Wilmer Cutler Pickering Hale and Dorr LLP · Major Events and Policy Issues in EC Competition Law, 2002-03 (Part 2) John Ratliff Abstract This article is the second and ﬁnal part

Wilmer Cutler Pickering Hale and Dorr LLPWilmer Cutler Pickering Hale and Dorr Antitrust Series

Year Paper

Major Events and Policy Issues in ECCompetition Law, 2002-03 (Part 2)

John Ratliff∗

∗WilmerHaleThis working paper is hosted by The Berkeley Electronic Press (bepress) and may not be commer-cially reproduced without the permission of the copyright holder.

http://law.bepress.com/wilmer/art20

Copyright c©2004 by the author.

Major Events and Policy Issues in ECCompetition Law, 2002-03 (Part 2)

John Ratliff

Abstract

This article is the second and final part of the overview of major events and policyissues in EC competition law in 2003, following on from last month’s journal ([2004] I.C.C.L.R. 19). This part of the article is divided into three sections: (1) Eu-ropean Commission decisions on cartels, joint ventures/horizontal co-operation,distribution and Articles 82/86 EC. (2) An outline of current policy issues, includ-ing competition and the liberal professions, review of the liner conference blockexemption, and the modernisation of Article 82 EC enforcement. (3) A surveyof areas of specific interest, focusing mainly on recent Commission activity asregards competition and gas supply, with brief notes on the Commission’s leasedlines sectoral enquiry and what the Commission has been doing in sport and me-dia.

This article is the second and final part of theoverview of major events and policy issues in ECcompetition law in 2003, following on from lastmonth’s journal ( [2004] I.C.C.L.R. 19). This part ofthe article is divided into three sections:

(1) European Commission decisions on cartels,joint ventures/horizontal co-operation, dis-tribution and Articles 82/86 EC.

(2) An outline of current policy issues, includ-ing competition and the liberal professions,review of the liner conference block exemp-tion, and the modernisation of Article 82 ECenforcement.

(3) A survey of areas of specific interest, focus-ingmainly on recent Commission activity asregards competition and gas supply, withbrief notes on the Commission’s leased linessectoral enquiry and what the Commissionhas been doing in sport and media.

Overview of major events (continued)

European Commission decisions

CartelsCartel enforcementhas continued apace. TheCom-mission emphasised in 2002 the creation of a sec-ond cartel unit, but this has been disbanded as theCommission generally reorganised on sectorallines in anticipation of the next 10-State ‘‘Enlarge-ment’’ in May 2004.1 Again, there have been manynew decisions (see Table 5 overleaf).

We have not yet seen a revised Notice on finingguidelines, although Mr Rocca has been talkingabout fining and, above all, about deterrence.2 Thekey idea appears to be that large firms should be

fined more, because they should know better andcan afford to police themselves better, and theCommission wants to hit hard and one time onlyto deter, rather than pursue multiple proceedingsagainst large companies. Equally, that in smallmarkets, small firms should be fined less. Boththemesare reflected in theCommission’s decisionspublished this year.

There has also been talk about electronicsearches for information.3 In this context, it maybe interesting to note that the Dutch CompetitionAuthority, theNMA,hasnowpublishedguidelineson such searches.

There is also more international co-operation indawn raids now. Thus, in February 2003, the Com-mission announced that there had been co-ordinated inspections on companies producingplastic additives related to the production of PVC,heat stabilisers, impact modifiers and processingaids on three continents, involving EU, US,Canadian and Japanese competition authorities.4

Finally, there have also been new issues aboutthe confidentiality of corporate leniency disclos-ures, as plaintiff groups have applied for them, andother evidence, in the Austrian Banks Case underthe EC’s new transparency regulations.5

Methylglucamines

On November 27, 2002, the Commission finedAventis Pharma and Rhone-Poulenc Biochemie(both in the Aventis Group) e2.85 million forparticipating in a price-fixing and market-sharingcartel with Merck KgaA from 1990 until 1999.6

Methylglucamine is a chemical used for the syn-thesis of x-raymedia, pharmaceuticals and colour-ings. Merck was granted full immunity because itrevealed thecartel to theCommissionandprovideddecisiveevidenceonthecartel’soperation.Aventisand Rhone-Poulenc were granted a 40 per centreduction for co-operation in the investigation.The market concerned is very small in size (e3.1million in 1999).

Plasterboard

On November 27, 2002, the Commission finedplasterboard producers Lafarge, BPB, GebruderKnauf Westdeutsche Gipswerke and GyprocBenelux a total of e478million for a cartel coveringthe four main markets in the European Union(Benelux, Germany, France and the United King-dom).7 This was the second highest fine everimposed for an infringement, after the Vitamins

[2004] I.C.C.L.R., ISSUE 3 c� SWEET &MAXWELL LIMITED [AND CONTRIBUTORS]

RATLIFF: MAJOR EVENTSAND POLICY ISSUES IN EC COMPETITION LAW, 2002–03 (PART 2): [2004] I.C.C.L.R. 55

Major Events andPolicy Issues inEC Competition Law,2002–03 (Part 2)

JOHN RATLIFF

Wilmer, Cutler & Pickering, Brussels

1. IP/03/603, April 30, 2003. The contact procedure forleniency applications on the Commission’s website re-mains.2. Arbault, EC Commission Competition Policy Newslet-ter, no.2 (Summer 2003), pp.1–7.

3. 2002 EC Commission Competition Report, paras683–684.4. MEMO/03/33, February 13, 2003.5. Notice of action brought in Case T-2/03, VKI v Com-mission [2003] O.J. C-55/37.6. IP/02/1746, November 27, 2002.7. IP/02/1744, November 27, 2002.

Hosted by The Berkeley Electronic Press

Cartel Case (e855 million in December 2001).Lafarge was fined e249.6 million, BPB e138.6million. These companies were found to have re-stricted competition in these markets, exchangedinformation on sales volumes and informed oneanother of price increases on the German and UKmarkets. Lafarge, BPB and Knauf were found tohave participated in the cartel from 1992 to 1998,Gyproc from 1996 to 1998.

Incontrast tomethylglucamine, theCommissionnoted that plasterboard is a very largemarket, somee1.2billion in1997.Lafargewasalsogivenagreaterfine for deterrence because its overall size was fivetimes that of BPB or Knauf. Lafarge and BPB alsohad their fines increased for recidivism, Lafargehaving participated in the cement cartel, and asubsidiary of BPB having participated in thecartonboard cartel. The Commission’s argumentis that at the time when these decisions werenotified to them, the two companies were partici-pating in another restrictive agreement in whichthey persisted.

Food flavour enhancers

On December 17, 2002, the Commission finedJapanese and South Korean companies a total ofe20.56 million for a price-fixing and customerallocation cartel in relation to ‘‘nucleotides’’, ornucleic acid.8 This product is made from glucoseand used to add flavour to foods. The cartel wasfound to have operated from 1988 to 1998.

One Japanese company, Takeda Chemical In-dustries (Japan), was granted full immunity (underthe 1996 Leniency Notice) because it submitteddecisive evidence at a time when the Commissiondidnotknowof thecartel.AjinomotoCo Inc (Japan)was finede15.54million,Cheil JedongCorporation(Korea) e2.74 million, and Daesant Corporation(Korea) e2.28 million.

Specialty graphites

On December 17, 2002, the Commission finedseven companies a total of e60.6 million for takingpart in a price-fixing cartel on the market forisostatic specialty graphites.9 The companies con-cerned were SGL Carbon (Germany), Le Carbone-Lorraine (France), Ibiden Co, Tokai Carbon Co,Toyo Tanso Co Ltd and Nippon Steel ChemicalsCo (Japan), Intech EDM BV and Intech EDM AG(Netherlands), and Graftech International (for-merly UCAR) (United States).

SGL Carbon was also fined e8.81 million for itsinvolvementwithGraphTech International inprice-fixing collusion affecting the market in extrudedspeciality graphite.

GraphTech International was granted full im-munity for both infringements, because it revealedthe existence of the cartels and provided decisiveevidence on them.

Concrete-reinforcing bars

AgainonDecember17,2002, theCommission finednine undertakings a total of e85 million for theirparticipation, togetherwitha tradeassociation, in acartel covering the Italianconcrete-reinforcingbarsmarket.10

The case reflects the changeover from the ECSCTreaty to the EC Treaty in so far as the cartelinfringed Article 65(1) ECSC, which expired inJuly 2002, and the Commission continued the pro-cedure under the EC rules.11 The companies werefoundtohavefixedprices for ‘‘sizeextras’’, thebasicprices and standard payment terms, and to haverestricted or controlled production and/or sales.

The fines ranged from e26.9 million (RivaAcciaio) to e3.57 million (Ferriere Nord). Fines onRiva and Lucchini reflected the fact that thesecompanies are in major groups whose turnover is


56 RATLIFF: MAJOR EVENTSAND POLICY ISSUES IN EC COMPETITION LAW, 2002–03 (PART 2): [2004] I.C.C.L.R.

8. IP/02/1907, December 17, 2002.

9. IP/02/1906, December 17, 2002.10. IP/02/1908, December 17, 2002.11. The Commission’s Communication of June 26, 2002,[2002] O.J. C152/5.

Table 5: Cartels

— Overview:Total fines Highest individual fines(emillion) (emillion)

Methylglucamines e2.85 Aventis was fined e2.85Plasterboard e478.00 Lafarge was fined e249.6Food flavour enhancers e20.56 Ajinomoto was fined e15.5Specialty graphites e60.60 SGLwas fined e27.75Concrete-reinforcing bars e85.00 Ria Acciaio was fined e26.9French beef e16.70 FNSEAwas fined e12Sorbates e134.40 Hoechst was fined e99

— Themes:� deterrence ... and ‘‘multi-product’’ companies;� big and small fines;� transparency disclosures?� cross-border retaliation as effect on trade/‘‘group effect’’ (Dutch Gases/Belgian Beer);� State action reducing fines.


much bigger than the other members of the cartel.The trade association involved, Federacciai, wasfound to have infringed, butwas not fined. FerriereNord’s finewas increased for recidivism.However,because it also co-operated with the Commission,its finewasreduced.Theothercompanies involvedwereAlfaAcciai, Feralpi Siderugica, IRO IndustrieRiunite Odolesi, Leali and Acciaiere e FerriereLeali Luigi in liquidation, Siderpotenza, ValsabliaInvestimenti, and Ferrara Valsablia (nine under-takings, eleven companies in total).

French beef

In April 2003, the Commission took an interestingdecision imposing relatively small fines on sixFrench federations in the beef sector for unlawfulprice-fixing and measures to block imports. Thecontext was the falling price of beef in a secondaryphaseof theBSEcrisis. TheCommissionappears tohave been keen to underline that even those cir-cumstances cannot entitle private parties topursueblatant infringements.13

What appears to have happened is that whenbeef prices collapsed in October 2001, Frenchfarmers started to block imports of foreign beefwith so-called ‘‘inspections’’ of trucks to see wherelivestock was coming from, and sometimes violentblockades of French slaughterhouses.

