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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 This Regulation has now expired and has been replaced by the link on state aid to shipbuilding.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.

Application of certain EU competition rules to agricultural products

Application of certain EU competition rules to agricultural products

Outline of the Community (European Union) legislation about Application of certain EU competition rules to agricultural products

Topics

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

Agriculture > General framework

Application of certain EU competition rules to agricultural products

Document or Iniciative

Council Regulation (EC) No 1184/2006 of 24 July 2006 applying certain rules of competition to the production of and trade in certain agricultural products [See amending acts].

Summary

This regulation states that, except for certain exceptions detailed below, Articles 101 to 106 of the Treaty on the Functioning of the European Union (TFEU) (ex-Articles 81 to 86 of the Treaty Establishing the European Community (TEC)) apply to all agreements, decisions and practices referred to in Articles 101(1) and 102 TFEU (ex-Article 81(1) and 82 TEC) relating to the production of, or trade in, agricultural products.

There are three exceptions. These general rules do not apply to:

  • agreements, decisions and practices that form an integral part of a national market organisation;
  • agreements, decisions and practices that are necessary in order to attain the objectives of the common agricultural policy (CAP);
  • certain agreements, decisions and practices of farmers or farmers’ associations belonging to a single European Union (EU) country, provided such agreements do not introduce an obligation to charge identical prices, exclude competition or jeopardise the objectives of the CAP.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Regulation (EC) No 1184/2006

24.8.2006

OJ L 214, 24.6.2006

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal

Regulation (EC) No 1234/2007

23.11.2007

OJ L 299, 16.11.2007

Regulation (EC) No 361/2008

14.5.2008

OJ L 121, 7.5.2008

Regulation (EC) No 491/2009

24.6.2009

OJ L 154, 17.6.2009

Successive amendments and corrections to Regulation (EC) No 1184/2006 have been incorporated into the basic text. This consolidated versionis for reference only.

Competition in professional services

Competition in professional services

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

Topics

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

Internal market > Single market for services

Competition in professional services

Document or Iniciative

Commission communication of 9 February 2004 entitled “Report on Competition in Professional Services” [COM(2004) 83 final – Not published in the Official Journal]

Summary

Professional services have an important role to play in improving the competitiveness of the European economy with the result that their quality and competitiveness have important spill-over effects. The disappearance of anti-competitive regulatory restrictions in this sector would mean that consumers could be offered more competitive and better-quality services on advantageous terms.

TheCommission report shows the need to take action in the field of the professions from a competition policy perspective, to provide information on what the Commission has done so far and to present its interim findings on key restrictions and their alleged general interest justifications and on the Community legal framework within which those restrictions have to be analysed. Finally, it proposes a future course of action aimed at encouraging the elimination of unjustified restrictions.

Restrictive regulation of professional services

At present, the professional services sector is characterised by either state regulation or self-regulation by professional bodies.

The Commission has analysed the markets in which lawyers, notaries, accountants, architects, engineers and pharmacists operate in the European Union and has identified five main categories of national legislation or self-regulation that restrict competition. These are:

