seem to be the right way forward.Last, but not least, we are helping in the Commis-sion’s review of the Electricity and Gas Directives. First, the Commission has powers under ArticleWe have detailed knowledge of the energy markets 86 in conjunction with Article 81, 82 or the statethrough previous case work in state aid control, aid rules in previous state monopoly areas, suchantitrust and merger control, but also through our as postal services and telecoms. In October 2004,ongoing sector inquiry, the preliminary results of the Commission challenged the German Postalwhich were presented to the public on 16 Febru- Law which induced the German incumbent Deut-ary (). Two issues of particular importance for the sche Post to bar private postal operators fromlegislative process emerged from our investiga- discounts for downstream network access. Goodtion. First, joint ownership of supply and network cooperation with the Bundeskartellamt helpedbusinesses as well as gas storage facilities results in us to achieve an almost immediate impact on thechronic competition problems. Imposing full struc- market: very shortly after the Commission’s Arti-tural unbundling in the next legislative package is cle 86 decision (10), the Bundeskartellamt adoptedone of the solutions proposed to get the incentives a decision on the basis of Article 82 (11), obliging Deutsche Post to apply the discounts in a non-(7) See section 9 of the Revised Impact Assessment Gui- d ­ iscriminatory manner. delines adopted by the Commission in June 2005: (9) 791_IA%20guidelines-main.pdf en.htm(8) Preliminary report and executive summary available at: (10) Commission decision of 20.10.2004, COMP/38.745 BdKEP/Deutsche Post AG + Federal Republic of Germany: sector_inquiries/energy/. See also European Energy Sector — Quo Vadis? First results of the Sector Inquiry, index/by_nr_77.html#i38_745. Competition Policy Newsletter, Spring 2005, p.12: (11) Bundeskartellamt decision of 11.2.2005 in case B 9 — 55/03, Deutsche Post AG/DID Deniz Intelligente Diens- cpn/cpn2006_1.pdf leistungen et al. Number 2 — Summer 2006
  5. 5. Competition Policy NewsletterSecondly, Article 10 in conjunction with Article countries essentially relates to catch-up strategies81 and/or 82 is quite a powerful tool. Under the by developing economies and the same logic sim-CIF (12) case law, national competition authori- ply does not apply to an economy that operates atties are entitled and even obliged to set aside the the technology frontier (or aims to do so).application of national law which infringes the ECcompetition rules. Within the European Competi- Furthermore, the EU countries trade first andtion Network ECN, the Commission encourages foremost among themselves. The EU-15 in 2003national authorities not to shy away from using exported (and imported) only 17% of its goodsthis power proactively. and services (13). If we are to have a set of national champions, then 83% of the time, it’s the EU con-International Co-operation sumer that will pay the price of inefficient resource allocation.Finally, EC competition policy also has a role toplay on the international scene. Competition law We must therefore combat any interference in theenforcement is increasingly — and rightly — per- process of cross-border restructuring by nationalceived as one of the major instruments of global governments which is not justified by a legitimategovernance, ensuring free and fair competition by interest foreseen in the Treaties. The Commissioncombating both private structures and behaviours has two principal legal instruments at its disposal,(international cartels, market power) which harm the single market rules and Article 21 of the ECconsumers; and public subsidies. The Commission Merger Regulation. The recent months have dem-is the leading competition law enforcer in the larg- onstrated that the Commission is ready and will-est trading bloc in the world and the only author- ing to use both of these, and will continue to useity with direct powers to control State aid. We can them.and should help emerging countries to introduce In the E.ON/Endesa case, for example, the Com-or improve competition rules, and we can and mission first sent a letter to the Spanish authoritiesshould be ready to learn from the best practices under the internal market rules requesting infor-of other authorities around the world. We need mation on the newly adopted measures designedto promote multilateral discussions in the ECN, to make the take-over by E.ON more burdensome.ICN and OECD, and we need to promote a shift On 4 April, it decided to refer Spain to the Courtof emphasis from trade regulation to competition of Justice for restrictions on investment in energywithin the WTO. We need to be more proactive in companies (14). The Commission has just giventhe area of global enforcement and advocacy and its approval to the transaction under the mergerwe should strengthen bilateral ties to ensure that control rules. The Commission will also take theglobal enforcement has teeth. necessary steps if specific national authorities seekAll of these elements, rigorous enforcement, to block mergers in this field in contravention ofgreater advocacy and international co-operation the legitimate exceptions — public security, pru-will help us grow into a role of intellectual leader- dential rules, and media plurality — contained inship. There are many aspects to that leadership, not Article 21 of the Merger Regulation.least that if we are to have credibility abroad, we What is clear, is that any attempt by a nationalmust have clarity at home. government to create an additional barrier for a transaction cleared by the Commission will not beThe Failure of Protectionism accepted.An important message to be conveyed both by At the same time, EC merger control does not stopcompetition advocacy and enforcement is that the creation of national or European champions ifprotectionism is not the right answer to economic this enhances competition rather than underminesreform challenges. Nor is it a way to create more it. In some cases, size may even lead to efficienciesjobs and growth. which are positively factored into the assessment. There are numerous examples of mergers approvedThe national champion logic of artificially shelter-ing European undertakings from competition is, (13) «EU competitiveness and industrial location», Europeanand always has been, flawed. Domestic monopoly Commission, Bureau of European Policy Advisers, pagepower has never helped firms become successful 20: The often-quoted success of Asian docs/eu_competitiveness_industrial_location_2006_ en.pdf (14) See Commission Press Release IP/06/437, Free move-(12) Case C-198/01 Consorzio Industrie Fiammiferi (CIF) v ment of capital: Commission refers Spain to the Court Autorità Garante della Concorrenza e del Mercato, 2003 of Justice for restrictions on investment in energy ECR I-08055: c ­ ompanies do?reference=IP/06/437Number 2 — Summer 2006