Keen to resolve such unrest, the Frenchagriculture minister actively encouraged whatwas called a ‘‘cross-industry agreement’’ betweenfour French farmers’ unions and two Frenchslaughterhouse unions. This agreement providedfor thepurchaseofbeefat certain (minimum)pricesand the boycott of imported beef (which wasusually cheaper). There were various press reportswhich were picked up by the Commission,resulting in letters to the French Government anddawn raids on the unions concerned. As a result,the actual agreement was short-lived. However, it

appears that, in practice, the agreement wascontinued as a ‘‘recommendation’’ from the unionsconcerned, in fact implemented by local action.There were some exceptions, where slaughter-houses refused to comply with the demands madeof them, but the decision notes extensive evidenceof ‘‘covert’’ implementation of this type. The Com-mission found that the infringement continuedfrom October 2001 until January 2002.

Various aspects of the case are interesting. First,there have not been many straight cartel cases inthe agricultural sector at EC level, although therehave been quite a few cases on auctions and co-operatives and there have also been agriculturalcases at national level.

Secondly, this is another classic example of howgovernment encouragement can be a trap for allprivate parties concerned. The French ministerstressed thathecouldnotoblige theunions toagree,but had them on his premises to ‘‘encourage’’ themto do so. France had also unlawfully banned im-ports of beef from theUnited Kingdom at that time.

Thirdly, predictably the French unions soughtrefuge in Regulation 26/62, but such claims wererejected by the Commission on the basis that theexception inArt.2(1) is verynarrow. (It is necessaryfor agreement to be between farmers alone, to showthat all the objectives of (what is now) Art.33(1) ECweremetandthat theagreement isnecessary to thatend.)

Fourthly, this is unusual in so far as the fine is onthe ‘‘unions’’ concerned. The Commission stressesthat activity within the scope of legitimate trade orprofessional union representation is not withinArt.81(1) EC, but where, as here, such activity isconsidered to go outside that representation, it iscaught byArt.81(1) EC if the activity has restrictiveeffects on inter-state trade.14

Fifthly, the fines were very low, as the Com-mission gave extensive credit for the exceptionaleconomic context, or, as one defendant put it, ‘‘thehuman crisis’’ which developed beyond the econ-omic one, as farmers faced acute hardship.

The Commission started predictably by con-sidering an agreement on minimum prices andblocking imports as ‘‘very serious’’. In order toassess the relative strength of the unions, the Com-mission decided not to look at market shares andlooked instead at the ratio between the amount ofthe annual membership fees collected by each ofthe farmers’ federations to assess their relative sizeand responsibility.15 The infringementwas of shortduration. The Commission treated the farmers’violence to compel slaughterhouse co-operationas an aggravating circumstance, justifying a 30 percent increase on basic amounts and the covertcontinuation to have justified another 20 per cent.



12. Document 38.279/309 and 310.13. Commission Press Release IP/03/479, April 2, 2003;Decision [2003] O.J. L209/12.

14. Para.112.15. Para.170.

Table 6: French beef

‘‘I arranged for a cross-industry meeting to be heldthis morning at eight-thirty in order to get everyoneto face their responsibilities.‘‘People are now negotiating with the help of the

Ministry, which is trying to iron out any difficulties.I would like to get downstream undertakings to agreeto stop purchasing abroad for a fewweeks, or indeeda fewmonths. Of course, I have no means of obligingthem to do so, the State cannot force them to do so ...‘‘I would like to get all parties to agree to a fair

purchasing price scale.’’12

Commission fine reductions

� minus 60 per cent for the crisis;� minus 30 per cent for State encouragement.


The fines on the slaughterhouse federations werereduced by 30 per cent because of the ‘‘forceful’’French Government pressure to conclude theagreement and a further 30 per cent for the ‘‘veryspecial situation’’ they faced with ‘‘physical co-ercion’’ from farmers.

However, beyond this, the Commission statedthat this is the first decision to penalise an agree-ment concluded entirely between ‘‘unions’’ andwhich relates to a basic agricultural product andinvolves two links in the production chain.16

As a result, the Commission considered thespecific economic context and concluded that this‘‘went beyond a straightforward collapse in pricesor the presence of a well-known disease’’. TheCommission had emphasised earlier in the de-cision that various measures had been taken underthe Common Market organisation for beef in orderto attenuate these circumstances, suggesting there-fore that further action (of the typechallengedhere)was not justified.When assessing the specific con-text, however, the Commission notes suchmeasuresas evidence of the exceptional circumstances.17 Ac-cordingly, the fines were reduced by 60 per cent,rather than the more usual 10–15 per cent for an‘‘industry incrisis’’.The farmers’unionswere finedbetween e12 million and e600,000; the slaughter-house unions between e720,000 and e480,000.

Sixthly, as will be apparent from the above, theCommission did not treat the pressure on theslaughterhouse federation as enough to denythe existence of an agreement at all.

Finally, for once it is theCommission rather thanthe defendant that emphasises that the effectswereuncertain. It appears that imports of beef rose inearly 2002, but the Commission is careful to notethat it is not clear that this was because the agree-ment ended.18

Sorbates

On October 2, 2003, the Commission fined fourproducers of a chemical preservative called a‘‘sorbate’’ a total of e134.4million for a price-fixingand market-allocating cartel between 1978 and1995–96.19 Sorbates are used to prevent thedevelopment of moulds, bacteria and other micro-organisms in foods and beverages. They are alsoused for the coating of wrapping paper or in cos-metics.TherewasoneEuropean (Hoechst) and fourJapanese participants. The case started througha leniency application by one of the Japanesecompanies (Chisso Corporation), which receivedfull immunity. Hoechst was fined e99 million,apparently reflecting increases for recidivism andbeing a co-leader in the cartelwithDaicelChemicalIndustries, together with a reduction of 50 per cent

for co-operation in the investigation. Daicel wasfined e16.6 million, Ueno Fine Chemicals e12.3million, and the Nippon Synthetic Chemical In-dustry Co e10.5 million.

Beer decision

In August 2003, the Commission published itsdecision in the Belgian Brewers—Bilateral Carteland Private Label Cases.20

It may be recalled that this case related to twoinfringements: a form of co-operation or ‘‘non-aggression pact’’ betweenDanoneAlken-Maes andInterbrew in Belgium; and concentration in offersfor private beer supply. The main interest in thecase lies in the finding that Danone demanded a‘‘500,000 hl’’ transfer of business, threateningotherwise to destroy Interbrew’s business inFrance.21 This was treated as evidence of effect ontrade.22 It was also relevant to recidivism, sinceDanone (as opposed to Alken-Maes in Belgium)had been found to have infringed the competitionrules through cartels before.23

Otherwise, the Commission decided, based onthe gravity of the infringement, to set the basicamount for the non-aggression pact at e45 millionfor Interbrew and e25 million for Danone, in partbecause ofmarket share and apparently also in partbecause Interbrew and Danone are large inter-national undertakings and because Danone is a‘‘multi-product company’’. The amounts are per-haps not so remarkable, but the view that inter-national and/or multi-product companies shouldbe fined more is, this author thinks, highly ques-tionable. Fines should relate to infringements, notwhether companies are conglomerates or not, es-pecially if they can be finedmore for recidivism onothermarkets inanyevent.The final amountsof thefines were e45.6 million for Interbrew and e44million for Danone. In the Private Label Case,Interbrew’s fine (e812,000) was increased by afactor of five, and that of Alken-Maes (e585,000)by a factor of two.24

Vitamins decision

In January 2003, the Commission published itsdecision in the Vitamins Cartel Case.25 It will berecalled that this case involvedproceedings relatedto 12 vitaminmarkets. The Commission dealt withseveral infringements in one decision without,however, treating them as a single conspiracy(albeit that the same people were involved inHoffmann La Roche and other companies). TheCommission stressed also that no producer was



16. Para.181.17. Para.185.18. Para.78.19. IP/03/1330, October 2, 2003.

20. [2003] O.J. L200/1. See also [2003] I.C.C.L.R. 59–60.21. Para.53.22. Paras 271–273.23. Paras 314–316.24. Para.344. See also [2003] I.C.C.L.R. 57–58.25. [2003] O.J. L6/1.


held responsible for collusion inproducts inwhichit was not involved.

The value of the EEA market in such productswas some e800 million in 1998. The Commissionnoted the different sizes of the companies con-cerned and their market shares in the productsconcerned. Infringements varied in duration be-tween 1989 and 1999. Some were not subject tofines on account of the five-year prescription rule.

Interestingly, in deciding to apply differentialtreatment to the companies involved, the Com-mission looked at their relative importance ineach of the product markets concerned and theirworldwide product turnover, since each cartel wasglobal.26 At the same time, the Commission statesthat there is no overlap with fines from otherjurisdictions such as the United States because itsfine is only for restrictions on competition in theEuropean Union/EEA.27 As a result, for example,the basic amount of the fine of Hoffmann La RocheforvitaminAwasincreasedfrome20milliontoe30million. Taking account of their size and overallresources, the fines on BASF, Hoffmann La RocheandAventiswere also increased by 100 per cent fordeterrence.

Hoffmann La Roche’s basic amount wasincreased by 50 per cent for its leadership role,and similarly that of BASF by 35 per cent. Aventisobtained a 100 per cent reduction in somemarkets,since it was the first undertaking to offer decisiveevidence on two of the vitamin cartels (and other-wise met the conditions of the 1996 LeniencyNotice). Hoffman La Roche and BASF also pro-vided such evidence but had lesser (50 per cent)reductions as instigators of the cartels concerned.

The key point to understand Hoffmann LaRoche’s huge finewas the accumulation of its finesfor each infringement, each of which had beenincreased for ‘‘differential treatment’’ of the com-panies concerned, and for ‘‘sufficient deterrence’’,with also a 50 per cent increase for having a leader-ship role. The total fine forHoffmannLaRochewase462 million.

Finally, an interesting procedural point is thatthe companies were given the opportunity to com-ment on the written replies of the other parties tothe statement of objections at the Oral Hearing.28

Soda Ash 2 decision (and new appeal)

In January 2003, the Commission published its sec-ond decision in the Solvay, CFK, Soda Ash Case.29

Thisdecision isessentially thesamedecisionas theCommission took in 1990, which the CFI annulledfor lack of proper authentication in 1995. TheCom-mission again imposes a fine of e3 million for amarket-sharing agreement lasting three years, now

almostamodestsumincomparisontomoremodernfines. The Commission notes that the appeal pro-ceedings (CFI and ECJ) took some eight years andnine months, during which time the prescriptionperiod in Regulation 2988/74 was suspended.

