Category Archives: Competition

Free competition is a key element of an open market economy. It stimulates European economic performance and offers consumers a broader choice of better-quality products and services and at more competitive prices.
European Union competition policy ensures that competition is not distorted in the internal market by ensuring that similar rules apply to all the companies operating within in it.
Title VII, chapter 1 of the Treaty on the Functioning of the European Union lays down the basis for the Community rules on competition.

Competition

Competition

Competition Contents

  • Rules applicable to firms: Agreements, Abuse of dominant positions, Mergers
  • Rules applicable to state aid: Plan of action, State aid scoreboard, Exemption by category, State aid to services of general economic interest, Regional aid
  • Rules applicable to specific sectors:  Agriculture, Energy, Postal services, Telecommunications, Transport
  • Competition: international dimension and enlargement: Bilateral agreements, Enlargement, Candidate countries

European Union Institutions and Bodies in relation to Competition

  • European Parliament: Committee on internal market and consumer protection
    Committee on economic and monetary affairs
  • Council of the European Unión: Competitiveness: internal market, industry and research
  • European Commission: Competition
  • European Economic and Social Committee: Single market, production and consumption section
  • Committee of the Regions: Commission for economic and social policy (ECOS)

Enactments

Article 101 (competition) of the Treaty on the Functioning of the European Union (ex Article 81 TEC)

1. The following shall be prohibited as incompatible with the internal market: all agreements
between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
— any agreement or category of agreements between undertakings,
— any decision or category of decisions by associations of undertakings, — any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

Article 107 of the Treaty on the Functioning of the European Union (ex Article 87 TEC)

1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.
2. The following shall be compatible with the internal market:
(a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned;
(b) aid to make good the damage caused by natural disasters or exceptional occurrences;
(c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point.
3. The following may be considered to be compatible with the internal market:
(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the regions referred to in Article 349, in view of their structural, economic and social situation;
(b) aid to promote the execution of an important project of common European interest or to
remedy a serious disturbance in the economy of a Member State; (c) aid to facilitate the development of certain economic activities or of certain economic areas,
where such aid does not adversely affect trading conditions to an extent contrary to the common interest;
(d) aid to promote culture and heritage conservation where such aid does not affect trading
conditions and competition in the Union to an extent that is contrary to the common interest;
(e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission.

Article 109 (procedure for adopting implementing rules for competition) (ex Article 89 TEC)

The Council, on a proposal from the Commission and after consulting the European Parliament, may make any appropriate regulations for the application of Articles 107 and 108 and may in particular determine the conditions in which Article 108(3) shall apply and the categories of aid exempted from this procedure.

Exemptions from consultations on passenger tariffs and slot allocation at airports

Exemptions from consultations on passenger tariffs and slot allocation at airports

Outline of the Community (European Union) legislation about Exemptions from consultations on passenger tariffs and slot allocation at airports

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Competition > Rules applicable to specific sectors > Competition in transport

Exemptions from consultations on passenger tariffs and slot allocation at airports

1) Objective

To exempt, subject to certain conditions, consultations on passenger tariffs and slot allocation at airports from the competition rules.

2) Document or Iniciative

Commission Regulation (EEC) No 1617/93 of 25 June 1993 on the application of Article 85(3) of the Treaty to certain categories of agreements and concerted practices concerning joint planning and coordination of schedules, joint operations, consultations on passenger and cargo tariffs on scheduled air services and slot allocation at airports [Official Journal L 155 of 26.06.1993].

Amended by the following measures:

Commission Regulation (EC) No 1105/2002 of 25 June 2002 amending Regulation (EEC) No 1617/93 as regards consultations on passenger tariffs and slot allocation at airports [Official Journal L 167 of 26.06.2002];
Commission Regulation (EC) No 1083/1999 of 26 May 1999 amending Regulation (EEC) No 1617/93 on the application of Article 85(3) of the Treaty to certain categories of agreements and concerted practices concerning joint planning and coordination of schedules, joint operations, consultations on passenger and cargo tariffs on scheduled air services and slot allocation at airports [Official Journal L 131 of 27.05.1999];
Commission Regulation (EC) No 1523/96 of 24 July 1996 amending Regulation (EEC) No 1617/93 on the application of Article 85(3) of the Treaty to certain categories of agreements and concerted practices concerning joint planning and coordination of schedules, joint operations, consultations on passenger and cargo tariffs on scheduled air services and slot allocation at airports [Official Journal L 190 of 31.07.1996].

3) Summary

Background

Under Regulation No 3976/87, which authorises the Commission to grant block exemptions to certain categories of agreements and concerted practices which relate directly or indirectly to the provision of air transport services, this Regulation is designed to exempt consultations on passenger tariffs and slot allocation at airports from Article 81(1) of the EC Treaty. The Commission may withdraw the benefit of the block exemption.

Scope

In 1993 the scope of this Regulation was broad enough to include agreements and concerted practices concerning joint planning and coordination of schedules, joint operations, consultations on tariffs and slot allocation at airports which could restrict competition and affect trade between Member States. Numerous successive amendments significantly reduced the scope of this Regulation. It is now limited to consultations on passenger tariffs and slot allocation at airports.

Conditions governing application

The exemption concerning the organisation of consultations on passenger tariffs applies on condition that:

  • participants discuss passenger tariffs only;
  • for each tariff category and for the seasons covered by consultations, passengers are able to combine the service with services on the same route on the same ticket and, in so far as circumstances allow, to replace or change reservations;
  • passenger tariffs are applied on a non-discriminatory basis;
  • participation in consultations is optional and open to all air carriers;
  • consultations are not binding on participants, which means that participants must maintain, after consultations have ended, the right to act independently on passenger tariffs;
  • consultations do not give rise to an agreement on staff pay or other aspects of tariffs covered by the discussion;
  • where tariffs have to be notified, each participant informs the competent authorities of the Member States concerned, on an individual basis, of any tariff not covered by the consultations.

