Brussels Brief - January 12, 2007
January 12, 2007
Full Printable Version in PDF Format
(Adobe Acrobat Reader required, available for free download here)
KEY DEVELOPMENTS
Competition: Gasoline Distribution – Agents and Independent Resellers
Philip Bentley QC
The Spanish Association of Petrol (Gasoline) Service Stations complained to the Spanish Competition Authority that the petrol company CEPSA’s standard agency contract restricted competition by fixing the price at which service stations had to sell to third parties. The Spanish Competition Tribunal rejected the complaint on the grounds that the service stations were commission agents of CEPSA, not independent traders. Upon reference to the European Court of Justice, it was ruled that when service stations undertake non-negligible financial and commercial risks related to the sale of gasoline, the gasoline supplier cannot impose the price of sale to third parties. In the contrary case, the gasoline supplier can determine such price, but the contract could still infringe the competition rules to the extent that exclusivity and non-competition clauses had the effect of “locking up” the market. The case illustrates how competition rules must be reckoned with in all forms of distribution, whether based on agents or independent resellers.
Taxation: Sweden Referred to ECJ Over Foreign Pension Fund Taxes
Andrea Hamilton
The European Commission has announced that it will refer Sweden to the European Court of Justice (ECJ) over its allegedly discriminatory pension tax legislation. Under Swedish law, pension insurance premiums paid by employers into Swedish-based pension insurance funds are exempt from taxes, while pension payments are taxed. In contrast, premiums paid to foreign pension funds are taxed on the same basis as employee salaries, while pension payments are tax exempt. This scheme may make subscription to foreign pension funds unattractive because (i) the taxation takes place earlier, and (ii) employees are potentially subject to a higher overall tax rate during their working lives. The Commission contends that by discriminating against pension funds based in other EU Member States and EEA countries, Swedish law is inconsistent with the principles of free movement of persons and capital, and the freedom to provide services. If the ECJ agrees, Sweden could be forced to change its laws or face fines.
Competition: Infringement Procedure Against Luxembourg Over Access to Telecommunication Markets
Maria Scimemi
The European Commission has sent a reasoned opinion to Luxembourg requesting it to comply with a European Court of Justice (ECJ) ruling of 12 June 2003 regarding access to its telecommunication markets. The ECJ ruling confirmed that Luxembourg had failed to fully transpose into national law Directive 90/388/CEE on competition in the markets for telecommunication services. In particular, the Commission found that procedures for obtaining rights of way to roll out telecommunication networks alongside roads and railway lines in Luxembourg lacked transparency. The Commission considers that despite recent improvements to its legislation, Luxembourg has still not complied with the judgment. The Commission has therefore sent a request explaining further steps which need to be taken by Luxembourg in order to comply. Unless Luxembourg’s legislation is brought into compliance within two months of receipt of the reasoned opinion, the Commission may refer the case to the ECJ for a second time and request that a fine be imposed.
Mergers: Commission Opens In-Depth Investigation into Proposed Takeover of SIG by CVC and Ferd
Maria Scimemi
The European Commission has opened an in-depth investigation into the planned acquisition of joint control by Ferd (owner of Elopak of Norway) and CVC (Luxembourg) over SIG of Switzerland. Both Elopak and SIG are suppliers of carton filling machines and carton material for packaging non-carbonated liquid food products. The carton packaging market in the EEA is highly concentrated with one large supplier (Tetra Pak) and two smaller ones (SIG and Elopak) accounting for virtually 100 per cent of sales. The proposed transaction would combine the second and third largest suppliers, while Tetra Pak would remain the largest competitor. The in-depth investigation will enable the Commission to assess whether the reduction in the number of competitors in such a highly concentrated market would result in anti-competitive effects that harm consumers. A decision is expected to be adopted by 15 May 2007.
Mergers: Commission Opens Second Phase Merger Proceedings in Ryanair – Air Lingus Case
Yannis Virvilis
The European Commission has opened a detailed second phase investigation into the proposed acquisition of Ireland’s flag carrier Air Lingus by the Irish low cost carrier Ryanair. The initial investigation of the Commission showed that there are competition concerns in the passenger air transport market. More specifically, the Commission found that the two companies have significant overlapping activities on a large number of European routes and that on many routes they are the only two competitors. This, coupled with the fact that the barriers to entry in the markets concerned are high, led the Commission to conclude that the transaction could lead to elimination of actual and potential competition on a large number of routes and thus to higher prices for customers. At the end of the first phase of the proceedings, Ryanair proposed a set of remedies that the Commission deemed insufficient to remove its competition concerns.
Environment: Commission Proposes to Include Air Transport in EU Emissions Trading Scheme
Elena Kostadinova
The European Commission has proposed an amendment to the Emissions Trading Scheme (ETS) Directive in order to include aviation. The scheme will cover both EU and foreign-based airlines operating flights between EU airports, and will start in 2011. As of 2012 the EU ETS should also cover emissions from all international flights to or from an EU airport. Whereas national caps for industrial emissions are fixed in national allocation plans, the cap on aviation emission allowances for the next three trading periods, ie, until the end of 2022, will be set at EU level. The allocation of allowances among aircraft operators will also be decided at EU level on the basis of each airline’s share of overall passenger and cargo traffic on the ETS covered routes. Each airline will calculate its annual emissions on the basis of its fuel consumption multiplied by a standard emission factor. Failure to surrender sufficient allowances in a given year will result in a financial penalty of EUR 100 for every tonne of CO2 not covered, and could also result in suspension of the airline’s licence. The Commission expects that this amendment will produce a significant positive environmental impact and only a limited increase in prices for air transport services.
Competition: Final Report on Energy Sector Inquiry Confirms Competition Problems
Elena Kostadinova
The European Commission has published the results of its inquiry into competition in the energy sector. The main problems identified include (i) high levels of market concentration, (ii) vertical integration leading to lack of equal access to infrastructure, and (iii) possible market sharing among incumbent operators. The Commission stated that it will make full use of its powers under antitrust, merger control and State aid rules to address the issues. In particular it will use far-reaching structural measures as remedies for antitrust infringements. In merger cases the Commission will pay particular attention to divestitures, gas release programmes, and the impact of long-term upstream contracts on downstream concentration. Regulatory changes will include the unbundling of network and supply activities, and increased transparency in market operations.
Monday 15 January – Friday 19 January 2007
COUNCIL MEETINGS
No meeting scheduled for next week
COURT OF JUSTICE
Judgments
Company law
C-220/05 Auroux and Others
Competition
C-421/05 City Motors Groep
Social policy
C-385/05 Confédération générale du travail and Others
Social security for migrant workers
C-265/05 Perez Naranjo
Taxation
C-313/05 Brzeziński
Opinions
Approximation of laws
C-17/06 Céline
Competition
C-328/05 P SGL Carbon v Commission
Customs union
C-62/05 P Nordspedizionieri di Danielis Livio and Others v Commission
Free movement of goods
C-195/04 Commission v Finland
Social policy
C-127/05 Commission v United Kingdom
COURT OF FIRST INSTANCE
Judgments
External relations
T-231/04 Greece v Commission
Intellectual property
T-53/05 Calavo Growers v OHMI - Calvo Sanz (Calvo)