  • Fixed prices: These are probably the regulatory instrument likely to have the most detrimental effects on competition, eradicating or seriously reducing the benefits that competitive markets deliver for consumers, particularly in terms of price choice. In most Member States, fees for professional services are negotiated freely between practitioners and clients. However, in a small number of cases the Commission has observed the existence of fixed prices (e.g. in Germany for tax consultants), minimum prices (e.g. in Italy and Germany for architects) and maximum prices (e.g. in Italy for lawyers). Although in some cases maximum prices might protect consumers from excessive charges, the Commission considers that less restrictive mechanisms (such as improved information on the services provided) could be put in place.
  • Recommended prices: These have a significant negative effect on competition since they may facilitate the coordination of prices between service providers and/or mislead consumers about reasonable price levels. The Commission found that in a minority of Member States (e.g. in Austria and Belgium) recommended prices are published for certain legal, accountancy, architectural and engineering services.
  • Advertising restrictions: Advertising may facilitate competition by informing consumers about different products and allowing them to make better-informed purchasing decisions. It is also widely recognised that advertising, and in particular comparative advertising, can be a crucial competitive tool for new firms entering the market and for existing firms wanting to launch new products. However, a large number of the EU professions are subject to sector-specific advertising regulation. In some cases (e.g. in France for notaries), advertising of any kind is prohibited. In others, specific media or advertising methods such as radio advertising, television advertising, “cold calling” or specific types of advertising content are prohibited. In certain cases, there is a lack of clarity in existing advertising regulations, and this, in itself, may deter professionals from employing certain advertising methods.
  • Entry restrictions and reserved rights: Excessive licensing regulation is likely to reduce the supply of service providers, with negative consequences for competition and quality of service. The professions are subject to qualitative entry restrictions in most Member States. These can take the form of minimum periods of education, professional examinations and minimum periods of professional experience. In many cases, entry restrictions are coupled with reserved rights to provide certain services. In some Member States the pharmacist and notary professions are even subject to quantitative entry restrictions based on demographic or geographical criteria. Entry restrictions, combined with reserved rights, ensure that only practitioners with appropriate qualifications and skills can carry out certain tasks. The EU is currently putting the finishing touches to a proposal for a directive designed to reform the system for recognising professional qualifications. The purpose of this reform, which is aimed at pharmacists and architects, among other professions, is to create a single legal framework to further liberalise the services sector and facilitate the recognition of qualifications in Europe.
  • Regulations governing business structure and multidisciplinary practices: Business structure regulations may have a negative economic impact if they prevent providers from developing new services or cost-efficient business models. For example, these regulations might prevent lawyers and accountants from providing integrated legal and accountancy advice for tax issues or prevent the development of one-stop shops for professional services in rural areas. Certain ownership regulations can also reduce access to capital in professional services markets, hindering new entry and expansion. A number of professions in the EU are subject to sector-specific regulations on business structure. These regulations can restrict the ownership structure of professional services companies, the scope for collaboration with other professions and, in some cases, the opening of branches, franchises or chains.

There are essentially three reasons for this regulation of professional services:

  • “asymmetry of information”, i.e. the difference in the information available to consumers and service providers: a defining feature of professional services is that they require practitioners to possess a high level of technical knowledge. Consumers may not have this knowledge and therefore find it difficult to judge the quality of the services they purchase.
  • “externalities”: the provision of a service may have an impact on third parties. Rules are therefore needed to ensure that both service providers and purchasers take proper account of these external effects.
  • the concept of “public goods”: certain professional services are deemed to be in the public good since they are of value for society in general, for example, the correct administration of justice or the development of high-quality urban environments.

While the Commission acknowledges that some regulation in this sector is justified, it believes that in some cases more pro-competitive mechanisms can and should be used instead of certain traditional restrictive rules.

Possible application of the EC competition rules

From the perspective of Community competition law, a distinction must be made between the liability of professional bodies and that of Member States.

Regulations adopted by professional bodies are decisions of associations of undertakings that may be caught by Article 81 of the EC Treaty. However, regulations that are objectively necessary to guarantee the proper practice of the profession, as organised in the Member State concerned, fall outside the scope of the prohibition.

Article 81 is, in itself, concerned solely with the conduct of undertakings and not with laws or rules emanating from Member States. Nonetheless, read in conjunction with the second paragraph of Article 10 (prohibiting measures by Member States which could jeopardise the attainment of the objectives of the Treaty) and with Article 3(1)(g) of the Treaty (which justifies intervention by the Community in order to ensure that competition in the internal market is not distorted), Article 81 prohibits Member States from introducing or maintaining in force measures, even of a legislative or regulatory nature, which may render ineffective the competition rules applicable to undertakings.