One can but note that all this takes far too long,even if one can understand how it happens. In thiscase, Solvay’s appeal was lodged in May 1991, theCFI ruled in June 1995, and the ECJ in April 2000.

German banks—Euro-zone Case decision

In January 2003, the Commission published itsdecision in theGermanBanks (Euro-zoneCurrencyExchange) Case.30 In this case, the Commissionfined five German banks between e28 million ande2.8 million for setting an agreed commission ofsome 3 per cent for the buying and selling of euro-zone bank rates during the three-year transitionalperiod to the introductionof the euro (January1999to January 2002). The purpose was to recover some90per centof the ‘‘exchangemargin’’ incomewhichbanks had made from currency exchange, after theabolition of the ‘‘spread’’ between buying and sell-ing rates for national currencies.

The Commission’s key point was that there wasno need for the banks to standardise the pricesconcerned, the charging structure or any otherservice concept. It may be recalled that the bulk ofEuropean banks settled similar proceedings withchanges to their practices during 2001. Amongother things, the banks argued that the service inquestion was local in nature and hence this was apurelynational case.31TheCommission’s viewwasthat the service of exchanging the currencies ofother EUMember States was ‘‘already cross-borderin nature’’.32 The ‘‘basic amounts’’ for the fines onthe large banks concerned were all increased by100 per cent for deterrence.

Dutch industrial and medical gases decision

In May 2003, the Commission published its de-cision in the Dutch Industrial and Medical GasesCase33 (with a rectificationdecision inMay200334).Thisdecisionisunusual invariouswaysandmeritsa close reading.

Essentially, the case relates to agreements be-tween suppliers of industrial and medical gases inliquid (bulk) form and in cylinders (such as HoekLoos, ASA Air Liquide, and others) in theNetherlands. They were found to have agreed:

� To raise prices;� not to compete for customers in periods after

each price increase so that such increases



26. Paras 678–681.27. Para.773.28. Para.147.29. [2003] O.J. L10/1.

30. [2003] O.J. L15/1. See also [2003] I.C.C.L.R. 62–63.31. Para.153.32. Para.156.33. [2003] O.J. L84/1. See also [2003] I.C.C.L.R. 63.34. [2003] O.J. L123/49.


worked (so-called annual ‘‘cease-fires’’ or‘‘moratoria’’); and

� to co-ordinate certain other trading con-ditions for various periods between 1989and 1991 and 1993 and 1997.

A first issue is the effect on trade. Importantly,based on various merger control cases, the Com-mission found that the geographic market for thesupply of industrial gasses in bulk form and incylinders is limited by high transport costs and istherefore local or regional.35 Governmental regu-lations on the use of cylinders reinforced the viewthat markets were national. The Commissionconcluded that the market for bulk supply wasalso national.

Unusually, the Commission included in its car-teldecisionanassessmentofmarket concentration,including (Herfindahl-Herschmann Index) ‘‘HHI’’figures showing concentration exceeding 1,800 ineach market. The Commission also assessed com-petition in such circumstances, including the like-lihood of retaliation in the event of customer loss.36

It is not entirely clear why the Commission tookthis unusual step for a cartel decision. However, itmay be in relation to effect on trade, since in theabsence of evidence of actual cross-border tradeflows, the Commission argues that one way inwhich trademay be affected in the case is becauseretaliation may be cross-border, on other geo-graphic markets.37

The Commission also argued that trade betweenMember States can be affected because swaps be-tween companies, whichmay be cross-border,maybe affected. The Commission noted that there areconsiderable imports and exports of industrialgases which ‘‘concern almost exclusively salesand swaps within industrial gases groups or be-tween such groups’’.38

Furthermore, the Commission argued that theinfringement could affect the financial flowswithin a group and the profitability of a branchwithin a group ‘‘because of changes in dividendpaymentsor investment fundsneeded’’ (a referenceback to the old German insurance case—Verbandder Sachversicherer).39 The Commission also ar-gued that the downstream customers for the gaseswill be affected, in so far as they export or competewith imports.

Itwill be interesting to seewhat theCFImakes ofthis. At first sight, these elements appear remoteand unconvincing. Unsurprisingly, Air Liquide iscontesting the Commission’s approach, arguingthat the issue is whether the infringements affecttrade, not the fact that the parties are in multi-national groups or might compete through

retaliation in other nationalmarkets. In the circum-stances, the case looks far more like a Dutch case,which (at least afterMay 2004) onewould expect tobe passed to the Dutch Competition Authority toapply Dutch and/or EC competition law.

A second issue in the case is duration. Here, theCommission lacked evidence of one single con-tinuous infringement from 1989 to 1991 (in otherwords, no evidence of meetings or other unlawfulexchanges of information in 1991–93). As a result,the Commission accepted that the earlier periodwas covered by prescription.40

A third issuewas the liability of BOC for the actsof its subsidiary, in so far as there was no evidencethat the group was aware of infringements at thetime. Again a little surprisingly, the Commissionappears to infer responsibility from the fact that thesame internal and external counsel represented thesubsidiary!41 On the other hand, the Commissionappears to have fined BOC only on the basis of itslocal involvement.

Afourthissue is theeffectof theanti-competitivebehaviour, the Commission recording extensivelyargued price increases of the cartel members. Thecompanies concerned, on the other hand, noted anerosion of prices between 1990 and 1999.Interestingly, as in the French Beef Case, the Com-mission accepted that causation in cases like thiscan be complex. Nevertheless, the Commissionfollowed its usual line, suggesting that the cartelmembers would not have carried on repeatedlymeeting if the cartel were perceived as having noimpact.42

Finally, the Commission includes an interestingsection on the issue as to whether a cartel infringe-ment with limited geographical scope should betreated as ‘‘serious’’ or ‘‘very serious’’ in termsof theCommission’s fining guidelines. The Commis-sion’s general position is that an infringement oflimited geographic scope may be categorised as a‘‘serious’’ infringement,butacceptsnoobligation todeviate from the general rule that aprice cartel is byitsnaturea ‘‘veryseriousinfringement’’.43 Itappearsthat the Commission also looked at the generalscope of effects related to the infringement, thelevelofparticipationinthecompanies (i.e.whetheronly at local subsidiary level or higher) and theeconomic significance of the sector concerned(where the Commission noted, for example, thatbanking is of ‘‘outstanding importance’’ for theeconomy as a whole44). Since its decision, theCommission has also conceded a factual mistakein the assessment of one company’s participationgoing to thedurationand therefore reduced the fineon that company by a corresponding amount.



35. Paras 64 et seq.36. Paras 77 et seq.37. Para.372.38. Paras 366 et seq.39. Para.371.

40. Paras 387–388.41. Para.401.42. Paras 418–421.43. Para.425.44. Paras 423–427.


Zinc phosphates decision

In June 2003, the Commission published its de-cision in the Zinc Phosphates Case.45 Zinc phos-phate isaproductusedasananti-corrosionmineralpigment in protective coating systems. The mainpoints of interest regarding the decision are:

� Theexplicitway that theCommissiondetailshow the cartel members divided up sales tocustomers; and

� the Commission’s statement that it is not itspractice to look at the size of the productmarket as a relevant factor to assess the grav-ity of an infringement (i.e.whether it is ‘‘veryserious’’ or ‘‘serious’’), but that it does look atthe geographical scope of the market for thatpurpose. In this case, the Commission tookinto consideration the limited size of theproduct market.46 In practice, this meantthat, taking into account also the EEA turn-over of the different participants, the largestbasic amount before duration increases wasonly e3 million.

Seamless steel tube decision

In June 2003, the Commission published its de-cision in the Seamless Steel Tubes Case.47 Thisdecision was actually taken three and a half yearsago, in December 1999. Essentially, the caseinvolved a market-sharing agreement betweenEuropeanand Japaneseproducers for certain seam-less carbon-steel pipes and tubes called ‘‘oilcountry tubular goods’’ and ‘‘line pipes’’ used fortransporting oil and gas.

The industry has been in crisis since the 1970s,with significant overcapacity (which in 1999 wassome 40 per cent). The arrangement was found tohave operated from 1977 until 1995, but inter-estingly, in view of voluntary export restraints andsimilar measures concluded between the Com-mission and Japan between 1972 and 1990, theCommission only took into account the periodfrom 1990 onwards.48 Fines also reflected the factthat the sales of the companies concerned in theEuropean Union were only some e73 million peryear.49

Joint ventures/horizontal co-operation

3Gmobile network sharing

In April and July 2003, the Commission followedup on its Article 19(3) Notices of last year related

to 3Gmobile network sharing in the United King-dom and Germany, with two decisions clearingthe arrangements on slightly modified terms.50 Itwill be recalled51 that the agreements in the UnitedKingdom are between T-Mobile and mmO2 andprovide for site sharing and national roaming.52

The Commission has now concluded that the sitesharing is not caught by Article 81(1) EC, because:

� It only concerns basic network infrastruc-ture, allowing the parties to differentiatetheir services downstream and compete; and

� the system did not lead to widespread fore-closure for third-party operators (even ifthere were particular problem sites, nationalregulators could also impose site sharing).

Environmental and health considerations werealso taken into account.53

As regards national roaming between networkproviders, the Commission concluded that thislimits competition with respect to coverage, retailprices, quality and transmission speeds. However,it also promotes market entry, leading to a betterand quicker 3G service ‘‘roll-out’’ and coverage.

TheCommission’sposition (reflecting thatof theparties) varies according to the nature of the areaconcerned. National roaming in rural areas of theUnited Kingdom is exempted until December 31,2008. Inurbanareas, suchroaming isexempteduntilDecember 31, 2007, the parties having indicatedthat they would not enter into such agreements inthe 10 largest cities, but only in some small citiescovering less than10per centof theUKpopulation.

The agreements in Germany are again betweenT-Mobile and mmO2 and follow a similar pattern,with exemption variations on national roamingaccording to the circumstances.

Canal Digital

In June2003, theCommission issuedanArticle 19(3)Notice indicating that it planned to take a favour-able decision concerning agreements betweenTelenor Broadband (‘‘TBS’’), Canal+ and CanalDigital related to the distribution of pay-TV pre-mium content channels via the direct-to-home(‘‘DTM’’) satellite platform of Canal Digital.54 Theagreements were entered into when Canal+ soldits 50 per cent stake in Canal Digital to TBS andare designed to secure ongoing supply of Canal+content for the platform.

The main issue was that the Commissionrequired the parties to reduce related periodsof exclusivity in time and scope. Thus, Canal+



45. [2003] O.J. L153/1. See also [2003] I.C.C.L.R. 60–61.46. Paras 302–303.47. [2003] O.J. L140/1.48. Paras 25–27, 108 and 166.49. In October 2003, the Commission published its de-cision in the Methionine Cartel Case: [2003] O.J. L255/1.See also [2003] I.C.C.L.R. 63.