  6. 6. under the Merger Regulation which resulted in those in larger economies. It is disappointing, ofthe creation or strengthening of leading European course, to find national governments complain-multi-nationals. To name just a few: in 2000, we ing that the Commission is discriminating againstapproved the creation of the nuclear giant AREVA ‘their’ industry, when they should be happy that wevia the merger of Framatome and the nuclear are not discriminating against ‘their’ citizens.activities of Siemens (15). In 2000, the Commission Thirdly, remedies for local markets are usually easyalso approved the creation of the world’s largest to devise if there is sufficient forethought, and suf-pharmaceutical company Glaxo-Smithkline from ficient will.a merger between two UK drugs companies (16).And indeed in 2004 the Commission cleared the Finally, a merger with the closest competitor in amerger of Sanofi and Aventis to create yet another domestic market is not the only way to reach thepharmaceutical giant (17). Finally the European necessary scale to compete globally. Cross-borderconsortium EADS was created from a merger of mergers are another, often less restrictive way. Takeseveral smaller European businesses. These are the mergers between Volvo and Renault (18) (insteadall examples of European champions which are of Volvo / Scania) or Abbey Bank / BSCH: (19) theseleading global players in their respective markets: examples show that cross-border consolidationnot only was their growth by merger/acquisitions is a real alternative for European companies thatapproved by the Commission, but the companies want to reach the scale needed to compete morebenefited greatly from the one stop shop for con- effectively abroad.trol of mergers of European dimension institutedby the Merger Regulation. The Right Way ForwardDespite these clearances, the argument is some- It is not enough, of course, to simply say that pro-times made that “narrow market definitions” tectionism is misguided, without giving someapplied by the Commission mean that larger com- indication of the right way forward. In addressingpanies in smaller Member States are unable to the challenges of globalisation, we must start withreach the critical mass required to face competi- the recognition that innovation, economic growthtion world-wide. This contention is simply not and jobs are created mainly by companies, whereassupported by the facts. governments (and the Commission) should con- centrate on creating the right conditions for thisFirst, the Commission takes markets as it finds to happen.them. So if markets are genuinely global in scope,the Commission will define them as such (the mar- This means that where we intervene, we need a bal-ket for civil aircrafts for example). If they are local, anced approach, one which takes into account thebecause consumers do not have other alternatives positive as well as the negative effects of a behav-to the merging companies than other local suppli- iour or a merger, and one which is underpinned byers, (as is often the case for retailing), the Commis- sound economic analysis. The Horizontal Mergersion will conduct an analysis at a local level. Guidelines (20) recognise the positive role of effi- ciencies. Through the Article 82 review (21), weSecondly, to allow mergers leading to significant allow for the possibility of efficiency argumentsmarket power in some small or local markets would also being taken into account under Article 82.lead to discrimination against consumers in smallerMember States. These consumers deserve the same (18) COMMISSION DECISION of 01/09/2000 decla-level of protection from dominant suppliers as do ring a concentration to be compatible with the com- mon market (Case No IV/M.1980 — 3* VOLVO/(15) 2001/769/EC: Commission Decision of 6 Decem- RENAULT V.I.) according to Council Regulation ber 2000 on the compatibility of a concentration (EEC) No 4064/89, OJ C 301 , 21/10/2000, p. 23 with the common market and with the EEA Agree- ment (Case COMP/M.1940 — Framatome/Siemens/ CELEX:32000M1980:EN:HTML Cogéma/JV), OJ L 289, 06/11/2001, p. 8: http://eur-lex. (19) Commission Decision of 15/09/2004 declaring a concentration to be compatible with the common mar- 32001D0769:EN:HTML ket (Case No IV/M.3547 — BANCO SANTANDER(16) COMMISSION DECISION of 08/05/2000 declaring a / ABBEY NATIONAL) according to Council Regu- concentration to be compatible with the common mar- lation (EEC) No 4064/89, OJ 255 , 15/10/2004 p. 7 ket (Case No IV/M.1846 — *** GLAXO WELLCOME/ SMITHKLINE BEECHAM) according to Council Regu- CELEX:32004M3547:EN:HTML lation (EEC) No 4064/89, OJ C 170, 20/6/2000, p. 6 (20) Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations CELEX:32000M1846:EN:HTML between undertakings, OJ C 31, 05.02.2004, pages 5-18:(17) Commission Decision of 26/04/2004 declaring a concen- tration to be compatible with the common market (Case tion/guidelines.htm No COMP/M.3354 — Sanofi-Synthelabo / Aventis) accor­ (21) ding to Council Regulation (EEC) No 4064/89 article_82_review.html Number 2 — Summer 2006
  7. 7. Competition Policy NewsletterSome practices under Article 82 are of a contrac- new Regional Aid Guidelines (22) for the periodtual nature and can thus under certain conditions 2007 to 2013 that are both fair and flexible(23). Fol-be exempted under Article 81(3) — why should lowing our Communication on Innovation (24),they not be exempted under Article 82 if the same we are now designing rules on innovation to beor similar conditions are fulfilled? In short, most included in the new common Framework on statebehaviours or mergers have both pro-competitive aid for research and development and innovation.and anti-competitive aspects and it is our work to We are also revising the Communication on stateassess on balance which prevail. aid to risk capital. And we will soon launch our first proposal to adapt the de minimis threshold,We should concentrate our competition action which dates from 1996, to the economic develop-on the most urgent market failures. This means ment of the Union (25).that we must recognise that sector inquiries are avery valuable tool where a flood of complaints or We need to play our part in reinforcing global co-other elements indicate that markets are not func- operation in enforcement, and in promoting effec-tioning properly. The outcome may in some cases tive competition policies in jurisdictions aroundlead to immediate enforcement, in others to more the world.medium-term and strategy orientation. In conclusion, competition and competition pol-We cannot accept artificial barriers to cross-bor- icy are key drivers for competitiveness, and com-der mergers and acquisitions created by national petitiveness is key to strengthening the EU econ-governments, and we will use both the competi- omy. We need to expand the role of a competitiontion and the single market rules in order to achieve agency both practically and culturally — beyondthe best possible outcome in each case. pure enforcement towards a wider role combiningWe must focus State aid control on ensuring that advocacy and enforcement. We need to push forless and better aid is used to tackle real market greater awareness of the market and competitionfailures. We want to concentrate the Commission’s implications of European and national scrutiny on the most distortive aid to We need a European response to preserve and pro-provide more flexibility to the Member States. In mote competition: focused, balanced and resistantDecember the Commission therefore adopted the to national egoisms. (22) OJ C 54, 4.3.2006, p. 13. (23) See also New guidelines on national regional aid for 2007 – 2013, Competition Policy Newsletter, Spring 2006, p. 18: cpn/cpn2006_1.pdf (24) See action_plan/cdsai_en.pdf (25) Copies of these documents, and information on ongoing public consultations, are available at comm/competition/state_aid/others/action_plan/Number 2 — Summer 2006