Where a State delegates its policy-making power to a professional association without sufficient safeguards, i.e. without clearly indicating the public interest objectives that must be complied with, without retaining the last word and without exercising control of implementation, the Member State can be held liable for any resulting infringement. Measures adopted by professional associations and legislative or regulatory instruments adopted by public authorities may therefore give rise to the liability of the members of the professions and of their associations under Article 81 of the Treaty and of Member States under Articles 10 and 81 of the Treaty.

Position of the Commission and proposed actions

A significant body of empirical research shows the negative effects that excessive or outdated restrictive regulations may have for consumers. Such regulations may eliminate or limit competition between service providers and thus reduce the incentives for professionals to work, in a cost-efficient manner, to lower prices, to increase quality or to offer innovative services.

The Commission therefore acknowledges that some regulation in this sector is justified, but it believes that in some cases more pro-competitive mechanisms can and should be used instead of certain traditional restrictive rules. There are a variety of less restrictive mechanisms to maintain quality and protect consumers. For example, measures to improve the availability and quality of information about professional services could help empower consumers to make more informed purchasing decisions.

The Commission is therefore inviting the regulatory authorities of the Member States to review the national legislation restricting professional services. They should consider whether the existing restrictions pursue a clearly articulated and legitimate public interest objective, whether they are necessary to achieve that objective, and whether there are no less restrictive means to achieve this. The Commission is also inviting all professional bodies to undertake a similar review of their rules and regulations. They should apply the same proportionality test as the regulatory authorities of the Member States and, where necessary, change existing rules or propose changes.

With the entry into force of Regulation (EC) No 1/2003 in May 2004, the national competition authorities and the national courts will have a more prominent role in assessing the legality of rules and regulations in the professions. In so far as competition restrictions are imposed within Member States, administrative enforcement of EC competition rules in the professions should be mainly the task of national competition authorities, although the Commission will continue to carry out casework where appropriate. The Commission also proposes discussing with national regulatory authorities whether the existing regulations are necessary, proportionate and justified.

In 2005 the Commission will report on the progress achieved in eliminating the restrictions identified above or on the factors justifying these rules. To this end, it will contact the regulatory authorities by the end of the year to ask them to report on any measures they have adopted that fall within the scope of this report. Any explicit justification of the restrictive rules which they wish to maintain should then be communicated to the Commission.

Background

Reform of the restrictive rules in the professional services sector was initiated in 2003 with the publication of a study commissioned by the Directorate-General for Competition on the economic impact of regulation of the professions in the different Member States. Commission action on this front complements the directive on services in the internal market. The Commission presented a further progress report [COM(2005) 405 final] in 2005.

Related Acts

Commission communication to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions of 5 September entitled “Professional Services – Scope for more reform”: Follow-up to the Report on Competition in Professional Services (COM (2004) 83 of 9 February 2004), [COM(2005) 405 final – Not published in the Official Journal]

In its communication the Commission makes a first assessment of the reform of unjustified restrictions in the professional services sector. It welcomes the progress made in some of the Member States but is concerned by the all too frequent persistence of unjustified regulation which seriously impedes competition in many others. The analytical work underway in most of them, which should lead to substantive reform, is encouraging. But some countries report no reform activity as yet.

The Commission consequently urges the Member States to step up their efforts to increase pro-competitive reform, advocating a more refined analysis of the markets concerned in order to arrive at a clearer definition of the general interest and to ensure better targeted regulation. Occasional users (individuals) of professional services may have a greater need of carefully targeted regulatory protection than the main users (business and the public sector). The position with respect to small business users is not entirely clear and needs to be analysed further.

Strong political backing at national level and greater input from the professions are essential to the reform process. The Commission will continue to act as a facilitator in this exercise, helping to spread best practice.