50. IP/03/589,April 30, 2003; [2003]O.J. L200/59; IP/03/1026, July 16, 2003.51. [2003] I.C.C.L.R. 91–92.52. [2003] I.C.C.L.R. 91–92.53. Paras 108 and 99.54. [2003] O.J. C149/16.


undertook not to own a competing DTH/SMATV(satellite master antenna network) distributionplatform in theNordic region for 10years (althoughit could continue to supply other Nordic pay-TVpremium content channels through third-partycable networks). This was reduced to four yearsand the definition of DTH/SMATV distributionwas narrowed to cable networks.

For its part, TBS undertook not to operate a pay-TV premium content channel for DTH/SMATVdistribution and not to distribute such channels ofcompeting suppliers via DTH/SMATV and certainsmaller cable networks for 10 years. (This did notapply to Telenor’s cable television networks.) Thiswas reduced to three years.

The arrangements also provided for the jointacquisition of certain content by the parties, theduration of which was also reduced to three years.

3G patents

In November 2002, the Commission cleared agree-ments for the licensing of patents for 3G mobileservices between a group of some 18 companiescalled the ‘‘3G Patent Platform Partnership’’(‘‘3G3P’’).55 In order to produce 3G equipment,manufacturers need to comply with the ‘‘IMT-2000 3G’’ standard. This standard covers five dif-ferent technologies, each of which can be used toproduce 3G equipment. To make such equipment,manufacturers need access to the patents essentialfor a particular technology.

3G3P notified a set of agreements providing forprocedures to establish whether a patent is essen-tial, to streamline licensing of those consideredessential, and to reduce the overall licence feespaid for the entire portfolio of essential patents.

The Commission noted that ‘‘essential patents’’may compete if two technologies compete, and hastherefore required theparties tomodify theseagree-ments so that there are now five sets of arrange-ments, one for each technology, instead of all theessential patents in one platform.56

The Commission’s idea is that these five sets oflicensing arrangements will not restrict compe-tition in the five technologies concerned.TheCom-mission also took into account that a number of 3Gessential patent holderswere not involved (includ-ing Ericsson, Nokia, Motorola and Qualcomm).

Philips/Sony57

In August 2003, the Commission cleared a set ofagreements between Philips and Sony establishingthe worldwide ‘‘Philips/Sony’’ CD Licensing Pro-grammeandastandard joint licenceagreement (the‘‘2003 SLA’’).58

According to a complex Press Release, Philipsand Sony had co-operated for some years on R&Din the field of optical data storage technology,resulting in joint inventions. In that context,Philips and Sony developed CD system standardspecifications, which were adopted by musiccompanies and consumer electronics manufac-turers, with access to the combined patents of thetwo companies. The CD system standard specifi-cations were subsequently entered into new for-mats, including CD-ROM used by the computerindustry.

However, several CD manufacturers had com-plained that the agreements between Philips andSony and the standard licence agreements infringedArticles 81 and 82 EC. After certain improvementsto the programme, the Commission concluded thatit was covered by the transfer of technology blockexemption.

TheCommission also cleared the 2003SLA tobeoffered to third parties, which covers the essentialpatents for compliancewith the different CD speci-fications, after some changes.

The Commission concluded that the 2003 SLA,as amended, didnot infringeArticle 81ECbecause,among other things:

� The SLA recognises the right of Philips andSony to license their respective patents sep-arately and to give non-assertion undertak-ings with regard to jointly owned patents,whether within or outside the standardspecifications of the CD systems;

� the SLA 2003 provides options for licenseesfor different types of CD;

� the Commission is satisfied that the patentscovered are only the essential ones (after anindependent-expert report);

� licensees are only obliged to license backtheir patents essential for the type(s) of CDthey have selected;

� royalty payment obligations reflect the terri-torial scope and duration of the licensedpatents;

� licenseesareonly required toprovidePhilipswith information regarding royalties bearingCDs produced and sold;

� conditions for access to a ‘‘reduced com-pliance royalty rate have been clarified andmade more attractive’’.



55. IP/02/1651, November 12, 2002.56. In addition, the Press Release states that: (i) eachlicensing agreement is limited to essential patents only;(ii) the agreements are not to foreclose competition inrelated or downstream markets; (iii) licensing is to be onnon-discriminatory terms; (iv) commercially sensitive in-formation is not to be exchanged; (v) 3Gmanufacturers arenot forced to pay for patent rights which they do not need;and (vi) the licensing arrangements ‘‘should not’’ discour-age further R&D and innovation.

57. With thanks to Flavia Distefano for her assistancewith this section.58. IP/03/1152, August 7, 2003.


More information is available on Philips’slicensing website. Apparently, Philips has alsooffered a one-time credit of US$10,000 on royaltiesto each EEA licensee.

REIMS II

In April 2003, the Commission issued an Article19(3) Notice, indicating that it planned to take afavourable decision as regards a revised version ofthe REIMS II postal terminal dues system.59 Thishasnowbeenfollowedupbyaclearancedecision.60

It may be recalled that ‘‘REIMS’’ stands for‘‘Remuneration of Mandatory Deliveries of Cross-Border Mails’’. These agreements provide for aphased increase in the charges which postal oper-ators can make for completing delivery of cross-border mail to specified percentages of thedomestic tariffs concerned. The agreements wereexempted in 1999 on various conditions, notably:

� Certain quality of service criteria (e.g. interms of speed of delivery) had to be met;

� postal operators had to offer a low-costalternative for bulk and commercial mail(called ‘‘Level 3 access’’);

� the maximum agreed collective tariff for ter-minal dues was set at 70 per cent of thedomestic tariff until 2001;

� the postal operators had to introduce a trans-parent cost-accounting system, designed toallow theCommission to assesswhat chargeswere justified for such postal terminationservices.

Since 1999, the postal operators have modifiedtheir agreements. Among other things, they have:

� Admitted the accession of Swiss Post, bring-ing the parties to 17;

� considered quality standards;� agreed on a new phased transitional period

designed to allow them to charge terminalduesof 80per cent ofdefineddomestic tariffsby 2004;

� envisaged renegotiations if the geographicstructure of incoming mail of a postal oper-ator has changed so that the receiving oper-ator cannot cover its costs.

The Commission noted that the quality of cross-border mail delivery had improved. However, theCommission had three big issues:

� First, the Commission reviewed the parties’cost data and proposed a longer phased tran-sitional period to 2006, going only up to 78.5per cent of domestic tariffs. The Commissionconsiders that this is closer to the parties’costs.

� Secondly, the Commission has found that‘‘Level 3 access’’ is not viable. The operatorshave therefore proposed a new, specific‘‘international direct mail’’ system which ismeant to offer an effective low-price alterna-tive system to the general terminal dues.

� Thirdly, taking account of the liberalisationof outgoing cross-border mail since January2003(if it isnotnecessary tosustainuniversalpostal services), the parties have agreed tooffer any third-party operator competingwith a REIMS II party in such services accessto inbound cross-border mail services in itscountry, at rates and conditions which arenon-discriminatory as compared to thoseoffered to the REIMS II party in the sender’scountry.

Other

Several of last year’s decisions have now also beenpublished.61 Thus, the Revised TACA clearancewas published in January 200362; the VISA Multi-lateral Interchange Fee clearance was publishedin November 200263; and the IFPI Simulcastingdecision was published in April 2003.64

InAugust2003, theCommissionalsoapprovedarail jointventure throughtheFrejus tunnelbetweenFrance and Italy.65 In October 2003, the Com-mission cleared the Austrian ‘‘ARA’’ system forthe disposal of packaging waste, which was de-scribed previously.66

Distribution

Interbrew

In November 2002, the Commission published anArticle 19(3) Notice, indicating that it proposed to



59. [2003] O.J. C94/3; IP/03/557, April 23, 2003.60. IP/03/1438, October 23, 2003.

61. In the course of the year, the Commission has alsoinvited comments on the British Airways/Iberia/GBAirways co-operation, [2003] O.J. C217/2; and the BritishAirways/SNAirlines co-operation, [2002]O.J. C306/4.Thelatter was cleared with undertakings as regards theBrussels–Manchester route: IP/03/350, March 10, 2003.62. [2003] O.J. L26/53; see, further, [2003] I.C.C.L.R. 91.63. [2002] O.J. L318/17; see also [2003] I.C.C.L.R. 90–91.(A change concerning the French Groupement des CartesBancaires was also described in a Notice: [2003] O.J.C80/13.)64. [2003] O.J. L107/58. This was described in detail lastyear: [2003] I.C.C.L.R. 89.65. IP/03/1148.66. IP/03/1405, October 17, 2003; [2003] I.C.C.L.R. 88.

Table 7: Distribution

— Interbrew:� clearance for the dominant on conditions;� only brewer above VRBE;

— De Beers: restrictions for efficiency for the dominant?— Other:

� Yamaha: low fine;� Nintendo decision: high fine—300 per cent for

deterrence.


take a favourable position concerning Interbrew’smodified ‘‘tied house’’ purchasing system inBelgium.67 This is interesting as one of the firstexamples of the Commission dealing with distri-bution by a company above the 30 per cent ceilingof the Vertical Restraints Block Exemption (‘‘theVRBE’’), complicated by the fact that Interbrewhadpre-existing agreements reflecting long-term loans,leases and sub-leases, etc.

Interbrew notified its brewery agreement forthe Horeca sector (hotels, restaurants and cafes)in Belgium in June 2000. There were five types ofagreement: loan agreements; lease and sub-leaseagreements;concessionagreements; franchiseagree-ments; and ‘‘opening tax’’ agreements. Interbrewwas found to hold some 56 per cent of the BelgianHoreca sector, followed byAlken/Maes (Scottish &Newcastle)with 13per cent,Haachtwith 6per centand Palm with 7 per cent. The first three focus onPilsner (in Interbrew’s case, Jupiler and Artois),Palm on an amber beer. In 1999, Interbrew’s tiedmarket share in the Horeca sector (measured bythe amount of beer sold through some [11,000–13,000] exclusive ‘‘Interbrew beer’’ outlets) wassome [17–22 per cent] (we are not told the precisefigures).

In the loan agreements, broadly Interbrewloaned money or equipment in return for an obli-gation to sell only Interbrew beer. Typically, theseagreements were for five years. The lease and sub-lease agreements contained similar non-competeprovisions. The duration of the lease agreementsis nine years, renewable twice for a similar periodup to a maximum of 27 years. The franchise agree-ments also reflect a non-compete obligation, andconcerned concessions for the exploitation of thefranchise formula for Leffe pubs (an abbey beer),Hoegaardenpubs (awheatbeer) and ‘‘Radio2’’pubs(a concept franchise with more than one type ofInterbrew beer). Interbrew would also tender forpublic authority ‘‘concessions’’ (in sports centresetc.) and then sell only its own beer through theoutlet. Interbrew had some 100 such concessions,with durations usually from 5–10 years. Finally,Interbrew would sometimes pay the outlet ‘‘open-ing tax’’ for anoperator, a financial benefit in returnfor which Interbrew would require a non-competeobligation.