The exemption concerning slot allocation and scheduling applies on condition that:

  • consultations are open to all air carriers;
  • priority rules are drawn up and applied without any discrimination;
  • the priority rules are made available to any interested party on request;
  • new arrivals are entitled to 50% of new or unused slots;
  • by the time of these consultations at the latest, the participating carriers have access to the information.

Air carriers must notify the Member States concerned and the Commission of the date, place and subject of these consultations at least ten days in advance so that observers from the Commission and the Member States can take part in them. Air carriers are required to submit a report on the consultations.

Other provisions

To help the Commission decide whether the block exemption should be extended beyond 30 June 2005, this Regulation requires air carriers participating in conferences to collect certain data on the relative use of the passenger tariffs set in the conferences.

Act Date
of entry into force
Final date for implementation in the Member States
Regulation (EEC) No 1617/93 01.07.1993
Regulation (EC) No 1523/96 20.08.1996
Regulation (EC) No 1083/1999 27.05.1999
Regulation (EC) No 1105/2002 29.06.2002

4) Implementing Measures

5) Follow-Up Work

This summary is for information only. It is not designed to interpret or replace the reference document, which remains the only binding legal text.

Competition in transport

Competition in transport

Outline of the Community (European Union) legislation about Competition in transport

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Competition > Rules applicable to specific sectors > Competition in transport

Competition in transport

Competition within the transport industry enables citizens to benefit from efficient and cheaper transport. Free competition also acts as a driving force to open up European networks and therefore gives investments and the network a continental dimension. In this context, the European Union is focusing on regulating this competition through legislation applicable to each mode of transport and a framework for State aid.

ANTITRUST LEGISLATION

Transport by rail, road and inland waterway

  • Competition in transport by rail, road and inland waterway

Maritime transport

  • Freedom to provide maritime transport services
  • Freedom to supply services, competition, unfair pricing practices and free access to ocean trade
  • Exemption for certain agreements between liner shipping companies (“consortia”)

Air transport

  • Exemption of certain air transport agreements from EU competition rules
  • Exemptions from consultations on passenger tariffs and slot allocation at airports

STATE AID LEGISLATION

Transport by rail, road and inland waterway

  • Public passenger transport service by rail and road

Maritime transport

  • Community approach to State aid for transport by sea
  • State aid to shipbuilding (I)
  • State aid to shipbuilding (II)

Air transport

  • Guidelines on State aid for developing regional airports

Guidelines on State aid for developing regional airports

Guidelines on State aid for developing regional airports

Outline of the Community (European Union) legislation about Guidelines on State aid for developing regional airports

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Competition > Rules applicable to specific sectors > Competition in transport

Guidelines on State aid for developing regional airports

Document or Iniciative

Commission Communication of 9 December 2005 “Community guidelines on financing of airports and start-up aid to airlines departing from regional airports” [PDF ] [Official Journal C 312 of 09.12.2005].

Summary

The purpose of these guidelines is to clarify how the competition rules apply to the financing of airports and to start-up aid granted to airlines by the State. The Commission’s aim is to tackle air transport congestion in the main European airports and make it easier for the European public to travel, while ensuring that the competition rules are complied with. It also takes the view that developing the regional airports also helps to develop the regional economies concerned.

Financing of airports

The Commission makes it clear that the financing and provision of airport infrastructure by the public authorities must comply with the Community rules on State aid. Aid may be justified and declared compatible provided it meets an objective of general interest, such as regional development or accessibility. Additional conditions are that the aid must be in proportion to the objective set and must not adversely affect the development of trade within the EU.

Addressing the issue of subsidies for the operation of airport infrastructure, the Commission makes a distinction according to airport size since, while funding granted to airports with fewer than one million passengers a year is unlikely to distort competition or affect trade to an extent contrary to the common interest, an operating subsidy for an airport with more than one million passengers a year may constitute State aid and must therefore be notified to the Commission, which will examine its impact on competition and trade between Member States and, where appropriate, its compatibility. On the other hand, the Commission has decided that public service compensation constituting State aid granted to airports with fewer than one million passengers entrusted with a mission of general economic interest should be exempted from the notification obligation and declared compatible.

Start-up aid for airlines

Start-up aid granted to airlines operating from regional airports is a way of attracting airlines to new destinations. Operating aid of this kind is justifiable, temporarily, only in the case of small airports that do not yet have the critical mass needed to reach break-even point. In addition, the aid must provide airlines with the necessary incentive to create new routes or new schedules operated from the regional airports in question.

Large airports, on the other hand, benefit from economies of scale and are able to attract connections. This results in air traffic being concentrated on a small number of hubs which are then faced with major congestion problems. Encouraging the development of regional airports will help to make air traffic in Europe less congested and provide scope for economic development in the regions concerned.

Consequently, the Commission considers that start-up aid for the operation of new routes should be allowed for a maximum of three years (five years in the case of the outermost regions). The duration of start-up aid is clearly a sensitive issue. A balance needs to be found between facilitating the development of regional airports in their formative years and open and fair competition between European airports. The Commission takes the view that a period of three years (five years in the case of the outermost regions) meets the objectives of regional development while satisfying the requirements of fair competition.