  8. 8. Competition Policy NewsletterOECD peer review gives positive assessment on competition policy ARTICLESand enforcement in the European Union (1)Sari SUURNÄKKI, Directorate-General for Competition, unit F-4The Organisation for Economic Co-operation policy field the review examination takes place atand Development (OECD) has published a report the OECD Competition Committee. The exami-reviewing competition law and policy in the Euro- nation of the EU competition policy took placepean Union. The European Commission DG in the October 2005 meeting of the CompetitionCompetition requested this review as it considered Committee. Following that examination the OECDit important to discuss EU competition policy at Secretariat adapted the report to take into accountthis unique forum where 30 developed countries the comments made on it during the examination.advance ideas and review progress in various The OECD Secretariat’s report on EU competitionpolicy areas, including competition policy. The policy is available at the OECD web-site ().review report was prepared by the Secretariat ofthe OECD, following extensive co-operation with EU review and ongoing EU competitionDG Competition, and formed the basis for a peer policy development projectsreview examination of the European Commissionin the OECD Competition Committee in October The dialogue and debate at the OECD and in other2005. The report gives a very positive assessment international fora, such as the International Com-of EU competition policy. It finds as particularly petition Network (ICN), is essential for developedpositive features that this policy is increasingly competition agencies to benchmark performance,based on market-centred economic considerations test ideas and develop best practices. It bringsand that economic underpinnings of competition together around one table the major competitionanalysis have become more explicit. The report also jurisdictions around the world. This was the firstputs forward policy options to further develop the time that EU competition law and policy has beenleniency system, cartel sanctions and the policy in reviewed at the OECD Competition Committee.the field of unilateral conduct as well as to increase The EU competition regime has some 40 years his-the capacity for economic analysis. () tory and during this time we have seen substantial developments.Objectives of an OECD peer review The EU has been continuously refining its think-exercise ing on policy issues and improving enforcementThe OECD is well known for its individual coun- processes and techniques. But in the past few yearstry surveys and reviews. Dialogue, consensus and projects have developed that by far exceed in scalepeer review are at the very heart of the OECD and depth any previous policy projects. Thesework. OECD peer review is a systematic exami- include most notably the modernisation of anti-nation and assessment of the performance of the trust enforcement, the merger review, the ongoingpolicy of an OECD member country in a given Article 82 review and the State aid action plan. Infield. There is no other international organisation view of these recent, and the still ongoing, initia-in which the practice of peer review has been so tives to develop the EU competition policy and lawextensively developed as the OECD, where it has enforcement, the OECD review of the EU compe-been facilitated by the homogeneous membership tition was very timely exercise.and the high degree of trust shared among the In the antitrust field the EU has undergone a majormember countries. reform of the enforcement system that has created a new basis for tackling private barriers to competi-The ultimate goal of an OECD peer review is to help tion within the EU’s network of 25 national compe-the reviewed jurisdiction to improve its policy mak- tition authorities and the European Commission,ing. The OECD Secretariat prepares a draft review all applying the same EU antitrust law together. Thereport on the country (a sort of a country study) European Competition Network (ECN) provides aand this report forms the basis for a peer review basis for more effective enforcement and more effi-examination in the relevant OECD Committee by cient use of the collective resources. The strengthsthe OECD Member countries. In the competition of each authority within the ECN are derived from the institutional capacity and enforcement record(1) The content of this article does not necessarily reflect the official position of the European Communities. Respon- of the individual agencies in it. However, by work- sibility for the information and views expressed lies enti- rely with the authors. (2) See 2 — Summer 2006
  9. 9. Articlesing together, all agencies can benefit from pooling approach is an instrument to better focus on ‘good’of market knowledge, efficient allocation of cases aid — which targets market failure and helps toand eventually reinforcing enforcement priorities. strengthen the structure of the EU economy — asThe new system has also opened the way for focus- well as to identify ‘bad’ aid — aid that is a waste ofing resources on fighting practices that are most taxpayers’ money and seriously distorts the marketharmful to competition and consumers. Instead competition.of dealing with notifications, we can now set new In support of its policy, the Commission has alsoproactive priorities. a practice of issuing comprehensive up front guid-The challenge of the recent reform in the merger ance to the legal and business community on thefield was to ensure the continuing effectiveness way it applies the EU competition rules. Guide-of the EU merger control system in the face of lines, notices and other forms of guidance issuedincreasingly complex cases and a necessary close by the Commission are of course binding onlyscrutiny by the EC Courts. To meet this chal- itself and not on the courts. But they do have threelenge the regulation was improved by most nota- positive effects:bly clarifying the substantive test and increasing l they help prevent anti-competitive practicesthe flexibility of the referrals system between the and structures;Commission and national authorities. In addition,the European Commission’s economic expertise l they help businesses to plan compliance better;was enhanced to make sure that investigations are l they help promote convergence in the think-firmly grounded in sound economic reasoning. ing and practice of competition agencies bothAs a result, the European Commission has now within and outside the EU. In itself this hasin place a mature merger control system, based advantages for businesses that operate globallyon sound economics and broadly the same legal and are faced with compliance in a large numberstandards as all major jurisdictions in the world. of jurisdictions.One of the particular strengths of the EU competi- The Commission has issued guidelines for instancetion policy is that, in addition to antitrust enforce- on assessment of vertical and horizontal restraintsment and merger control, it can also effectively of competition, technology licensing agreements,tackle State barriers to competition. In this area the and horizontal mergers and on a number of StateCommission has taken a two-pronged approach aid issues. At present the Commission is develop-comprising both competition advocacy or soft law ing guidance both in the field of unilateral conductmeasures and enforcement action. One impor- and with respect to vertical and conglomeratetant advocacy measure that the Commission has mergers.launched is so called ‘competition screening’. Thisinvolves a systematic assessment of the impact of Main conclusions and policy optionsproposed new EU legislation on competition. raised in the OECD Secretariat reportIn addition to this kind of softer measures that seek The OECD Secretariat report gives overall a favour-to bring about regulatory reform on a consensual able assessment on the EU competition law andbasis, the Commission has also various enforce- policy. It notes in particular the reshaping of EUment tools at its disposal. One prominent tool is competition policy in terms of the increased rolethe control of State aid which may distort competi- of effects-based economic analysis and concludestion among Member States. In this area the Com- that ‘competition law in the European Union is inmission has launched a comprehensive and far- transition, as policies about antitrust, mergers andreaching reform. The purpose is to strengthen the State aids are increasingly based on market-cen-economic analysis underpinning state aid control tred economic considerations. Modernisation ofand ensure a consistent approach across all policy concepts sets out basic analysis in an administra-areas. The State aid reform is essentially a continu- ble format while making its economic underpin-ation of the work that has been under way for some nings more explicit.’time in increasing the role of sound, effects-basedeconomic analysis in EU competition law enforce- The report provides a concise overview of the EUment. This approach is perhaps most fully devel- competition law and policy. It starts by recallingoped in the analysis of anti-competitive agree- the history and origins of the EU competitionments (under Article 81) and mergers. With the policy moving then to reviewing the content ofongoing reviews into State aid and unilateral con- the competition law in the main policy fields, withduct (under Article 82), the economic underpin- the emphasis on vertical and horizontal restraints,ning of EU competition law enforcement action abuse of dominance and merger control. Thereaf-is being developed across the field. It is important ter the report turns on analysing the institutionalto understand that in the State aid area economic structure, enforcement processes and powers of Number 2 — Summer 2006