As notified, the scope of the ‘‘tie’’ varied accord-ing to the typeofagreement.Generally, therewasanobligation for an outlet operator to buy all hisrequirements for beers and other drinks specifiedin the brewery agreement from Interbrew (i.e. notsell competing beers or drinks) (with variationsfrom franchise outlets). Loans and ‘‘opening tax’’agreements entered into after March 2001 tieddraught beer only, and those from June 2001 wereterminable on three months’ notice. Agreementsafter July 2001 required that the operator purchase

at least 75 per cent of his total beer turnover fromInterbrew (instead of a non-compete).

After two rounds of amendment, what the Com-mission required (broadly) was a reduction in thebreadth and extent of the minimum purchasingobligation to give more access to Interbrew’s tiedoutlets for other beers, save as regards draught Pils,core distributed products. The Commission alsorequired shorter termination possibilities for theoperators (three months):

� In the case of loan ties (which accounted formore than 7,000 outlets), the ‘‘quantity forc-ing’’ obligation (exclusive or minimum pur-chasing obligation) only applies to draughtPilsner, allowing operators to sell bottled orcanned Pilsner, or other types of beerwhether draught or bottled, provided thatthe outlet buys at least 50 per cent of its totalbeer requirements fromInterbrew.Moreover,all such agreements are now to be terminableon three months’ notice. The outstandingloan balance is repayable, but without anearly repayment penalty or other financialcompensation.This concerns [11–16per cent]of the tied share.

� As regards some 2,000 loan or bank guaran-tee agreementswhich Interbrew entered intobetween 1997 and 2000 with a duration of10 years, Interbrew undertakes to terminatethe quantity forcing obligation at the lateston December 31, 2006. (The Commissionappears to have accepted a five-year transi-tion period beyond that provided for in theVRBE.)

� In the case of leases, the non-compete obli-gation is reduced in a different way to coverall types of draught beer brewed by Interbrew(Pilsner and others) under its own brands orundera licence (meaning inpracticeTuborg).The operator can therefore sell draughtTrappist beer and all types of bottled orcanned beer made by competitors. Interbrewwill treat its concession agreements in thesame way as the lease or sub-lease contracts.In the case ofLeffe orHoegaarden franchises,Interbrew limits the non-compete obligationto the type of beer that is the subject of thefranchise formula, subject to a minimumpurchase obligation of 25 per cent of all beerpurchases. There is no non-compete ormini-mum purchasing obligation for the Radio 2franchises.

In the Commission’s Press Release for its de-cision in April 2003, the Commission amplified orchanged certain points68:

� First, that the ‘‘50 per cent of total beer turn-over requirement’’ in the loan agreements



67. [2002] O.J. C283/14. 68. IP/03/545, April 15, 2003.


was not thought likely to have major fore-closingeffects, sinceoutletswereexpected toaccount for that through draught Pilsner, nottherefore limiting third-party sourcing forother bottled or canned beers.

� Secondly (although it is not entirely clear inthe Press Release), it appears that in the leaseagreements, the operator can also sell onebrand of a competitor’s draught beer, otherthandraughtPilsner, insteadofbeing limitedto Interbrew’s range of draught beers. This‘‘guestbeer’’ could therefore includewheatoramberbeer,not justbeers likeTrappistwhichInterbrew does not sell. It appears, however,that the ‘‘guest beer’’ will be supplied byInterbrew or a wholesaler appointed by it(and the Commission will review this ‘‘guestbeer’’ system after one year). Here, the Com-mission appears to have been influenced bythe fact that Interbrew owns the premises,only leasing them out.

All of this is very interesting. The brewery sectoris something of a special case, but has been thevehicle for someof theCommission’smostdetaileddecisions on distribution foreclosure/market ac-cess. This is one of the first cases above the 30 percent market-share ceiling in the VRBE. The Com-mission appears to have recognised:

� Theneed to balance the commercial interestsof a supplier which might be considereddominant (Interbrew had 56 per cent of thesector) and was the only market participantoutside the VRBE, with the interest of com-petitors (andcustomers) to see greatermarketaccess; and

� the commercial fact that Interbrew had awhole network of agreements, reflecting com-mercial choices on both sides which onewould think cannot be radically changedovernight.

The overall solutions do not appear that surpris-ing. In other contexts, the Commission has alloweddominant suppliers to have ‘‘50 per cent exclu-sivity’’ obligations on customers, where these maybe justified.

Practically, one may note, however, thatInterbrew’s competitors operating under theVRBE will be allowed to impose stricter ties onHoreca outlets (i.e. they can oblige such outlets tobuyall theirbeer fromthesupplier inexchange forafive-year loan, or for the full durationof any lease orsub-lease if the supplier owns the premises).

It is interesting also to see the Commissionaccepting a three-month notice period withoutpenalty as indicating adequate switching possi-bilities. One senses that the Commission thinksthat one loan from one brewery could be replacedby another loan fromanother—apparently also that

Interbrew’s market position will not de facto detersuch switching. Interesting material, given caseslike Masterfoods II, where the possibility ofswitching on two months’ notice was rejected asbeingsomethingwhich inpractice theoutletwouldnot do.

Finally, the Commission has also stressed thatit has co-operated with the Dutch competitionauthority in relation to another case above theVRBE ceiling involving Heineken69 (and, high-lighting the new European Competition Network(‘‘ECN’’) framework, that it planned a ‘‘workshop’’with the other national competition authorities onbeer (brewery contracts)!).

De Beers diamond distribution

During the year, there have been three develop-ments related to theDeBeers diamonddistributionsystem.

First, in November 2002, the Commissionindicated that it planned to clear an amended newdistribution system called the Diamond TradingCompany’s (‘‘DTC’’) ‘‘Supplier of Choice’’ system(notified inMay2001).70 This has been followedupby a Press Release confirming the clearance inJanuary 2003.71

Secondly, in that same Press Release, the Com-mission has indicated that it objects to a trade/supply agreement between De Beers and AlrosaCompany Ltd (‘‘Alrosa’’), a Russian state-ownedcompany which produces some 20 per cent ofworld production of rough diamonds. Under thatagreement, Alrosa agrees to sell to De Beers somee800 million of rough diamonds over five yearswhich De Beers will subsequently release on themarket. The Commission considers that this in-fringes Articles 81 and 82 EC and sent a Statementof Objections to De Beers and Alrosa.

Thirdly, the Commission has cleared a jointventure between De Beers and LVMH MoetHennessy Louis Vuitton (‘‘LVMH’’) for the retail ofdiamond jewellery under the EC Merger ControlRegulation on the basis that this does notstrengthen the dominant position held by De Beersin rough diamond supply. The Commission’s de-cision contains much information useful to under-standing theSupplier ofChoice andAlrosaCases.72

What appears to be happening is that De Beers ischanging its distribution strategy. Until recently, itcontrolled some 85–90 per cent of rough diamondsupply (i.e. before the diamonds are polished andcut for jewellery). Recently, however, some smallercompetitors have started to supply the market in-dependently. Notably, three companies, Argyle,



69. NMAdecisionofMay28, 2002,Case2036/Heineken.RBB Brief 04, August 2002, andwww.nmanet.nl.70. [2002] O.J. C273/2.71. IP/03/64, January 16, 2003.72. [2003] O.J. L29/40.


Alrosa and BHP Diamonds (‘‘BHP’’), now sellindependently (although, according to the Com-mission’s merger decision, it appears that Alrosahas an agreement to supply half of its productionthrough De Beers and DTC, and that BHP supplies35 per cent of its output via De Beers sales chan-nels). It appears from the Commission materialsthat Argyle has less than 5 per cent of the roughdiamondmarket,Alrosabetween10and15percent(independently), and BHP less than 5 per cent(independently).73 There have been (and still are)arguments for a concentration of supply, in order toprovide consistency and (overtly) to protect pricelevels.

De Beers now controls some 60–65 per cent ofrough diamond supply and is therefore the domi-nant supplier.

Until recently, De Beers supplied the marketthrough some 120 ‘‘sightholders’’, whereby cus-tomers bought pre-prepared ‘‘lots’’ or ‘‘boxes’’ ofrough diamonds sorted by quality and cost, afterso-called ‘‘sights’’ when they saw the diamonds.

Recently, De Beers has indicated that it plans toswitch to a system whereby it will have fewersightholder customers, but will invest with themintermsofgiving themimprovedsupplyandaccessto DTC’s marketing and branding surrounding theDTC name, the so-called ‘‘Forevermark’’ icon andthe ‘‘A Diamond is Forever’’ advertising slogan.Retail strategy through the LVMH joint venturewill be based on the ‘‘DeBeers’’ name. Sightholdersare also to be encouraged to work more with DeBeers’ downstream partners to improve diamonddistribution.

The changes indistribution strategy are aimedatincreasing demand for De Beers diamonds.

Through theSupplierofChoicesystem,DeBeersessentially limits the customers through which itwilldistribute,but intensifies the relationshipwiththem.74

As originally designed, the Commission con-sidered that the system constituted not only aninfringement of Article 81 EC but also an infringe-ment of Article 82 EC because of the criteria forsightholder selection and the amount of infor-mation sought. Under the system, De Beers soughtmuch detailed and confidential information ontheir customers’ operations. Based on that infor-mation, De Beers intended to select a limited num-berofsightholderswithwhichitwoulddobusinessand todetermine the allocation of diamondswhicheach might receive. After the Commission’s inter-vention, this has been reduced. For example, thenumber of questions involved in theDeBeers ques-tionnaire has been reduced from 60 to 21, withcorresponding changes to the rest of the system.

Sightholders also do not have to reveal their mar-keting or promotional initiatives toDTC, savewhereDTC support is sought.

Various sightholder (selection) criteria wereinvolved in the system as originally designed, relat-ing to the strength of the sightholder and com-pliance with certain ‘‘best practice’’ principles,including an obligation not to handle artificiallytreated/synthetic diamonds. The latter has nowbeen removedafter theCommission’s intervention.

De Beers also sought greater information on themarket, although the Commission appears to haveconsidered that it had enough already, partly be-causeDeBeers also has sales subsidiaries selling tothe secondary market (one level after the sight-holders) and polishing operations of its own.

Under the Supplier of Choice system,DTC is notobliged to offer boxes to sightholders, althoughDTCis tousereasonableendeavours tomeetapplications.

The Commission appears to have been con-cerned that the system left sightholders too depen-dent on DTC, giving De Beers too much scope torestrict their commercial behaviour, and thereforehas intervened and accepted a new ‘‘Ombudsman’’dispute resolution system (in addition to existingarbitration and litigation possibilities). TheOmbudsman is to consider whether DTC has fol-lowed improper procedures in its decisions onselection or deselection of sightholders, and alsoin relation to DTC’s supply decisions.