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

Exemptions for certain horizontal agreements

Exemptions for certain horizontal agreements

Outline of the Community (European Union) legislation about Exemptions for certain horizontal agreements

Topics

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

Other

Exemptions for certain horizontal agreements

Document or Iniciative

Council Regulation (EEC) No 2821/71 of 20 December 1971 on the application of Article 81(3) (formerly Article 85(3)) of the EC Treaty to categories of agreements, decisions and concerted practices [See amending act(s)].

Summary

The Commission may grant individual exemptions to certain agreements, decisions and concerted practices that meet the conditions of Article 81(3) of the Treaty establishing the European Community (EC Treaty) (now Article 101(3) of the Treaty on the Functioning of the European Union (TFEU)). It may also grant block exemptions by way of regulation. This regulation enables the Commission to exempt certain agreements, decisions and concerted practices by way of a block exemption.

Scope

This regulation enables the Commission to apply, by way of regulation, Article 81(3) of the EC Treaty to certain agreements, decisions and concerted practices which have as their object:

  • the research and development of products or processes and exploitation of the results, including provisions regarding industrial property rights and confidential technical knowledge;
  • specialisation, including agreements necessary for achieving it.

Conditions for the exemption regulations

The exemption regulations laid down by the Commission must meet a number of conditions. They must:

  • contain a definition of the categories of agreements, decisions and concerted practices to which they apply and specify the restrictions, clauses or other conditions which may appear in them;
  • apply for a limited period, although they may be amended or repealed;
  • apply with retroactive effect to agreements which, at their date of entry into force, might have benefited from a decision issued with retroactive effect under Article 6 of Regulation No 17 (EEC)Regulation No 17 (EEC). They do not apply to agreements that existed prior to 13 March 1962 or had to be notified before 1 February 1963.

The regulations concerned must comply with the following approval procedure:

  • a draft must be published to enable all persons and organisations concerned to submit their comments to the Commission;
  • the Commission must consult the Advisory Committee on Restrictive Practices and Monopolies before publishing a draft or adopting a regulation;
  • where the Commission, either on its own initiative or at the request of a European Union (EU) country or of natural or legal persons, finds that, in any particular case, agreements, decisions or concerted practices to which an exemption regulation applies nevertheless have certain effects which are incompatible with the conditions laid down in Article 81(3), it may adopt a decision withdrawing the benefit of the regulation.

In applicant countries, this regulation will enter into force on the date of the country’s accession to the EU.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EEC) No 2821/71

18.1.1972

OJ L 285 of 29.12.1971

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EEC) No 2743/72

1.1.1973

OJ L 291 of 28.12.1972

Regulation (EC) No 1/2003

24.1.2003

1.5.2004

OJ L 1 of 4.1.2003

Successive amendments and corrections to Regulation (EEC) No 2821/71 have been incorporated into the basic text. This consolidated version is for reference only.

Exemption for certain vertical agreements

Exemption for certain vertical agreements

Outline of the Community (European Union) legislation about Exemption for certain vertical agreements

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

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Exemption for certain vertical agreements

1) Objective

To empower the Commission to adopt by regulation block exemptions for certain vertical agreements, decisions and concerted practices.

2) Document or Iniciative

Council Regulation (EEC) No 19/65 of 2 March 1965 on the application of Article 81(3) (formerly Article 85(3)) of the Treaty to certain categories of agreements and concerted practices [Official Journal L 36 of 06.03.1965].

Amended by:
Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [Official Journal L 1 of 04.01.2003];
Council Regulation (EC) No 1215/1999 of 10 June 1999 [Official Journal L 148 of 15.06.1999].

3) Summary

Background

Under Article 81(3) of the EC Treaty and without prejudice to the rules on its implementation as established by Regulation (EC) n° 1/2003, Regulation No 19/65 empowers the Commission to grant exemptions by regulation in respect of certain categories of exclusive agreements between two firms for the resale of goods. It does not apply to agreements between more than two firms or to agreements on exclusive distribution, delivery or purchase of services or products for processing.