  10. 10. Competition Policy Newsletterthe Commission as well as the system of judicial integrated system (at least not yet), but adminis- ARTICLESreview. While reviewing the substance of the law trative complications and unnecessary variationsand the enforcement processes and powers, the need to be pays particular attention to the recent andongoing initiatives to develop EU competition Policy option 2 relates to the discussion that ispolicy and enforcement, as far as those initia- ongoing in the EU on principles for the Com-tives were on public domain at the moment of the mission’s policy against abuse of dominance. Thereview. Finally the report analyses also the limits of report notes that ‘this area of law is due for mod-EU competition policy and competition advocacy ernisation to adapt it to the Commission’s moreinitiatives of DG Competition. economics-centred approach, to focus on likely orThe report concludes with the following four pol- actual market foreclosure effects more than on for-icy options for consideration: mally defined prohibited behaviours’. Due to the fact that the report was prepared before the Com-1. clarify the relationship among the leniency pro- mission discussion paper on Article 82 was issued, grammes of the Community and the national it does not reflect the content of that paper. How- enforcement agencies; ever, the key principles of the Article 82 review were already discussed in public at that moment2. in adopting an economic approach to domi- and therefore those ideas are behind the reflec- nance, make liability depend upon effects that tions in this report too. In particular, the recom- harm competition; in appropriate cases, assess- mendation that in Article 82 cases liability should ing the scope for recoupment should be an depend upon effects that harm competition is in integral part of such an approach; line with the effects-based approach taken in the3. increase further DG Competition’s capacity for Article 82 discussion paper. The OECD Secretariat economic analysis; also calls for making, in appropriate cases, assess- ment on the scope of recoupment () an integral4. consider means for extending sanctions to part of the effects based approach. individuals as well as firms, such as co-ordina- tion with application of Member State laws that Concerning the EU merger control, the report provide for individual sanctions. finds as positive features the inclusive legal stand-Policy options 1 and 4 both concern the EU cartel ard, which can deal with all kinds of competitivepolicy. The report notes as positive developments effects, and the horizontal merger guidelines thatboth the increase in DG Competition resources ‘imply strong harmonisation in approach acrossdedicated to the cartel enforcement and the the Atlantic, at least for horizontal combinations’.increase in enforcement activity. But concerning But in this context the report also calls for a fur-sanctions, it considers that ‘enforcement against ther increase in DG Competition’s capacity forcartels would be strengthened further if sanctions economic analysis, particularly by increasing theapplied to individuals as well as firms’. The OECD staffing of the Chief Competition Economist’sSecretariat considers that the EC Treaty could sup- team. The report welcomes nonetheless the meas-port administrative fines against individuals, but ures that the Commission has taken to increase itsthat this might not be sufficient. Therefore, the capacity for economic analysis and to strengthenreport concludes that, if it is not feasible under the internal quality controls (in particular the peerCommunity law to implement sanctions against review panels and the expansion of the hearingindividuals, it suggests as an alternative to promote officers’ role) (). But it considers that DG Compe-and support the imposition of individual sanctions tition’s caseload may in the future consist of moreunder the national laws of Member States. complex and controversial cases (particularly fol- lowing the antitrust modernisation and the caseThe report also reflects the issue that there are cur-rently multiple leniency programmes in operation (3) Possibility of recoupment is relevant in predation casesin the EU. Due to this companies may need to file and the test is to determine whether a company’s allegedleniency applications for several authorities in the predatory strategy would be likely to eliminate and deter competition and whether it is likely that the predatorEU (there is no single point of contact). Differ- would then be able to collect at least enough profit toences in the leniency programmes complicate the recover the losses it sustained during its predatory attack.matter further. While no case of serious disagree- See for reference the OECD policy brief on the OECDment has been reported yet, the OECD Secretariat Competition Committee roundtable on predatory fore-recommends clarifying the relationship among the closure published in OECD web-site (4) While these measures are discussed in the report in thevarious leniency programmes of the Community context of merger control, it needs to be kept in mind thatand the national enforcement agencies. The report these improvements apply across the field in the EU com-notes that this does not need to result in a single petition law enforcement.Number 2 — Summer 2006
  11. 11. Articlesallocation within the ECN), and that these internal Finally, concerning the State measures that restrictsteps might become more a rule than something to competition, the report notes that the Treaty pro-be used selectively. visions that prohibit Member State measures con- trary to Treaty rules about public undertakingsAs for the administrative process in general, the and undertakings with special or exclusive rightsreport underlines as positive features the changes have been the foundation for the long-term liber-in the law that strengthen investigative powers alisation program to reform traditional infrastruc-as well as the better incorporation of economic ture monopolies. As for the State aid control, theevidence in decision-making. The report also report notes that the subject is too technical andwelcomes the modernisation of the enforcement wide-ranging for detailed treatment in this report.process, by eliminating notification and prior The report also notes the fact that the Commis-approval of exemptions while sharing enforcement sion’s impact analysis of EU legislative proposalsresponsibility with national agencies, and consid- is turning attention to avoiding that EU legislationers that this is designed, among other things, to restricts competition. It reminds that ‘the extent toredirect resources so that DG Competition can which other parts of the Commission are commit-concentrate on complex, Community-wide issues ted to pro-competitive reform of their regulatoryand investigations. A continuing challenge will be programmes remains to be seen’.to convince the courts and to maintain policy con-sistency in a system of decentralised enforcementwhere the Member State