This type of State aid may be granted to airlines either by a public authority (central, regional or local government) or through the airports that receive public subsidies. The Commission emphasises the fact that subsidies must be granted only for new routes or new schedules.

In addition, it will not be acceptable to grant start-up aid for a new air route corresponding to an existing high-speed rail link. This concern to ensure that the different modes of transport are mutually complementary is a reflection of the intermodal approach that the Commission is seeking to promote, e.g. by encouraging cooperation between the rail and air transport sectors in an effort to deal more effectively with the effects of saturation and pollution around urban areas.

The State aid guidelines apply equally to both private and public airports. The term “State aid” refers to the origin of the funds not the status of the airport. For example, a public airport may act as a private investor by granting subsidies to airlines from its own resources on the basis of commercial profitability considerations. Conversely, if a private airport uses public resources, granted by a regional or local authority for example, this constitutes State aid.

The Commission recognises the role of airlines and airports in the process of opening up European airspace and certain regions. The exponential growth of low-cost carriers in Europe has done much to help the establishment of a network of interregional air routes, making it easier for the general public to travel and promoting the growth of the local economies and job creation.

Background

These guidelines set out a legal framework for the financing of airports and for State start-up aid used by regional airports for the benefit of airlines. They thus spell out the principles underlying Commission Decision 2004/393/EC of 12 February 2004 in the Ryanair/Charleroi case. These new guidelines add to rather than replace the 1994 guidelines. They are the outcome of extensive consultation of the various parties involved in air transport and its effects on regional development.

Related Acts

Commission Decision 2004/393/EC of 12 February 2004 concerning advantages granted by the Walloon Region and Brussels South Charleroi Airport to the airline Ryanair in connection with its establishment at Charleroi [OJ L 137 of 30.04.2004].

Community guidelines on the application of Articles 92 and 93 of the EC Treaty and Article 61 of the EEA Agreement to State aids in the aviation sector [OJ C 350 of 10.12.1994].

 

State aid to shipbuilding

State aid to shipbuilding

Outline of the Community (European Union) legislation about State aid to shipbuilding

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Competition > Rules applicable to specific sectors > Competition in transport

State aid to shipbuilding (I)

Document or Iniciative

Council Regulation (EC) No 3094/95 of 22 December 1995 on aid to shipbuilding [See amending acts].

Summary

Regulation (EC) No 3094/95, which was the result of an agreement concluded in 1994 within the framework of the Organisation for Economic Cooperation and Development (OECD) regarding normal competitive conditions in the commercial shipbuilding and repair industry, cannot enter into force until the agreement has been ratified by all the parties. Given the reluctance by the United States to ratify, the Council initially adopted Regulation (EC) No 1540/98 in its place. This Regulation has now expired and has been replaced by the link on state aid to shipbuilding.

Definition of some of the terms used in the Regulation (“shipbuilding”, “ship repair”, etc.).

Enumeration of the various types of aid and the conditions which must be satisfied for them to be judged compatible with the common market:

  • social assistance (when such aid is intended to cover the cost of measures for the exclusive benefit of workers who lose retirement benefits or who are made redundant or are otherwise permanently deprived of their employment in the respective shipbuilding, conversion or repair enterprise, when such assistance is related to the discontinuance of shipyard activities, bankruptcy, or changes in activities other than shipbuilding, conversion or repair);
  • research and development aid (when such aid relates to fundamental research, basic industrial research, applied research or development, provided the limits set by the Regulation are observed);
  • indirect aid (when this is given in the form of state loans and guarantees, as development assistance to a developing country or for the building or conversion of ships, provided the conditions laid down in the Regulation are observed).

Derogations in favour of Spain, Portugal and Belgium, whereby reconstruction aid granted in the form of investment assistance and any other aid for social measures not covered by the Regulation and granted after 1 January 1996 may be authorised, provided the conditions laid down in the Regulation are observed.

Possibility of considering other aid to be compatible in the particular cases listed in the Regulation.

Monitoring procedure:

  • obligation on Member States to give the Commission advance notice of any aid scheme or amendment of an existing scheme, any decision to apply an aid scheme to an undertaking or any individual application of aid schemes;
  • obligation on Member States to provide the Commission with various reports on aid, on the basis of which the Commission draws up an annual overall report to serve as a basis for discussion with national experts.

References

Act Entry into force – Date of expiry Deadline for transposition in the Member States Official Journal
Regulation (EC) No 3094/95 31.12.1995 OJ L 332 of 30.12.1995
Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EC) No 2600/97 23.12.1997 L 351 of 23.12.1997

Related Acts

Seventh Commission report to the Council on the situation in world shipbuilding [COM (2003) 232 final – Not published in the Official Journal].

The countries or regions with the largest market shares in this sector are Japan, South Korea, China and the European Union. The sector is currently reeling from a deep crisis caused by three factors: past over-ordering, the global economic slowdown – and particularly the US slowdown – and the repercussions of September 11.

Order intake worldwide fell by 12.3% from 2001 to 2002, following a decrease of 20.7% between 2000 and 2001. European shipyards have, however, been the worst affected by this slump, with orders generally down 50% on 2001 and by over 70% compared to 2000. The hardest hit vessels are container ships and cruise ships. Only oil product tankers and bulk carriers have seen increased ordering, due to the replacement of old tonnage following new European Union maritime safety regulations and strong domestic demand in the Far East.

The main shipbuilding regions have, however, been affected in different ways: Japanese yards have the advantage of strong domestic demand, especially for bulk carriers; South Korea and China are battling for tanker contracts; and the European Union is only really active in the ferries and small tankers segment, where replacement needs are building up, although it is possible that Korean shipbuilders might try to further penetrate this market segment.