Sightholders are appointed for two-year periodswithasixmonth terminationnoticeperiod (insteadof three months). According to the Article 19(3)Notice, supplies are also to be based on six-monthpurchasing requirement indications. Sightholderswill be able to buyonly the boxes theyhave appliedfor and after inspecting the stones.

Sightholders no longer have to renounce anyclaimsagainstDeBeers relating to theperiodbeforethe Supplier of Choice arrangements.

The Commission’s approval appears somewhattentative as it states the systemcould still beused toartificially reduce supply. It appears that, for themoment at least, the Commission is more focusedon opening up other channels of supply. Hence itschallenge to the Alrosa arrangements. Neverthe-less, although very exceptional, this is an inter-esting and rare example of a dominant supplierapparently being able to modify its distributionstructure with related restrictions to promote ef-ficiency and competition.

Audi authorised services and repair network

In January 2003, the Commission indicated that ithad intervened as regards Audi’s authorised ser-vice network75 after complaints from dealers and



73. The Commission’s merger decision at paras 46 and58–59.74. TheCommission’smerger decision at paras 77 et seq.and the Art.19(3) Notice referred to above.

75. IP/03/80, January 20, 2003, and SPEECH/03/59,February 6, 2003, at p.4; Gambs, EC Commission Compe-tition Policy Newsletter, no.2 (Summer 2003), pp.53–55.


authorised Audi repairers concerning terminationof dealer or authorised repairer agreements beforethe end of the transition period to the new MotorVehicle Block Exemption (‘‘MVBE’’).

In a complex Press Release, the Commission setout its position that carmanufacturers’ agreementswith service repairers which do not also sell carswere not covered by the old MVBE and couldtherefore only reflect qualitative selection criteria,even before the end of the transitional period.

Agreements with car dealers which also in-volved service repairs benefited from Regulation1475/95 until October 1, 2003 and could thereforeinvolvequantitative restrictions.However, theexist-ence of such agreements was no ground for notapplying purely qualitative criteria in other cases.

The Commission emphasised that car dealersperforming service and repair obligations whoseagreements had been terminated before the end ofthe transitional period should also qualify as ser-vice repairersunder the current qualitative criteria.Independent pure service repairers should alsoalready have the same opportunity.

Audi agreed to follow this approach. As a result,various dealer or repairer agreements were rein-stated in theVWnetwork, apparently as authorisedrepairers. The Commission has indicated thatVolkswagen is also doing so, as is Opel.

Yamaha

In July 2003, the Commission imposed a fine ofe2.56milliononYamaha for restricting trade in theEuropean Union and fixing resale prices.76

It appears that Yamaha pursued a number ofpractices, including obligations on official dealers:to sell only to final customers; to purchase exclus-ively fromYamaha subsidiaries; to contactYamahabefore exporting via the internet; and the fixingof resale prices. The Commission indicated thatsuch activities concerned Germany, Italy, France,Austria, Belgium, the Netherlands, Denmark andIceland.

Although the Commission notes that such aninfringement is ‘‘serious’’, it appears to haveimposed a verymoderate fine. It will be interestingto see more precisely why when the decision ispublished.

There have been low or no fines for limitedparallel import cases before (e.g. Triumph motorcycles).77Clearly,however, therehavealsobeenthehuge fines likeNintendo. From thePress Release, itappears that the Yamaha infringement was moresporadic than systematic, being applied only to alimited number of dealers and products, not beingsystematically included in all Yamaha agreementsin the EEA, and that the restrictions were not fullyimplemented. The Press Release also speaks of the

‘‘object’’ of such practices being to restrict compe-tition, more than discussing effects. Yamaha isstated tohave terminated ‘‘amajority’’ of the restric-tions as soon as the Commission intervened. It isnot clear what duration was involved.

Otherwise, this is a classic area of practicalconcern, as companies feel the need for someterritorial restrictions within a selective distri-bution system (limiting cross-sales within the net-work), even though that may be blacklisted in theVRBE.

Nintendo decision

In October 2003, the Commission published itsNintendo decision.78 It will be recalled that thiscase involved parallel import restrictions on mar-kets for game consoles and cartridges such as the‘‘Game Boy’’ system. The Commission fined notonly Nintendo, but also various distributors, andthe fineonNintendowas a recorde149,000millionfor a ‘‘vertical’’ infringement.

The decision explains how this high level wasreached. Essentially, the Commission found that:

� The infringement was very serious and EEA-wide;

� Nintendo’s position should be given morespecific weight;

� Nintendo’s basic amount should beincreased by 300 per cent for deterrence,taking into account its size and overall re-sources, and that it was the manufacturer ofthe products concerned;

� Nintendo continued its infringement, afterthe Commission had started an investigationinto EU video game prices and specificallyNintendo in 1995, justifying a 25 per centincrease.

Although the Commission treated the infringe-ment as vertical and denied Nintendo and othersthe specific application of the (cartel) LeniencyNotice, much of the decision reads like a cartelcase, with classic references to case law on agree-ments and concerted practices.

The Commission also allowed Nintendo andJohn Menzies analogous reductions for their co-operation with the Commission. In Nintendo’scase, this was 25 per cent.

Interestingly, Nintendo was also given a re-duction in its fine of e300,000 million for ‘‘sub-stantial financial compensation to third partiesidentified in the Statement of Objections as havingsuffered financial harm’’.79,80



76. IP/03/1028, July 16, 2003.77. IP/00/1014, September 15, 2000.

78. [2003] O.J. L255/33; [2003] I.C.C.L.R. 97.79. Paras 440, 441.80. In June 2003, the Commission indicated that it hadopened proceedings against Topps for practices designedto prevent imports of Pokemon collectible stickers andcards from EU countries where these are low-priced to


Articles 82/86 ECDeutsche Telekom

In May 2003, the Commission adopted a decisionfining Deutsche Telekom (‘‘DT’’) some e12.6million for what it considered an abusive marginsqueeze forwholesale access to the final (or ‘‘local’’)telecommunications loop between the last switchand the household.81

The Commission found that DT was dominanton themarkets forwholesale and retail access to thelocal loop. As regards wholesale access, DT is theonly network operator offering nationwide retailcoverage in Germany. There are other forms oftechnical infrastructure (fibre optic and wirelessnetworks, satellites and upgraded TV networks)but the Commission found them not sufficientlydeveloped to be equivalent to DT’s network.

After a complex assessment, the Commissionconsidered that DT had been ‘‘margin-squeezing’’.In other words, the Commission found that therewas an insufficient spread between DT’s (whole-sale) local loop access prices andDT’s downstreamtariffs for retail subscriptions.Asa result, third-partycompetitors could not compete for end customers.

The Commission found that, from 1998 to 2001,DT had charged competitors more for unbundledaccess at wholesale level than it charged its sub-scribers for access at the retail level, leavingcompetitors no margin to compete for the retailsubscribers. From2002,prices forwholesaleaccesswere lower than for retail access, but the Com-mission found that the difference was still notenough to cover DT’s own downstream product-specific costs for the supply of end-user services.

The Commission stated that it had reduced thefine intwoways.First, ithadnot increasedthebasicamountof the fine for theperiod from2002onwards‘‘due to the reduced scope for price adjustments’’under German regulation. Secondly, the Commis-sion reduced the basic amount by 10 per cent‘‘becauseof legaluncertaintyabout the tariffsunderscrutiny’’.82

This is an interesting and complex case. Thereare three big issues.

First, the calculationof themarginsqueeze isnewand complex. The Commission had to compare the

single wholesale service (local loop access) to sev-eral retail services (access to analogue, ISDN andADSL connections), in itself a complex task, leav-ing scope for differing interpretations. The Com-mission decided it could do so and then applied a‘‘weighted approach’’ to prices and costs, aggregat-ing retail access for analogue, ISDN and ADSL onthe basis of the number of each variant that DT hadmarketed to its own end-users.

The ‘‘comparable’’ wholesale and retail serviceswere found to be fully unbundled local loop accessand retail access in analogue, ISDN andADSL. TheCommission found that:

� If the average retail prices are below the levelof the wholesale charges, there is a marginsqueeze.

� If DT’s average retail costs were above itswholesale charges, then the Commissionlooked at DT’s product-specific costs for pro-viding its ownretail services, andconsideredthat therewas amargin squeeze if those costsexceeded the ‘‘positive spread’’ between theretail and wholesale prices. DT argued,among other things, that this was too narrowan approach and that revenues for call ser-vices (which also feature in the overallpricing decisions) should also have beentaken into account.

As the Commission acknowledged on fining,this is new, and previously the weighted methodapplied to determine the margin squeeze has notbeen the subject of a formal Commission decision.TheCommission’s decision should bevery import-ant to network industries in similar positions.83

Secondly, there is much controversy over theextent of scope for autonomous conduct which DThad in the case where DT’s wholesale prices wereregulated (apparently at what the German regulat-ory authority considered to be cost level). DT’sretailpriceswerealsoregulated,albeit inadifferentway. Both had been regulated by the Germanauthorities and the German regulator had also con-sidered the issue of a price squeeze.

TheCommission argued that DT could still haveincreased its retail charges to increase the spreadbetween wholesale and retail prices,84 and thatnational action does not prevent the Commissionapplying the EC competition rules. DT also arguedthat this is at odds with its obligations to provideaffordable universal services, while the Com-mission argued that a restructuring of the tariffsconcerned could still achieve that.85

Thirdly, DT argued that the Commission was ineffect applying a per se rule, since no negativeeffectson themarketwere shown.TheCommission



otherswhere theyarehigh-pricedformostof theyear2000:IP/03/866, June 19, 2003.81. IP/03/717, May 21, 2003; [2003] O.J. L263/9.82. Press Release, p.2.

83. Decision, Paras 102–111 and 206.84. Paras 53–57.85. Paras 192–198.

Table 8: Articles 82/86 EC

— Deutsche Telekom:� margin squeeze;� wholesale access compared to several retail

products;� weighted approach;� EC intervention although NRA review;

— IMS: interimmeasures withdrawn.


argued that it was enough if it proved the existenceof themargin squeeze, referring to case law such asHoffmann La Roche and AKZO.86 However, theCommission also considered that the marginsqueeze did raise barriers to entry, noting that fewcompetitors had entered the market thus far.

DT has appealed.