competition agencies and What the peer review gives for the futurecourts can fully apply Community substantive law. development of EU competition policy?The informal network of the enforcement authori- The Directorate-General for Competition hasties, ECN has in this context an important task to already during and before the peer review exer-facilitate inter-agency co-ordination. The report cise been working on certain of the policy issuesnotes that the ECN has got a promising start, but displayed in the peer review for consideration.that experience will show whether it is necessary Particularly concerning leniency policy, the Euro-or prudent to make it more formal. pean Commission is already working in the ECNAs for the coverage of the Community competi- together with the EU Member States’ nationaltion law, the report finds that it is ‘broad and gen- competition authorities to ensure that discrep-erally consistent, with no sectoral exclusions and ancies between the various programmes and thefew provisions for special enforcement processes’. flexible enforcement system opted for in the EUEven though a specific treatment applies to aspects do not dissuade applicants from coming forward.of agriculture and transport, particularly ocean Leniency policy has proven to be a powerful andshipping, the report recalls that these sectors com- central instrument in the fight against cartels. Itmonly get specific treatment also elsewhere. The is therefore in the Commission’s and other ECNreport calls for careful attention to ensure consist- members’ interests to ensure that our respectiveency in sector-specific application of state aid rules, leniency programmes continue to be attractive forwhere the enforcement is under the responsibility the business community. The next step is necessar-of the sector specific Directorates General, and ily to design and implement a one-stop-shop sys-other general competition rules. It is worth noting tem, but it is still too early to describe how that sys-that after this review exercise the Commission has tem would look and when it could be put in place.launched a proposal for the Council to repeal the The Commission is also reviewing its policy inblock exemption for liner shipping companies (). abuse of dominance cases. On 19 DecemberThe preparatory works on this proposal started 2005 the European Commission published forwell before the peer review exercise (). When third party comments a Staff Discussion Paperthis proposal is adopted, one important sector is on the application of EC Treaty competitionremoved from the list of areas which get some sort rules on the abuse of a dominant market positionof specific treatment. (Article 82) (). The Discussion Paper is designed to promote a debate as to how EU markets are best(5) Commission proposal of 14.12.2005 for a Council Regu- protected from dominant companies’ exclusionary lation repealing Regulation (EEC) No 4056/86 laying conduct, conduct which risks weakening competi- down detailed rules for the application of Articles 85 and tion on a market. The paper suggests a framework 86 to maritime transport, and amending Regulation (EC) for the continued rigorous enforcement of Article No 1/2003 as regards the extension of its scope to include cabotage and international tramp services. 82, building on the economic analysis carried out(6) First consultation paper on this matter was published in March 2003. Public consultation documents in this review process are available at DG Competition web-site: (7) The discussion paper is available at DG Competition web-site: lation/maritime/ trust/others/article_82_review.html10 Number 2 — Summer 2006
  12. 12. Competition Policy Newsletterin recent cases, and setting out one possible meth- legal framework and taking into account poten- ARTICLESodology for the assessment of some of the most tial implications for the whole EU anti-cartelcommon abusive practices, such as tying, and enforcement system. The system of cartel sanc-rebates and discounts. tions in the EU is based on effective application of a combination of corporate and individual sanc-The rest of the policy options put forward by the tions at Community and national level. ThereOECD Secretariat merit also a careful examination. would seem to be some scope for examining howThe recommendation to increase DG Competi- to best use the options available in this system.tion’s capacity for economic analysis has probablyoverlooked that in the past few years DG Compe- Finally it should be noted that one area whichtition has put particular emphasis on increasing clearly would have merited more attention at theits capacity for economic analysis throughout the OECD Secretariat’s report is the EU State aid pol-house. As a result there are currently a relatively icy. As mentioned above, one of the major strengthslarge number of economists around the house of the EU competition policy is that it allows theworking in case-teams along with lawyers. The Commission to effectively tackle also State barri-Chief Economist’s team provides further support ers to competition, be it through bringing reformto the individual case-teams like the Policy Direc- on a consensus basis or via application of varioustorate (Directorate A), which also has within it a enforcement tools, most notably the State aid con-number of highly qualified economists. The Chief trol tools. Commission has launched a comprehen-Economist’s team is also involved in various policy sive and far-reaching reform in the field of State aiddevelopment projects. control (). It would have been highly beneficial to receive views of the OECD experts in this area too,The policy option raised in the report on extend- both because of the importance of this policy areaing sanctions to individuals is not a novel one, for the EU and because the review coincided withbut it raises complex legal and policy issues. That the beginning of the reform project, when envis-policy option needs to be analysed in the EU aged orientations of the reform were published. (8) See Press Release — IP/05/680 of 7.6.2005 on State Aid: Commission outlines comprehensive five year reform of state aid policy to promote growth, jobs and cohesion.Number 2 — Summer 2006 11
  13. 13. ArticlesPreliminary results of Commission sector inquiry in payment cardsindustry raise competition concerns (1)Magdalena BRENNING-LOUKO, Tatyana PANOVA, Lukas REPA andAntonio Carlos TEIXEIRA, Directorate-General for Competition, unit D-11.  Introduction issuing. The average profit-to-cost ratio for debit card issuing is also high at 47%. High profitabilityThe payment cards industry is of growing eco- is often correlated with high fees charged to mer-nomic importance in Europe. Cards increasingly chants and cardholders. A key preliminary findingreplace cash and cheques as payment means for of the inquiry is that, even in the absence of inter-over the counter purchases. In 2004 a total of 23 bn. change fees, other revenues alone would gener-card payments were made in the EU with an over- ate profits for issuers. The evidence suggests thatall value of € 1.350 bn. Retailers paid an estimated card issuing would generate positive profits in 20€ 25 bn. in fees to banks for accepting cards. Con- out of 25 countries, even without interchange feesumers pay fees for card usage, interest for the use income.of credit facilities and money exchange fees whichcan add up to considerable sums. () The profitability of payment card acquiring seems to vary, though is fairly high overall. Credit cardIn its Communication of 2 February 2005 to the acquirers across the EU have a 15% profit-to-Spring European Council on a new start for the cost ratio on a weighted average, while debit cardLisbon strategy, the Commission endorsed a acquirers averaged around 5% profitability. As amore pro-active application of competition policy, result, issuing of debit and credit cards is signifi-in particular, by means of sector investigations. cantly more profitable than acquiring in the EU.The Commission launched three sector inquiries These results cast doubts upon a longstanding(energy, retail banking and business insurance) claim of industry participants that interchange feeson 13 June 2005 (). The first part of the inquiry are necessary to render the business of card issuinginto retail banking focussed on the payment cards sufficiently On 4 April 2006 the Commission pub-lished an interim report on preliminary findings 2.2. High variation of fees across Europeon the payment cards industry (), available on theinternet (). It raises a series of substantive compe- 2.2.1.  