Prices: the statistics show that some categories of vessel are particularly affected by a major drop in market prices. Large container ships have seen their sales prices fall as a result of excessive price-cutting by Korean yards. The trend has been such that production costs have not always been covered. This is all the more surprising as the current weakness of the US dollar against the euro, won and yen should have led to an across-the-board increase in US dollar prices. Studies have also been carried out to investigate the relationship between the normal price, which is the full cost of production plus a profit margin of 5%, and the actual contract price charged by certain Korean shipyards. Given that production costs have risen in recent years, the gap between contract prices and normal prices has widened further. The studies are based on an analysis of several Korean yards and have revealed that the difference between the normal price and the contract price ranges from between -1% and -39%. All these results indicate a clear trend: Korean shipyards are trying to grab every order that appears in the market no matter the cost, despite assertions made to the contrary by the management of the different Korean groups. This strategy could be damaging if Korean yards fail to take certain factors into consideration, such as inflation and debt servicing, and major financial difficulties could ensue in the short term.

Sixth Commission report to the Council on the situation in world shipbuilding [COM (2002) 622 final – Not published in the Official Journal].

Following the breakdown of two rounds of talks conducted by the Commission (26-27 August 2002 in Seoul and 24-27 September 2002 in Brussels) the Commission had no choice but to initiate proceedings with the World Trade Organisation (WTO) and to start bilateral consultations with the Republic of Korea. At the same time a temporary defensive mechanism was authorised for certain market segments and for a limited period only.

The crisis in world shipbuilding is deepening with very slow order intake in the major shipbuilding regions in the first six months of 2002. The main reasons are past over-supply, slowing economies around the world and the effects of 11 September. Only Japanese yards still manage to fill building slots. However, this is helped a lot by domestic demand, in particular for bulk carriers, as has been long-standing practice in this region.

World-wide ordering of new ships in the first half of 2002 was down by almost two thirds compared to average quarterly figures in 2000, which was admittedly the best year ever for shipbuilding. In the EU the situation is even worse, with ordering down by almost 80% compared to 2000. Prices for new ships have declined further and are now at the lowest level for more than a decade. Yards in South Korea have further lowered offer prices despite increases in all major cost factors, and a number of Korean yards may find it difficult to meet their financial obligations if order intake is not increased soon.

Fifth Commission report to the Council on the situation in world shipbuilding [COM (2002) 205 final – Not published in the Official Journal].

The world shipbuilding market continues to face serious difficulties due to a substantial imbalance of supply and demand. Past expansion of shipyards, mainly in Korea, but now increasingly also in China, has led to price depression. Thanks to a historically high level of ordering in 2000, prices recovered to some extent, but the significant drop in orders in 2001 has led to a new reduction in prices. The year 2001 has been very problematic for the maritime industries worldwide: the recession in the United States and the terrorist attacks of 11 September have reduced the demand for sea trade and cruises respectively. The decline in ordering affected the container ship and cruise ship sectors most, leading to a drop in overall market shares for Korea and the EU, which are particularly strong in these segments.

The detailed cost investigations undertaken by the Commission show that certain Korean yards continue to price ships below cost while others are trying to improve their bottom line. Despite various rounds of talks with Korea, the Commission did not manage to convince the Korean authorities and yards to fully implement market principles and allow a shake-out of non-viable companies. An improvement in the market situation is therefore unlikely and the Commission has consequently proposed counter-measures to the Council, including preparing the ground for requesting a dispute settlement at the World Trade Organisation and the introduction of a temporary defensive mechanism for shipbuilding.

Fourth Commission report to the Council on the situation in world shipbuilding [COM (2001) 219 final – Not published in the Official Journal].

The year 2000 has seen a significant expansion in orders for new ships. Nearly 56% more orders were placed as compared to 1999, primarily benefiting South Korean shipyards, which have seen their market share increase again. EU yards also benefited considerably from the higher demand for ships, although orders for cruise ships probably played a dominant role here. In 2000 South Korea has consolidated its dominant position on the world shipbuilding market, accounting for more than 35 % of all tonnage ordered worldwide. If cruise ship orders are included, the market share for the EU and Norway is around 18 % (in cgt). However, if they are excluded from the overall figures, the market share of EU yards for new orders in 2000 is below 10 %. In 2000 prices for new ships are reported to have recovered in certain market segments from the very low levels seen after the Asian crisis in 1997.

Third Commission report on the situation in world shipbuilding [COM (2000) 730 final – Not published in the Official Journal].

In this report the Commission confirms the general trend highlighted in the second report of 18 May 2000, namely that, despite increased orders, ship prices have not on the whole recovered the ground lost since 1997. Prices continue to be depressed owing to the very low offer prices from yards in South Korea, which is now the biggest shipbuilding country in the world. Over the first eight months of 2000, its shipyards took more than 40% of all new orders. The Commission considers the stagnation in prices to be all the more alarming in that the European Union has drastically cut back state aid to shipbuilding. Despite the signing of the Agreed Minutes in June 2000 aimed at obtaining from South Korea firm commitments on non-intervention in the financing of shipbuilding, bilateral talks ended in failure. The Commission thus plans to:

  • continue its monitoring of the market situation;
  • examine the European industry’s complaint of October 2000 against Korean dumping, in order to deal with this problem under WTO rules;
  • remain open, at the same time, to any Korean proposals;
  • continue efforts to re-establish fair competition at international level;
  • encourage the International Monetary Fund to ensure that the restructuring of Korean shipyards is closely monitored;
  • continue to cooperate with the industry on competitiveness issues;
  • examine with the Council any possible action to address the problem.