Wanadoo Interactive

In July 2003, the Commission also fined WanadooInteractive, a subsidiary of France Telecom, somee10.35 million for predatory pricing in ADSL-based internet access services to the general pub-lic.87 The Commission considered that between1999 and 2002, Wanadoo marketed its ADSL ser-vices at prices below their average costs (beforeAugust 2001, below variable costs; afterwards,equivalent to variable costs, but below total costs)while France Telecom was expecting significantprofits for itswholesaleADSLprovision to internetservice providers (including Wanadoo). In effect,the Commission argued that this was a deliberatepolicy to take the market for high-speed internetaccess, as it was first introduced. The abuse wasfound to have ended in October 2002 when FranceTelecom reduced its wholesale ADSL prices bysome30percent.Wehavenotyet seen thedecision.

IMS

In August 2003, the Commission withdrew itsinterim measures decision again IMS.88 TheFrankfurt Oberlandesgericht had ruled that, whileIMS Health’s 1860 brick structure is protected byGerman copyright, NDC Health (IMS’s rival) candevelop another brick structure similarly based onadministrative and postal divisions, ‘‘even if theresulting structure might have a similar number ofbrick segments to the 1860 structure and might bedeemed to be derived from that structure’’. It alsoappears that since then, NDC has signed a numberof contracts, some with bigger pharmaceuticalfirms, and therefore may be able to stay on themarket. In addition, AzyX, another would-becompetitor of IMS in Germany, has withdrawnfrom the German market. The Commission there-fore considers that there is no urgency justifying aninterimmeasures decision requiring IMS to licenseits copyright to NDC.

Onthe facts,however,NDC’sGermansubsidiarywas found to have infringedGermanunfair compe-tition law by copying IMS’s 1860 structure andusing it. (In another case, theLandgerichtFrankfurthas made a reference to the ECJ on these issues.89)

Italian railways

InAugust 2003, the Commission announced that ithad followed through and adopted a decision in itscase involving access to Italian railways for anoperator seeking to offer a service from GermanytoMilan viaBasle.90 TheFerroviedelloStato (‘‘FS’’)had refused to offer traction services and refused todiscuss terms for access to track. In the circum-stances, FS was considered to be the only under-taking/operator able to offer such services. FSsettled thecaseandagreedtodealwith these issues,or at least to use its best endeavours to do so. TheCommission emphasised that, in the circum-stances, for FS not to do so would be consideredan abuse of its dominant position.

Other

In January 2003, the Commission published itsreadopted decision in the Soda Ash, Solvay Re-bates Case.91 Aswith the SodaAshCartel Case, thetext is essentially the same, save that there is asection dealing with the appeal which led to an-nulment of the decision for lack of proper authenti-cation/signature.Again, the time takenonappeal isstriking—amounting to almost nine years. Solvayhas now appealed again on the substance.

InMarch 2003, the Commission announced thatit hadsent aStatementofObjections toClearstreamBanking AG.92 The Commission considered thatClearstream is the dominant supplier of clearingand financial settlement services for securitiesissuedunderGermanlaw.ClearstreamistheGermanCentral Securities Depository. The Commission’sobjections relate to an alleged refusal to allowEuroclear Bank SA access to settlement servicesfor German-registered shares for some two years,while Clearstream established a competing cross-border operation. The Commission also allegedthat Clearstream was discriminatory, since othercustomers were given access much more quickly.Moreover, until January 2002, Clearstreamchargeda higher per transaction price to Euroclear than tonational Central Securities Depositories outsideGermany. In the Commission’s view, this is notjustified.

In July 2003, the Commission sentAstra Zenecaa Statement of Objections, alleging that it hadmisused the patent system and other regulatoryprocedures for the marketing of pharmaceuticalsin order to block or delay market entry for genericproducts.93



86. Paras 176–180.87. IP/03/1025, July 16, 2003.88. IP/03/1159, August 13, 2003; [2003] O.J. L268/69.89. CaseC-418/01,Notice of action brought on January5,2002, [2002] O.J. C-3/23.

90. IP/03/1182,August28,2003; thedecision isavailableon the Commission’s website.91. [2003] O.J. L10/10.92. IP/03/462, March 31, 2003. See also, in this field, MrMonti’s speech: ‘‘The integration of European capitalmar-ket infrastructures and competition law’’, SPEECH/02/614, December 5, 2002.93. IP/03/1136, July 31, 2003.


The Commission contended that, contrary toArticle 82 EC, Astra Zeneca concealed the date onwhich it first received its marketing authorisationfor a product called Losec, used in the treatment ofstomach ulcers and other acid-related diseases. Asa result,AstraZenecaobtainedsupplementarypro-tection certificates for Losec, extending its patentprotection. It is also alleged that Astra Zenecaswitched Losec from a capsule formulation to atablet formulation and requested national medi-cines agencies to de-register the market authoris-ations for the capsules, making it more difficult forgeneric producers to obtain marketing authoris-ations and for parallel importers to obtain relatedimport licences.

Otherwise, we await events concerning theMicrosoft and Coca-Cola Cases.94 On Microsoft,the Commission indicated in the summer that ithad sent Microsoft a further Statement of Objec-tions.95 The Commission’s position was thatMicrosoft is leveraging its ‘‘overwhelming domi-nant position from the PC into low-end servers, thecomputers which provide core services to PCs incorporatenetworks’’.Otherwise, theCommission’sposition was that Microsoft’s tying of WindowsMedia Player to the Windows operating systemwas unlawful. It appears that the Commission hasalso given Microsoft the opportunity to commentonproposedremedies.On the first alleged infringe-ment, ‘‘core disclosure obligations’’ to allow inter-face by rival vendors of low-end services are beingconsidered. On the second alleged infringement,there is discussion of untying Windows MediaPlayer from Windows or requiring Mircosoft tooffer competing media players (a so-called ‘‘mustcarry’’ provision). The hearings were set for earlyNovember.96

Current policy issues

Liberal professions

The Commission is continuing to advocate morecompetition for liberal professions. At the end oflast year, the Commission engaged the Institute ofAdvanced Studies in Vienna to study facts con-cerning the regulation of lawyers and notaries,architects and engineers, auditors and account-ants, and medical practitioners and pharmacistsin the European Union. The consultants were alsoasked to do a representative cost-benefit analysis ofthe regulation of some professions.

During the year, the Commission has explainedits position more clearly. Put shortly, it appears tobe that variations in the degree of regulation indifferent Member States show that some restric-tions in some Member States are disproportionateand not objectively justified. If removed, they mayexpand the market for the services concerned.97

Just recently, in October 2003, the Commissionhas released the results of the Vienna Study on theCommission’swebsiteandheldaconferenceonthesubject of the regulation of professional services.Among other things, it has published a list of thekey restrictions for each profession in differentMember States and has suggested that, throughArts 10 and 81 EC and the Italian Matches case,there may be ways to push change further.

These issues need careful evaluation. Manyrules reflect consumer interests, as well as thoseof the professionals concerned. Many rules alsoreflect value judgments concerning objective justi-fications for the rules concerned, or economicassessments which may also be quite valid. AfterWouters, it is alsoclear thatnationalvariationsmaybe allowed.

Whileonecanunderstandwhat theCommissionis doing to advocate competition in services, oneshould therefore not infer too easily from compara-tive studies that any evaluation of relative stan-dards must be to the least demanding standard.On the other hand, there may be a case for mod-ernisation of some rules, allowing for increasedcompetition.

The Commission’s idea now appears to be topersuade the Member States that some liberalis-ation of these areas would be beneficial, eventhough there may be recognised grounds forspecific (often self-) regulation of the professionsconcerned. The Commission appears to betargeting pricing and advertising restrictions first.A key point is that many restrictions stem fromnational legislation, as opposed to private agree-ments.98 It is likely to be a lively debate for someyears to come.



94. Reuters, February 11 and June 19, 2003.95. IP/03/1150, August 6, 2003.96. It appearsanewcomplaintagainstMicrosoftwasalsofiled this spring, in relation to its Windows XP system:Reuters andNew York Times, February 11, 2003.

97. Speech by Mr Monti to the German Federal BarAssociation (Bundesanwaltskammer), March 21, 2003,SPEECH/03/149, available on the Commission’s websiteand as IP/03/420, March 21, 2003.98. 2002 EC Commission Competition Report, paras197–209.

Table 9: Current policy issues

— Liberal professions:� Vienna study;� key restrictions: prices, advertising (andmore?);� persuade greater action because of public

regulation?— Liner conference block exemption:

� can the Commission convince theMember Statesto review it?

� not clear;— Modernisation of Art.82 EC:

� moremovement on Art.81(3) EC than the conceptof abuse.


This has been coming for some time, flanked bysome EC and national competition decisions, no-tably in the United Kingdom and the Netherlands.

Review of liner conference blockexemption99

In March 2003, the Commission published a Con-sultation Paper on the justification for a continuedblock exemption for liner conferences,1 containedinRegulation4056/86.Since then,various responseshavebeenpostedon theCommission’swebsite andthe Commission has continued to advocate thatthe liner conference block exemption should bereviewed.

Essentially, the Commission argues that:

� The exemption is too generous, in so far as itallows horizontal price-fixing and limitationof output, and is unlimited in time;

� it isnowsome16yearsoldand ‘‘[un]likewinethere is no evidence that block exemptionsimprove with age’’.2 In other words, marketconditions may have changed;

� the benefits therefore need to be specificallyjustified, showing that there are not less re-strictive solutions (following an approach,the Commission has also applied to otherblock exemptions recently).

The Commission also notes that with Regulation1/2003, the possibility for further individual ex-emptions has ended.

Against this, one may note that like Regulation26/62 for agriculture, this block exemption is aspecial case, since it was adopted to supplementthe rules of the UNCTADCode of Conduct for linerconferences. In other words, part of the reasoningbehind the exemption was trade considerations intransport, which may still be live issues.

Equally, there is extensivedebate on the benefitsof the stability given to the trades concerned.As theCommissionhaspredicted, there isnowlikely tobea protracted debate, not least because the linerconference block exemption is embedded in aCouncil Regulation, so again the Member Statesmust be convinced to change.

Modernisation of Article 82 EC enforcement

Ideashavebeenaired thisyear tomoderniseArticle82EC.3 It is an interesting thought, becausesomuchof Commission modernisation is about moving to

more effect-based assessments. US lawyers havealso advocated closer parallels to US law. On theother hand, the European Court has maintained itscase law on the concept of abuse, focusing on rulesoperating inmarkets ‘‘weakenedbydominance’’, incases suchasMichelin. (TheCourthas also rejectedclaims that US law would give different results asnot relevant.)

It appears as a result that more reflection isrequired on how usefully to modernise the abuseconcept in the European context. In the meantime,as noted above, the Commission appears to beemphasising that Article 81(3) EC clearance canbe used by the dominant—in the IPGuidelines, thedraft Guidelines on Article 81(3) EC and cases likeInterbrew.