Merchant feestition concerns. Commissioner Kroes has invitedthe industry to address the problems identified in Merchant fees are the price per transaction that athe report. business (or ‘merchant’) pays to the acquirer for accepting cards as a method of payment. The pre-The interim findings of the payment cards inquiry liminary results of the inquiry indicate that there isare divided into two categories: financial findings a high variation of merchant fees across the Euro-and potential barriers to competition. pean Union. The market for card payment services may therefore not be working effectively in some2.  Financial findings Member States, to the detriment of businesses and consumers.2.1. High profitability of the payment cards There is evidence of price dispersion at five levels: business l Businesses in some countries pay a far higherAn important preliminary finding of the sector merchant fee on average than others. Merchantsinquiry is that the profitability of payment card in Hungary, Czech Republic and Portugal haveissuing is high and sustained over time. The credit to pay an average fee of between 2.5 and 3.1% ofcard business appears particularly profitable, with total transaction value to accept a Master/Visaa weighted profit-to-cost ratio average of 65% for credit card. This level is 3 to 4 times higher than in Sweden, Finland and Italy.(1) The content of this article does not necessarily reflect the official position of the European Communities. Respon- l Businesses pay a far higher merchant fee on sibility for the information and views expressed lies enti- average to accept credit than debit cards. For rely with the authors. example, a merchant in the UK pays almost five(2) See Press Release IP/05/719.(3) See Press release IP/06/496. times as high a fee on average for accepting a(4) MasterCard credit card as compared to a Master sector_inquiries/financial_services/interim_report_1.pdf Card debit card.12 Number 2 — Summer 2006
  14. 14. Competition Policy Newsletterl Businesses pay a far higher merchant fee on determines to a large extent the fees paid by mer- ARTICLES average to accept cards issued in the interna- chants. The results of the inquiry show that there tional networks than cards issued in the domes- is high variation of interchange fees across the EU. tic networks. Typically, businesses pay 30-40% The level of interchange fee dispersion is similar lower fees on average for domestic debit card to those of the merchant fees. Acquirers in some usage than Visa/MasterCard (Maestro) debit. Member States pay far higher interchange fees on average than in others. This is true for internationall Smaller businesses pay premium rates for credit, international debit and domestic debit card accepting MasterCard and Visa. They pay typi- transactions. cally between 60 and 70% higher fees on aver- age for Visa and MasterCard credit and debit card transactions than larger ones. This does 3.  Potential barriers to competition not seem justified solely based on transaction volumes as in domestic card payment systems The investigation has identified a number of poten- the price difference between smaller and larger tial barriers to competition in the markets for card merchants is only 7% on average. payment services. These barriers are of a structural, technical or behavioural nature:l Businesses in some sectors pay much higher merchant fees on average than in others: For 3.1. Structural barriers instance, florists, restaurants and car rental firms pay a merchant fee twice the level of fuel The high vertical integration of some card payment companies and wholesale trade firms. systems may impede new entrants, in particular non-banks (processors), from competing with theThe investigation has also shown that inter-system incumbent in one segment of the market. In sys-competition between MasterCard and Visa is ham- tems where the network is co-owned by the verypered by pricing practices. Acquiring banks often banks that are the customers of the network oper-charge businesses the same level of merchant fees ator, banks have little incentive to sign up with afor accepting cards issued by different networks. processor other than ‘their’ network operator. ThisThis practice is known as ‘blending’. Acquirers may lead to a lack of competition which inhibitsapply blending to competing products, such as innovation and inflates processing costs.MasterCard and Visa, both in domestic and inter-national card payment systems. The inquiry has Joint ventures between banks for acquiring mer-found that blending of prices may weaken inter- chants may remove the competitive pressure onnetwork price competition, which in turn may lead merchant fees, because merchants only face oneto businesses paying higher acquirers fees. Blend- offer for the network concerned instead of offersing appears to be widespread across the EU25. from many competing banks. Such joint ventures exist in Belgium and Denmark for domestic pay-2.2.2.  Cardholder fees ment card transactions and in eight Member StatesCardholder fees are the fees a cardholder pays to for acquiring MasterCard and Visa. Informal com-the issuing bank for a payment card. The results of plaints have highlighted that foreign banks incurthe inquiry show that there is no significant nega- particular difficulties in entering national marketstive relationship between the levels of fee per card where local issuing banks co-own such acquir-and credit card interchange fee at the country- and ing joint ventures. Only about 9% of the acquir-network-level. The evidence challenges hypoth- ing banks surveyed ever attempted a cross-bordereses advanced by some industry participants and entry into a new market and few of them have beenthe economic literature of an inverse relationship successful.between card fees and interchange fees. Accord-ingly, high interchange fees do not appear to result Banks may also find it difficult to enter paymentin low fees per card, or vice versa. card systems without a central clearing house. In systems where clearing occurs bilaterally between2.2.3.  Fees paid between banks pairs of banks, the foreign bank is forced to find a local bank as ‘sponsor’ to access the clearing infra-Acquiring banks in the MasterCard and Visa sys- structure. This makes new market access depend-tems and in some national systems pay issuing ent on the goodwill of incumbent banks.banks “interchange fees” for every transactionwith a payment card. The level and structure of 3.2.  Technical barriersthese fees are typically decided upon by a system’smember banks in a collective manner. The inter- Diverging technical standards across the Europeanchange fee operates as a transfer of revenues from Union may hinder acquirers, processors and ter-the acquiring bank to the card issuing bank and minal vendors from operating efficiently on a pan-Number 2 — Summer 2006 13