Second Commission report on the situation in world shipbuilding [COM (2000) 263 final – Not published in the Official Journal].

The report takes stock of the world shipbuilding market. The market is in crisis, with supply outstripping demand. Vessel prices are falling in the face of unbeatable competition from Korean yards, which are prepared to sell at a loss in order to ensure market share and cash flow. To address the problem, the European Commission obtained an agreement from the Korean authorities to restrict State financial intervention in the shipbuilding industry. The Commission also gathered evidence pointing to unfair competition, and a complaint may be filed under the Trade Barriers Regulation.

First Commission report on the situation in world shipbuilding [COM (1999) 474 final – Not published in the Official Journal].

The report describes overcapacity on the shipbuilding market, with a marked imbalance between supply and demand caused mainly by South Korea’s increased capacity. Vessel prices were between 15 and 30% down on 1998 levels, stimulating demand and increasing the Korean yards’ market share. There were reasons to believe that Korean yards were offering vessels at below-retail rates.

Council Regulation (EC) No 1177/2002 of 27 June 2002 concerning a temporary defensive mechanism to shipbuilding [Official Journal No L 172 of 2.7.2002].

The commitments contained in the Agreed Minutes signed by the European Commission and the Government of the Republic of Korea on 22 June 2000 with a view to ensuring an effective price surveillance mechanism have not been effectively implemented by the Korean side and therefore a satisfactory result has not been obtained.

Consequently, despite the ban imposed by Council Regulation (EC) No 1540/98, the 2002 Regulation introduces a temporary defensive mechanism applicable to certain segments of the market (namely container ships and product and chemical tankers) for a short and limited period authorising support of 6% of contract value before aid. The aim is to enable Community shipyards to overcome unfair Korean competition. This Regulation expires on 31 March 2004.

This summary is for information only. It is not designed to interpret or replace the reference document, which remains the only binding legal text.


Another Normative about State aid to shipbuilding

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic

Competition > Rules applicable to specific sectors > Competition in transport

State aid to shipbuilding (II)

To remove the differences between the rules applicable to the shipbuilding industry and to those applicable to other industrial sectors.

2) Document or Iniciative

Framework on state aid to shipbuilding [Official Journal C 317 of 30.12.2003].

3) Summary

Background

Since the early 1970s, state aid to shipbuilding has been subject to a series of specific Community regimes. This framework, which replaces Council Regulation (EC) No 1540/98, is designed to remove the differences between the rules applicable to the shipbuilding industry and those applicable to other industrial sectors. However, it takes account of specific factors affecting the shipbuilding sector, namely:

  • the nature of the world shipbuilding market (overcapacity, depressed prices, etc.);
  • the nature of ships as very large capital goods in respect of credit facilities;
  • the difficulty of applying the World Trade Organisation (WTO) rules on unfair trading practices to the shipbuilding sector;
  • the existence of agreements within the Organisation for Economic coordination and development (OECD) in the shipbuilding sector; this mainly concerns the 1994 Agreement on respecting normal competitive conditions in the shipbuilding and repair industry, which has not entered into force and which the OECD is in the process of replacing.

Definitions

For the purposes of this Framework, the following definitions shall apply:

  • shipbuilding: the building of self-propelled seagoing commercial vessels;
  • ship repair: the repair or reconditioning of self-propelled seagoing commercial vessels;
  • ship conversion: the conversion of self-propelled seagoing commercial vessels of not less than 1 000 gt, on condition that conversion operations entail radical alterations to the cargo plan, the shell, the propulsion system or the passenger accommodation;
  • self-propelled seagoing commercial vessels, including:

– vessels of not less than 100 gt used for the transportation of passengers and/or goods;
– vessels of not less than 100 gt for the performance of a specialised service (for example, dredgers and ice breakers);
– tugs of not less than 365 kW;
– fishing vessels of not less than 100 gt;
– unfinished shells of vessels.

Scope

Aid to shipbuilding includes aid to any shipyard, related entity, shipowner or third party which is granted, whether directly or indirectly, for the building, repair or conversion of ships.

The Framework provides for special measures in relation to investment aid for innovation, closure aid, export credits, development aid and regional aid.

Research, development and innovation aid

Aid granted to defray expenditure by shipbuilding, ship repair or ship conversion firms on R&D projects may be considered compatible with the common market if it complies with the rules laid down in the Community framework for state aid for research and development.

Aid granted for innovation in existing shipbuilding, ship repair or ship conversion yards may be deemed compatible with the common market up to a maximum aid intensity of 20% gross, provided that it contributes to the search for innovative products and processes.

Closure aid

Aid to defray the costs resulting from the total or partial closure of shipbuilding, ship repair or ship conversion yards may be considered compatible with the common market provided that the resulting capacity reduction is of a genuine and irreversible nature.

The costs eligible for aid are:

  • payments to workers made redundant or retired before the legal retirement age;
  • the costs of counselling services to workers made or to be made redundant or retired;
  • payments to workers for vocational retraining;
  • expenditure incurred for the redevelopment of the yard, its buildings, installations and infrastructure for use other than shipbuilding.

Companies receiving partial closure aid must not have benefited from rescue and restructuring aid in the past ten years. For further information, see the Community guidelines on state aid for rescuing and restructuring firms in difficulty.

Employment aid

Aid granted for the creation of employment, the recruitment of disadvantaged and disabled workers or to cover the additional costs of employing disadvantaged and disabled workers in shipbuilding, ship repair or ship conversion firms may be considered compatible if it complies with the substantive rules laid down in Commission Regulation (EC) No 2204/2002.