Areas of specific interest

Competition and gas supply

‘‘Acceleration Directive’’In November 2002, the EU Member States reachedpolitical agreement on the so-called ‘‘AccelerationDirective’’ to increase liberalisation in the elec-tricity and gas sectors.4 The main points are:

� Market opening for all non-domestic gas andelectricity customers from July 1, 2004, andfor all other customers, including privatehouseholds, from July 1, 2007;

� reinforced universal service obligations;� legal and functional unbundling for trans-

mission system operators as of July 1, 2004(phased to July 1, 2007 for distribution sys-tem operators);

� regulated third-party access for trans-mission, distribution and liquefied naturalgas facilities. For storage, EU Member Statescanchoosebetweenregulatedandnegotiatedthird-party access regimes;

� regulatory authorities to be established fornetwork access tariffs.



99. With thanks to Oleh Malskyy for his assistance withthis section.1. On the Commission’s website.2. Speech by Mr Monti, June 12, 2003, SPEECH/03/294,available on the Commission’s website.3. See n.53, above. 4. IP/02/1733, November 26, 2002.

Table 10: Competition and gas supply

— Danish gas supply—joint marketing ended and gas tonew customers

— FurtherMarathon settlements:� improved access to pipeline capacity;� entry and exit fees, not contractual paths;

— Gazprom:� territorial restrictions removed and ‘‘Italian’’ gas to

third parties?


Danish gas supply

In April 2003, the Commission announced that,with the Danish Competition Authority, it hadsettled an investigation into the joint marketing ofNorth Sea gas by the Danish Underground Consor-tium (‘‘DUC’’) composed of A.P.Moeller and Chev-ronTexaco.5 The investigation started in July 2001.DUCargued that the arrangementswere covered bythe Specialisation Block Exemption. The Com-mission disagreed. Without prejudice to their pos-ition, the three DUC companies agreed to ceasetheir joint marketing and to market their gas indi-vidually in future.

Moreover, they agreed to offer some 7 billioncubicmetres of gas for sale to new customers over aperiod of five years starting January 1, 2005, orearlier if new gas volumes were available beforethen. This would amount to some 1.4 billion cubicmetres per year, i.e. 17 per cent of the total pro-duction of the DUC parties.

The investigation also concerned certain gassupply agreements between the DUC and DONG,the incumbent Danish gas supplier. It appears thatthere were gas sales agreements between DONGandeach of theDUCpartners. Through these agree-ments, they satisfied Danish demand and suppliedadditional volumes to Sweden and Germany.

Certain provisions have now been terminated:

� A provision obliging DONG to report to theDUC the volumes sold to certain categories ofcustomers in order to obtain a discount orspecial prices;

� anobligation imposedontheDUCpartners tooffer all their future gas finds first to DONG.Here, DONG has committed not to buy thevolumes dedicated by the DUC partners tonew customers, and not to buy any newDUCgas fromApril 2003 until three years after thestart of a newpipelinewhich is being built tolink the Danish gas fields with the existinginfrastructure to the European continent.The pipeline is expected to be operationalby January 1, 2005 at the latest;

� a so-called ‘‘necessary adjustment mechan-ism’’,underwhichDONGclaimedtheright toreduce the amount of gas it would buy fromthe DUC partners if they started to sell gasonto the Danishmarket. DONG argued that itneeded this as protection for its ‘‘take or pay’’obligations in the agreements. The compe-tition authorities accepted this as long asDONG had limited connection possibilitiesto sell gas outsideDenmark.However,DONGagreed to waive the provision six monthsafter the new pipeline starts.

DONG has also agreed to introduce an improvedaccess regime for its off-shore pipelines linking theDanish gas fields to Denmark.

The competition authorities state that they ex-pect this commitment to facilitate competitionin Denmark and also in countries such as theNetherlands and Germany.

FurtherMarathon settlements

InApril and July2003, theCommissionannouncedthat it had continued with theMarathon Case, andhad settled with Gasunie and BEB (having settledthe case with Thyssengas in November 2001).6

The case concerns the alleged joint refusal togrant access to continental European gas pipelinesby a group of five European gas companies. TheNorwegian subsidiary of the US company Mara-thoncomplained.Theredoesnot appear tobe a liveissue with Marathon after an out-of-court settle-ment, but in practice the parties have amended theunderlying practices related to the dispute in orderto settle the Commission proceedings.

Stating that the Commissionhadworked closelywith the Dutch energy regulator, Dte, the Com-mission indicated that it was closing the caseagainst Gasunie after several commitments. Theseare that Gasunie will:

� Publish on its website the contracted trans-port capacity at all entry and all majorexit points of its gas network, improvingtransparency as to available transmissioncapacity;

� introduce an online balancing system toavoidhighprices for gas suppliedbyGasuniebecause of an unexpected increase/or de-crease by one of its customers; and

� improve handling of access requests throughonline screen-based booking procedureswhich are particularly relevant for short-term trading.

Furthermore, Gasunie has undertaken to offer tolink other pipelines to its own system. It appearsthat Gasunie has already improved its accessregime through various measures, includingshort-term transport contracts for one day, and aso-called ‘‘entry/exit system’’ to deal with ‘‘fic-titious’’ transport of gas (which enters the systembut is not actually transported, other gas beingtakenoffelsewheretosupply theorder inquestion).Under the system, shippers only have to bookcapacity at entry and exit but do not have to payforgas transportaccordingtoso-called ‘‘contractualtransport paths’’ which may not coincide with thephysical gas flows.



5. IP/03/566, April 24, 2003.6. IP/03/547, April 16, 2003; IP/03/1129, July 29, 2003;[2003] I.C.C.L.R. 111.


The commitments will remain in place untilJanuary 2007.

As regards BEB, the position is fairly similar.BEB is owned by ExxonMobil and Shell. Marathonsought access to its Northern German pipelinenetwork,whichwas refused. To settle the proceed-ings, BEB has undertaken to:

� Publish on its website available transportcapacity at all entry and major exit points ofits transmission network, as well as avail-ability of storage capacity;

� introduce an online balancing system and abulletin board for shippers to co-operate ontransport and storage. BEB will also allowcompanies to use its storage facilities in de-fined circumstances;

� offer online screen-based booking pro-cedures;

� apply a ‘‘use it or lose it’’ principle for trans-port capacity reservations of its own gastrading branch (so that others can use it asappropriate) and to allow customers to leaseor sub-lease capacity; and

� introduce an entry/exit regime similar to thatfor Gasunie. Prices no longer relate to ‘‘con-tractual paths’’. Apparently, BEB has alsoagreed to consider extending the systemthroughout Germany (presumably if otheradjacent pipeline operators agree).

The commitments will remain in place untilJanuary 2007. Apparently, the Marathon case iscontinuing for two more operators.

Territorial restrictions—Nigeria and GazpromIn December 2002, the Commission closed its in-vestigation into the European gas supply agree-ments of the Nigerian gas company NLNG.7 TheCommission was concerned about territorial salesrestrictions and other barriers to onward intra-EUsales. It is not clear from the Commission’s PressRelease what the Commission found, other than aterritorial sales restriction in one agreement. (Itappears that NLNG is the second largest supplierof liquefied natural gas (‘‘LNG’’) to Europe, withsome 5 billion cubic metres of gas shipped everyyear to customers in Italy, Spain, France andPortugal.)

NLNG has agreed:

� To release the customer bound by the terri-torial sales provision and not to introducesuchprovisions in futuresupplyagreements;

� not to introduce use restrictions in futuresupply agreements (preventing buyers fromusing gas for purposes other than thoseagreed); and

� that the agreements do not include profit-splitting mechanisms, whereby if gas is sold

across borders or for uses other than thoseagreed upon, then the supplier receives ashare of the profits (and not to introducesuch provisions in the future).

In October 2003, the Commission announced asettlement in its long-standing case against theterritorial restrictions in the gas supply agreementbetween theRussian gas supplier Gazpromand theItalian gas supplier ENI.8

As regards the agreement concerned, thecompanies agreed to delete the territorial salesrestrictions from their existing long-term gassupply agreements and not to introduce suchclauses innewcontracts. They also agreed todeletea provisionwhich obliges Gazprom to obtain ENI’sconsent when selling gas to other customers inItaly.

In addition, ENI has agreed to offer significantgas volumes to customers outside Italy over fiveyears. If ENI does not sell enough by a defineddate,it is toorganiseanauction for certaingasvolumesatBaumgarten on the Austrian–Slovakian borderwhere Russian gas is delivered to a number ofEuropean customers. ENI also agreed to increasecapacity on the Trans-Austria Gazleitung (‘‘TAG’’)transit pipeline and offer an improved third-partyaccess regime on the pipeline.

Telecoms—leased-lines sectoral enquiry

In December 2002, the Commission closed its sec-toral enquiry into leased lines, on the basis that theissues relating tohighprices andpossiblediscrimi-nation were now being addressed.9 Notably, theCommission found that leased-lineprices had con-siderably decreased and that national regulatoryauthorities were being more proactive. The Com-mission closed its specific investigations inBelgiumand Italy, buthaskept themopen (togetherwith pressure on the parties to reduce prices) inSpain, while ‘‘closely monitoring’’ the situation inPortugal and Greece.

Sport and media

For reasons of space, the author doesnotpropose togo into the details of sport in the paper this year.However, the author will just note the main eventsfor those following it:

� The Commission opened proceedingsagainst the joint selling of media rights con-cerning the English Premier League inDecember 2002.10



7. IP/02/1869, December 12, 2002.

8. IP/03/1345, October 6, 2003.9. IP/02/1852, December 11, 2002; EC Commission 2002Annual Report, paras 101–103.10. IP/02/1951, December 20, 2002.


� In May 2003, the Commission closed itsinvestigation into Audiovisual Sport afterSogecable and Telefonica’s Via Digitalmerged.11

� In the same month, the Commission indi-cated that it had cleared ticketing arrange-ments for the Olympic Games in Athens in2004.12

� The Commission has adopted a decisionexempting the joint selling arrangements ofUEFA for the media rights to the ChampionsLeague,13 and has published a Notice

proposing clearance of the joint selling ofthemedia rights to the GermanBundesliga.14

� In October 2003, the Commission indicatedthat it was ceasing monitoring of the FIA/Formula One settlement.15

Finally, in the spring of 2003, the Commissionindicated that it was investigating whetherHollywood film studios and European pay-TVhave been colluding to fix the prices and terms formovie rights distributed in the European Union.16



11. IP/03/655, May 8, 2003.12. IP/03/738, May 23, 2003.13. IP/03/1105, July 23, 2003.

14. IP/03/1106, July 24, 2003; [2003] O.J. C261/13. Thereare also recent speeches on these issues on the Com-mission’s website by Herbert Ungerer, Jurgen MenschingandMiguel Pereira.15. IP/03/1491, October 31, 2003.16. Financial Times, January 15, 2003.


Documents

Wilmer Cutler Pickering Hale and Dorr LLP · Major Events and Policy Issues in EC Competition Law, 2002-03 (Part 2) John Ratliff Abstract This article is the second and ﬁnal part