  15. 15. ArticlesEuropean scale. There appears to be significant High joining fees of card payment systems andscope for efficient convergence of technical stand- their structure may discourage new entry andards in the payment cards industry. expanded card issuing. High variation of joining fees across the EU for similar card payment sys-3.3.  Behavioural barriers tems may also indicate that the level of fees is not objectively justified.Agreements on interchange fees may raise the costsof foreign banks to enter a new market. This seemsto be at least the situation in Austria, Portugal, Spain Other network rules may also prevent or makeand France. Moreover, interchange fees account entry more difficult. Prohibition on co-operativefor 40 % to 70% of the average merchant fee. They agreements with competing networks or non-appear to inflate retail prices and may inhibit price banks, co-branding, may hinder domestic debitcompetition between acquiring banks. card payment systems from entering into compe- tition with Visa and MasterCard, or, retailers orSome governance arrangements within card pay- other operators from entering into competitionment systems risk distorting the competitive with issuing banks. Similarly, the prohibition forconditions between the members, in particular merchants to charge customers for paying by card,between new entrants and the incumbent banks. surcharging, may hinder the development of alter-For instance, in some networks, associate mem- native non-cash payment instruments as the truebers have to communicate business sensitive costs are hidden to the consumers via cross-sub-information to the principal members without sidisation.reciprocal information sharing. In other systems,decision making on issues affecting intra-systemcompetition, such as fees, membership rules and 4.  Follow uptechnical specifications, is reserved to the princi-pal members. The preliminary findings of the interim report onSome payment system membership requirements payment cards were subject to public consultationmay hinder non-banks from domestic acquir- until 21 June 2006. A public hearing was held oning and new entrants from cross-border acquir- 17 July 2006 giving industry, academia, businessesing. Rules which may constitute barriers include and consumers the possibility to comment on therequirements to be a financial institution and preliminary findings. The final report on card pay-to have a local establishment. About half of the ments is to be published together with findings ondomestic card payment systems in the EU require the competitive market situation in other areas ofissuers and acquirers to be financial institutions. retail banking at the end of 2006. This report willSome systems also require banks to establish a contain concrete recommendations to industry,local presence before joining a domestic payment regulators and the legislator to improve the com-system. petitive situation in the payment cards industry.14 Number 2 — Summer 2006
  16. 16. Competition Policy Newsletter COMPETITION DAY The European Competition Day in Vienna on 19 June 2006: ‘Competition law and its surroundings — links and new trends’ () The event, traditionally organised by each EU presidency, was this time co-staged by the two 2006 Presidencies of the Council of the European Union countries Austria and Finland. We would like to bring to your attention a few quotations in order to give a better vision of the main themes treated by the programme sessions: I) Do mergers keep what they promise? II) Links and trends in antitrust policy III) Europe’s quest for competitiveness — role of antitrust. From left to right: Jonathan Evans, MEP; Neelie Kroes, Commissioner in charge of competition; Martin Bartenstein, A ­ ustrian Federal Minister for Economics and Labour; Dr Paul Rübig, MEP Mrs Neelie Kroes, Member of the European Commission in charge of Competition. Opening session remarks: ‘I am firmly of the view that private enforcement of competition law is an essential component of a truly effective and comprehensive anti-trust system. If we can encourage an increase in effective private enforcement, this will not only secure compensation for injured busi- nesses and consumers — which they already have a right to after all! But it will also play an important part in encouraging overall compliance with the rules as a complement to the actions of competition authorities.’ ‘We must protect competition, not competitors; and the ultimate aim is to avoid harm to consumers. The Article 82 review Discussion Paper therefore suggests ways of analysing this type of conduct which are firmly rooted in sound economic analysis. This should enable us to identify those practices which are most harmful to competition and consumers. By focusing our enforcement priorities on these abuses we hope to optimise our use of resources and improve the quality of our decisions.’ The content of this article does not necessarily reflect the official position of the European Communities. Responsibility (1)  for the information and views expressed lies entirely with the authors.Number 2 — Summer 2006 15
  17. 17. Competition day Mr. Raimo Luoma, Director General, Finnish Ministry of Trade and Industry. Delivering his opening address, Mr. Luoma said: ‘The effectiveness and focus of EU competition policy should also be assessed at the political level. The debate on competition policy should not solely remain the concern of officials implementing competition rules’. Mr Emil Paulis, Director of Policy and strategic support of the Directorate General for Competition of the European Commission. Presenting the Interaction between public and private enforcement and the role of leniency he said: ‘It can’t be right that the victims of competition violations are left to stand out in the rain with no effective means to redress that situation.’…. ‘If we do not have an effective type of collective action, only individual actions, will that be sufficient to ensure that the harm is undone? That is very doubtful.’ ‘The Commission has not yet decided if actions — legislative or otherwise — are necessary. Also, no conclusions have been reached whether any possible action is best taken at the Community level or at the level of the Member States. The Commission will take on board all comments received on the Green Paper and assess at that point what further action, if any, is needed.’ During the discussion about Europe’s quest for competitiveness he said: ‘The purpose of EU competition policy, to the extent that markets in Europe are already open to competition, is to ensure that competition is not undermined. To the extent that markets in Europe are not already open to competition, its purpose is to ensure that competition is introduced to the extent possible.’…..‘A consumer welfare standard is at the root of our approach to competition policy: this is the most reliable benchmark for ensuring that markets are productive and that society as a whole will benefit from this productivity.’ ‘There is no necessary incompatibility between embracing open and competitive markets in Europe and worldwide (economic globalisation) and the provision by governments of mechanisms aimed at ensuring that its citizens are equipped to survive and prosper in a market-driven economy, including the alleviation of some of the undesirable consequences of a market-driven economy.’ RA Dr. Hanno Wollmann, Lawyer from Schoenherr Partners speaking on counteracting anticompetitive practices — the impact of other Laws, said: …’ there is an apparent conflict of interests between competition policy and other state policies (conflicts which need to be solved in mutual respect); there are many instances where competition rules and other national laws serve the same or at least a similar purpose. The most notorious example is the law against unfair competition. This is particularly obvious in the area of Article 82 EC-Treaty. More often than not, the abuse of a dominant market position is hardly anything else than unfair competition conducted by a dominant firm.’ …’ the stakeholders in neighbouring laws (e.g. the regulators in the area of liberalized industries, or the consumer protection organisations in the field of unfair competition) should have adequate access to the instruments of antitrust policy. Austria is a jurisdiction where “crossing borders” in this sense usually works well.’ Mr. Rainer Geiger, OECD, Deputy Director Financial and Enterprise Affairs, presenting the convergence international cooperation in Competition Law explain the role of the OECD: ‘1  —  Competition Committee has for many years promoted best practices in competition law enforcement cooperation. 2  —  Recommendations and Best Practice documents provide framework for cooperation. 3  —  Roundtable discussions contribute to substantive convergence.16 Number 2 — Summer 2006