Development aid and export credits

Aid to shipbuilding in the form of development aid or export credits may be considered compatible with the common market if it complies with the terms of the 1998 OECD Arrangement on Guidelines for Officially Supported Export Credits and with its Sector Understanding on Export Credits for Ships.

Regional aid

Regional aid to shipbuilding, ship repair or ship conversion may be considered compatible with the common market on condition that it fulfils the following conditions:

  • aid must be granted for investment in upgrading or modernising installations with a view to improving productivity and must not be linked to financial restructuring of the yards concerned;
  • in the regions referred to in Article 87(3)(a) of the EC Treaty and in compliance with the regional aid map, the intensity of the aid must not exceed 22.5%;
  • in the regions referred to in Article 87(3)(c) of the EC Treaty and in compliance with the regional aid map, the intensity of the aid must not exceed 12.5 % or the applicable regional aid ceiling, whichever is the lower.

Aid must cover eligible expenditure as defined in the Community guidelines on regional aid.

Member States are required to submit annual reports to the Commission on all existing aid schemes. This Framework will be applicable from 1 January 2004 until 31 December 2006 at the latest. It may be reviewed by the Commission during this period, in particular in the light of the Community’s international obligations.

4) Implementing Measures

5) Follow-Up Work

This summary is for information only. It is not designed to interpret or replace the reference document, which remains the only binding legal text.

Community approach to State aid for transport by sea

Community approach to State aid for transport by sea

Outline of the Community (European Union) legislation about Community approach to State aid for transport by sea

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Competition > Rules applicable to specific sectors > Competition in transport

Community approach to State aid for transport by sea

This instrument aims to improve transparency and determine which State aid programmes may be launched in order to support Community maritime interests. >

Community approach to State aid for transport by sea [Official Journal C 205, 05.07.1997].

Summary

Historical background

The aim of the Community’s maritime policy has been to ensure freedom of access to maritime transport markets throughout the world for safe, non-polluting ships, if possible flying the flags of Community Member States and crewed by nationals of Member States. This approach has enabled markets to be opened up and a broad spectrum of maritime transport operations to be offered to the consumer. However, for many reasons the number of ships flying Member State flags and the number of Community seafarers employed have shrunk considerably.

The lack of competitiveness of Community flags was recognised in the late 1980s and, in the absence of Community harmonising measures, the Member States unilaterally took action in order to safeguard their seafaring interests. In 1989 the Commission mapped out the initial approaches in order to ensure a certain consistency among the Member States’ activities. Those approaches have been re-examined, particular account being taken of, their fiscal aspects.

Scope and general aims of the revised approaches to State aid

The current approaches cover all of the aid given to maritime transport by the Member States of the Community or via public monies. That includes all financial benefits, in whatever form, funded by the public authorities, that concept extending to public companies and State controlled banks.
The existing approaches do not cover aid granted to shipyards under Directive 90/684/EEC, nor do they draw any distinction between recipient types in terms of their legal status (companies, partnerships, private individuals), nor between the public and private sectors.

Without exception State aid may only be granted for ships registered in Member States. The reasons for this are as follows:

  • to safeguard Community jobs throughout the seafaring sector;
  • to maintain Community seafaring know-how and to develop seafaring skills;
  • to improve safety.

Taxation of shipping companies

Several non-member countries offer tax incentives that attract shipowners. They see in this good reasons for switching flags and contemplating relocation. In order to combat this fiscal competition several Member States have taken action that is intended to make their tax environment more attractive to shipping companies. Such tax abatements are considered to be State aid.

Since the aim of State aid within the common transport policy is to boost the competitiveness of Community fleets on the world market for sea transport services, tax concession systems require, without exception, a link with a Community flag.

Moreover, since the aim is also to help to expand the maritime transport sector and the number of jobs within that sector in the Community’s interest, the tax incentives must be restricted to maritime transport activities. The Member States’ normal taxation practice is maintained for all other activities, shareholder dividends and directors’ pay.

Salary costs

In terms of State aid and the cutting of labour costs maritime transport is a particular case since such aid may be considered to be compatible with the common market (Commission Notice on monitoring of State aid and reduction of labour costs – Official Journal C 1, 03.01.1997).

However, the aim of support for the maritime sector must be to reduce the costs and tax burdens borne by Community shipowners and seafarers (i.e. those subject to the tax system and/or social security contributions in a Member State) to levels comparable with those in the rest of the world.

As part of its approach the Commission advocates authorisation of the following:

  • reducing the social contributions made by Community seafarers working on board ships flying a Member State flag;
  • reducing the income tax paid by Community seafarers working on board ships flying a Member State flag.

Crewing relief

The aid for crewing relief is intended to lower the cost of employing seafarers on board ships sailing in distant waters. That aid may be granted in the form of payments or of reimbursing the cost of repatriating Community seafarers working on ships flying Member State flags.

Investment aid

Investment in new vessels must obey the rules applying to shipbuilding. Other forms of investment aid may be authorised in accordance with Community policy on safety at sea where it is a matter of:

  • improving on-board equipment;
  • promoting the use of reliable, non-polluting ships.

Training

Where training includes State aid components this must be notified. State aid for training is authorised when this meets the Commission’s general criteria such as proportionality, non-discrimination and transparency.

Public service obligations (PSO) and contracts

In its assessment of the contracts concerning PSO the Commission feels that making good the operating losses directly incurred by meeting certain public-service obligations does not constitute aid within the meaning of Article 92(1) of the Treaty. Notification under Article 93 (1) is therefore not necessary if:

  • there has been a public invitation to tender;
  • the call for tenders was accompanied by adequate publicity;
  • there has been no over-compensation or cross subsidy.

Restrictions on aid

The current approach lays down a maximum aid level corresponding to:

  • the calculation of the tax and social charges applying to seafarers;
  • the cancellation of the tax on shipping company turnover.

In order to avoid any distortion of competition it should not be possible for greater benefits to be conferred by means of other aid systems.

This summary is for information only and is not designed to interpret or replace the reference document which remains the only binding legal basis.

 

Public passenger transport service by rail and road

Public passenger transport service by rail and road

Outline of the Community (European Union) legislation about Public passenger transport service by rail and road

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Competition > Rules applicable to specific sectors > Competition in transport

Public passenger transport service by rail and road

Document or Iniciative

Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road, and repealing Council Regulations (EEC) No 1191/69 and (EEC) No 1107/70

Summary

Public service compensation may be necessary to ensure the provision of services of general economic interest (SGEI) and guarantee safe, efficient, attractive and high quality passenger transport.

This Regulation applies to regular and non-limited access, national and international public passenger transport services by rail and other track-based modes and by road.

Public service contracts and general rules

The competent authority * is obliged to conclude a public service contract with the operator to which it grants an exclusive right and/or compensation in exchange for discharging public service obligations * (PSO). Obligations which aim to establish maximum tariffs for all or certain categories of passengers may be subject to general rules.

To define the framework for the competent authority, the latter grants compensation for the net positive or negative financial impact on costs and revenue occasioned by compliance with the pricing obligations established in the general rules.

The public service contracts * and general rules define:

  • the PSO to be fulfilled by the operator and the areas concerned;
  • the parameters based on which compensation must be calculated and the nature and scope of all exclusive rights granted to avoid any overcompensation;
  • the means of distributing the costs linked to service supply (staff costs, energy, infrastructure, maintenance, etc.);
  • the means of distributing income from the sale of transport tickets between the operator and the competent authority.

The duration of public service contracts is limited and must not exceed ten years for bus and coach services, and fifteen years for passenger transport services by rail or other track-based modes. This period may be extended by up to 50 % under certain conditions.

Awarding of public service contracts

Public service contracts are awarded according to the rules laid down in this Regulation. However, for awarding certain passenger transport services by bus or tram, the procedures of Directives 2004/17/EC and 2004/18/EC apply.

Subject to certain reservations detailed in Article 5 of the Regulation, local authorities may provide public transport services themselves or assign them to an internal operator over which they have control comparable to that over their own services.

Any competent authority who uses a third party other than an internal operator must award public service contracts by means of transparent and non-discriminatory competitive procedures which may be subject to negotiation.

The obligation to instigate competitive procedures does not apply to:

  • low level contracts, the average annual value of which is estimated at less than EUR 1 000 000 or which supply less than 300 000 kilometres of public passenger transport services;
  • where emergency measures are taken or contracts are imposed in response to actual or potential service interruptions;
  • regional or long distance rail transport.

Terms and conditions

The Member States have three months to provide the Commission with all the information necessary to determine whether the compensation allocated is compatible with this Regulation.

Each competent authority must publish a global annual report on the public service obligations incumbent on them and the resultant compensation received by them.

One year prior to any competitive procedure, the competent authority must ensure that the following information is published in the Official Journal of the European Union: name and contact details of the competent authority, type of allocation proposed and services and territories likely to be affected.

The Member States must gradually come into line with the Regulation, with the end of the transition period fixed at 3 December 2019.

Background

This Regulation forms part of the objectives in the Commission’s white paper of 12 September 2001 entitled “European transport policy for 2010: time to decide” and repeals Regulations (EEC) No 1191/61 and (EEC) No 1107/70.

Key terms used in the act
  • Competent authority: any public authority or group of public authorities in one or more Member States which can intervene in public passenger transport in a given geographical area, or any body invested with such power;
  • Public service obligation: requirement defined or determined by a competent authority to guarantee general interest services in terms of passenger transport which an operator, in considering its own commercial interest, would not assume or would not ensure in the same measure or under the same conditions, without compensation;
  • Public service contract: all arrangements made between one or more transport operators with one or more responsible authorities for all the rights and obligations of the service in question, including any unilateral public acts.

Reference

Act Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EC) No 1370/2007 3.12.2009 OJ L 315 of 3.12.2007

Exemption for certain agreements between liner shipping companies

Exemption for certain agreements between liner shipping companies

Outline of the Community (European Union) legislation about Exemption for certain agreements between liner shipping companies

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Competition > Rules applicable to specific sectors > Competition in transport

Exemption for certain agreements between liner shipping companies (“consortia”)

Document or Iniciative

Commission Regulation (EC) No 906/2009 of 28 September 2009 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia).

Summary

This regulation applies to consortia * providing international liner shipping * services from or to one or more ports within the European Union (EU).

Exempted agreements

In accordance with Article 101(3) of the Treaty on the Functioning of the European Union (TFEU) (formerly Article 81(3) of the Treaty establishing the European Community (TEC)), Article 101(1) TFEU (formerly Article 81(1) TEC) is not applicable to the following activities of a consortium:

  • the joint operation of liner shipping services;
  • capacity adjustments in response to supply and demand fluctuations;
  • the joint operation or use of port terminals;
  • any other activity ancillary to those listed above, which is necessary for their implementation, such as:
    1. the use of a computerised data exchange system;
    2. an obligation on members of a consortium to limit use in the relevant market or markets to vessels allocated to the consortium;
    3. an obligation on members of a consortium not to assign or charter space to other vessel-operating carriers in the relevant market or markets except with the prior consent of the other members of the consortium.