  18. 18. Competition Policy Newsletter COMPETITION DAY 4  —  Cooperation traditionally an instrument to reduce conflicts and tensions (at times of fundamental differences over competition policy goals). 5  —  Today much greater emphasis on cooperation as an instrument to make enforcement more effective. 6  —  Effective cooperation depends on convergence of substantive and procedural rules.’ With some conclusions: ‘1  —  Cooperation depends on substantive and procedural harmonization; differences interfere with cooperation. E.g., ECN has highest level of cooperation: enforcement of the same legal norms; similar legal culture. 2  —  Concurrent developments on many fronts: important roles for OECD, ICN, bilateral and regional cooperation models. 3  —  Formal instruments and informal contacts: the role of the Competition Committee. 4  —  International cooperation on competition: an important step toward managing globalization’ Professor Tomi Laamanen of Strategic Management at the Helsinki University of Technology presenting mergers and business strategy give ‘key insights of Managing Acquisitive Growth: Acquisitions programs can be used to engineer growth strategies that contribute to shareholder value creation, and programs for managing acquisitive growth should be tightly embedded to the organic growth strategy.’ Jonathan Evans MEP, member of the European Parliament, Chairman of the Transatlantic Legislators Dialogue, and European Parliament Rapporteur on the modernisation of EU Competition Policy, highlighted the links between the EU Competition Day and the EU-US summit between President Bush, Chancellor Schussel and Commission President Barroso being held in Vienna the same week. Both meetings faced the major challenge of confronting economic nationalism and protectionism. Mr Evans anticipated much closer coordination between the Commission DGs dealing with Competition and the Internal Market, and within their equivalent committees in Parliament in identifying further areas for sectoral inquiries in following years. The day concluded that competition and well-performing markets constitute a background for all key competitiveness themes. During Finland’s EU Presidency, the competition perspective will also be reflected in the innovation policy and the energy policy debate. Future Competition Days The Bulgarian Commission on Protection of Competition is organising a Competition Day the 9th November 2006 in Sophia under the theme ‘Competition Policy before and after Bulgaria’s Accession to the EU’. In 2007 the Competition Day will be held under the Germany Presidency of the Council of the Euro- pean Union during the first half of 2007 in Munich.Number 2 — Summer 2006 17
  19. 19. Competition Policy NewsletterProkent/Tomra, a textbook case? ANTITRUSTAbuse of dominance under perfect information (1)Frank MAIER-RIGAUD, Directorate-General for Competition, unit A-3 andDovile VAIGAUSKAITE, Directorate-General for Competition, unit E-1 (2)Introduction: () () tic bottles or cans. In essence, the machine allows the customer to return empty bottles, therebyOn 29 March 2006 the Commission adopted the recouping the deposit, in an automated way. UponProkent/Tomra decision imposing a fine of € 24 insertion of the bottle, the machine identifies itmillion on the Norwegian group Tomra, a supplier based on parameters such as shape or bar code,of so-called reverse-vending machines that are and calculates the deposit that is to be reimbursedused by retail outlets to collect empty drink con- to the customer. Typically, the machine then printstainers. The Commission found that Tomra abused a receipt that is credited back at the shop’s cashier.its dominant position and therefore infringed Arti-cle 82 of the EC Treaty and Article 54 of the EEA There exist different types of such machines,Agreement in five different EEA markets: Austria, depending on the type of drink containers theyGermany, the Netherlands, Norway and Sweden. can accept and their storage capacity. The basic machine model can accept one type of container,The infringement committed by Tomra Systems for example, either only glass bottles or cans. MoreASA, Tomra Europe AS and its five national sub- complex machines can accept several types of con-sidiaries in the relevant EEA markets (together tainers and corresponding crates. Furthermore,‘Tomra’) consisted of the operation of a system certain types of machines can be connected toof exclusivity agreements, individualised quan- backroom equipment, that is, equipment installedtity commitments and individualised retroactive in a room separated from the shop, allowing emptyrebate schemes, restricting or at least delaying the containers to be mechanically sorted and entry of other machine manufacturers. Connection to backroom equipment increases sig-This in turn led to the foreclosure of the market nificantly the storage capacity of a machine. Whilefor Tomra’s competitors, in some instances even to this type of machine is usually referred to as ‘high-their elimination from the market to the detriment end’ RVM, the single standing ones are referred toof consumers. as ‘low-end’ RVMs.The Commission’s investigation was triggeredin 2001 by a complaint from a German supplier The relevant market:of reverse vending machines, Prokent, asking Although there were indications that high-endthe Commission to investigate whether Tomra machines may constitute a separate market dis-was abusing its dominant position, in particu- tinct from the market for low-end RVMs (), thelar through agreements concluded with several Commission left this question open, since thelarge retail companies that allegedly denied Pro- competitive assessment would substantially be thekent access to the market. Following the inspec- same under both market definitions. In any event,tions carried out in Tomra’s premises, and several such a more encompassing market definition wasyears of further investigation, the Commission more favourable to Tomra.found that Tomra in fact abused its dominance inthe time span of five years from 1998 to 2002. The The development of the market for RVMs is highlyinfringement was found to be serious, and a cor- dependent on the enactment of national legisla-responding fine was imposed. tion subjecting the sale of drink containers to a mandatory deposit. The types and the volumesThe product: of certain drink containers in any given country, together with consumer preferences, determine‘Reverse Vending Machines’ (RVMs) are installed the demand for reverse vending machines andin shops and supermarkets to facilitate the collec- the models that are marketed in the country intion of empty drink containers, such as glass, plas- (3) For example, the difference between the storage capacities(1) The content of this article does not necessarily reflect the of high-end and low-end machines usually meant that big official position of the European Communities. Respon- supermarkets would not opt for a low-end machine, as sibility for the information and views expressed lies enti- the amount of containers handled by a big shop would rely with the authors. require big storage capacity, offered only by a backroom(2) The authors would like to thank Stefan Bechtold, Celine equipment-capable machine. There are significant price Gauer, Jean Huby, Luc Peeperkorn and Joos Stragier for differences between high-end machines and lower priced comments on an earlier version of this article. low-end machines.Number 2 — Summer 2006 19