Hardcore restrictions

The exemption above does not apply to a consortium that, directly or indirectly, alone or together with other factors under the control of the parties, has the object to:

  • fix prices when selling liner shipping services to third parties outside the consortium;
  • limit the capacity or sales except for the previously mentioned exempted capacity adjustments;
  • allocate markets or customers.

Conditions for exemption

To qualify for the exemption, the combined market share of the consortium members in the relevant market in which the consortium operates must not exceed 30 %, calculated by reference to the total volume of goods carried by the members within or outside the consortium. 5. To qualify for the exemption, members of the consortium must have the right to withdraw, subject to a maximum period of notice of six months, without any penalty, financial or otherwise. In the case of a highly integrated consortium, the maximum period of notice can be extended to 12 months.

Background

This regulation builds on Regulation (EC) No 823/2000 which expired on 25 April 2010. Although the justifications for a block exemption for liner consortia are still valid, Regulation 906/2009 ensures a greater convergence with other existing block exemption regulations for horizontal cooperation whilst taking into account current market practices in the liner industry.

Key terms used in the act
  • Consortium: an agreement or a set of interrelated agreements between two or more vessel-operating carriers which provide joint international liner shipping services exclusively for the carriage of cargo relating to one or more trades.
  • Liner shipping: the transport of goods on a regular basis on a particular route or routes between ports and in accordance with timetables and sailing dates advertised in advance and available, even on an occasional basis, to any transport user against payment.

References

Act Entry into force – Date of expiry Deadline for transposition in the Member States Official Journal
Regulation (EC) No 906/2009

26.4.2010 – 25.4.2015

OJ L 256 of 29.9.2009

Competition: international dimension and enlargement

Competition: international dimension and enlargement

Outline of the Community (European Union) legislation about Competition: international dimension and enlargement

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Competition > Competition: international dimension and enlargement

Competition: international dimension and enlargement

In the context of increasing globalisation, the activities of European firms are becoming more and more international and the activities of firms in third countries are likely to have an impact on competition within the European Union. As such, international cooperation stands out as a key element of competition policy.
Furthermore, the compliance of candidate States with the Community acquis on competition matters is an essential requirement for their accession to the Union.

ENLARGEMENT

Ongoing enlargement

  • Croatia – Competition
  • Turkey – Competition
  • The former Yugoslav Republic of Macedonia – Competition
  • Iceland – Competition

Enlargement of January 2007

  • Bulgaria
  • Romania

Enlargement of May 2004

  • Cyprus
  • Estonia
  • Hungary
  • Latvia
  • Lithuania
  • Malta
  • Poland
  • The Czech Republic
  • Slovakia
  • Slovenia

Competition in transport by rail, road and inland waterway

Competition in transport by rail, road and inland waterway

Outline of the Community (European Union) legislation about Competition in transport by rail, road and inland waterway

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Competition > Rules applicable to specific sectors > Competition in transport

Competition in transport by rail, road and inland waterway

Document or Iniciative

Council Regulation (EC) No 169/2009 of 26 February 2009 applying rules of competition to transport by rail, road and inland waterway.

Summary

This regulation repeals Regulation (EEC) No 1017/68 with the exception of Article 13(3) of that regulation, which continues to apply to decisions adopted under Article 5 of Regulation (EEC) No 1017/68 before 1 May 2004 until the date of expiration of those decisions.

As provided for by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) (ex-Articles 81 and 82 of the Treaty Establishing the European Community (TEC)), anticompetitive agreements and concerted practices, as well abuses of dominance are prohibited. This regulation applies to agreements, decisions and concerted practices which have as their object or effect:

  • the fixing of transport rates and conditions;
  • the limitation or control of the supply of transport;
  • the sharing of transport markets;
  • the application of technical improvements or technical cooperation;
  • the joint financing or acquisition of transport equipment or supplies where such operations are directly related to the provision of transport services and are necessary for the joint operation of services by a grouping of road or inland waterway transport firms.

Exception for technical agreements

The prohibition provided for in Article 101(1) TFEU does not apply to agreements, decisions or concerted practices which have the object and effect of applying technical improvements or achieving technical cooperation by means of:

  • the standardisation of equipment, transport supplies, vehicles or fixed installations;
  • the exchange or pooling, for the purpose of operating transport services, of staff, equipment, vehicles or fixed installations;
  • the organisation and execution of successive, complementary, substitute or combined transport operations, and the fixing and application of inclusive rates and conditions for such operations, including special competitive rates;
  • the use, for journeys by a single mode of transport, of the routes which are most rational from the operational point of view;
  • the coordination of transport timetables for connecting routes;
  • the grouping of single consignments;
  • the establishment of uniform rules as to the structure of tariffs and their conditions of application, provided such rules do not lay down transport rates and conditions.

Exemption for groups of small and medium-sized undertakings

This regulation also provides an exemption for groups of small and medium-sized undertakings, where the individual capacity of each firm belonging to a grouping may not exceed 1 000 tonnes for road transport or 50 000 tonnes for inland waterway transport (the total carrying capacity of any grouping must not exceed 10 000 tonnes for road transport and 500 000 tonnes for inland waterway transport). However, if the implementation of agreements, decisions or concerted practices has effects which are incompatible with the requirements of Article 101(3) TFEU, undertakings may be required to make such effects cease.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EC) No 169/2009

25.3.2009

O J L 61 of 5.3.2009