Over the years, the approach envisaged by the Regulation has proved too rigid in terms of the changing economic situation and current distribution techniques. However, Regulation No 1215/1999 has extended its scope to include vertical agreements.

Scope

The Commission may, by way of regulation, exempt certain agreements or concerted practices such as:

  • agreements between two or more firms relating to the purchase, sale or resale of goods or services;
  • agreements between two firms which impose restrictions on purchases or on the use of intellectual property rights or know-how.

Conditions for the implementation of the exemption regulations

The exemption regulations laid down by the Commission must meet a number of conditions. They must:

  • contain a definition of the categories of agreements, decisions and concerted practices to which they apply and specify the restrictions, clauses or other conditions which may appear in them;
  • apply for a limited period, although they may be amended or repealed;
  • apply with retroactive effect so as to take in agreements which, at their date of entry into force, satisfied the conditions for exemption.

The regulations concerned must comply with the following approval procedure:

  • the proposal for a regulation must be published so as to enable all persons and organisations concerned to submit their comments to the Commission;
  • the Commission must consult the Advisory Committee on Restrictive Practices and Dominant Positions before publishing a draft or adopting a regulation.

Following the entry into force of Regulation No 1/2003, which governs the changeover from a system of centralised authorisation based on prior notification to a legal exception system, national authorities and courts are being called upon to ensure, for purposes of implementing competition law, that the competition rules are complied with.

Act Date
of entry into force
Deadline for implementation in Member States
Regulation (EEC) No 19/65 26.03.1965
Regulation (EEC) No 1215/1999 18.06.1999
Regulation (EC) No 1/2003 25.01.2003 01.05.2004

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.

State aid for employment

State aid for employment

Outline of the Community (European Union) legislation about State aid for employment

Topics

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

Employment and social policy > Job creation measures

State aid for employment

State aid for job creation and aid to promote the recruitment of disadvantaged and disabled workers are exempt from any obligation to notify.

Document or Iniciative

Commission Regulation (EC) No 2204/2002 of 12 December 2002 on the application of Articles 87 and 88 of the EC Treaty to State aid for employment. [See amending acts].

Summary

The Regulation applies to two categories of employment aid: aid for job creation and aid to promote the recruitment of disadvantaged and disabled workers. Other types of employment aid are not prohibited, but they must be notified to the Commission in advance.

In accordance with Article 87(1) of the EC Treaty, aid exempted by the Regulation must have as its object and effect the promotion of employment, while leaving trade unaffected. Export aid is not covered by the Regulation.

Aid granted to an individual enterprise and aid which does not lead to an overall increase in the number of employees (e.g. aid to help convert temporary contracts into permanent ones) remains subject to the prior notification requirement. Enterprises which qualify for rescue and restructuring aid remain subject to the relevant EU guidelines.

The Regulation applies to all industries apart from coalmining (Council Regulation 1407/2002), shipbuilding (Council Regulation 1540/98) and transport, which remain subject to sector-specific rules.

Job creation

With regard to employment aid intended for job creation, the Regulation lays down the following ceilings:

  • In areas and sectors which do not qualify for regional aid, the gross aid intensity must not exceed the ceilings of 15 % in the case of small enterprises and 7.5 % in the case of medium-sized enterprises.
  • In areas and sectors which qualify for regional aid, the ceilings correspond to those mentioned on the regional aid maps and in the multisectoral framework for regional aid for large investment projects. In the case of SMEs, the ceiling is increased by 10 or 15 percentage points according to whether the areas are covered by point (c) or point (a) of Article 87(3). In less-favoured areas, it is these ceilings or, where appropriate, the higher ceilings provided for in Regulation 1257/1999 that apply.

Aid may be granted for a maximum period of two years, provided that the employment created:

  • represents a net increase in the number of employees;
  • is maintained for a minimum period of three years, or two years in the case of SMEs;
  • benefits workers who have never had a job or are unemployed.

To receive this type of aid, the beneficiary must submit an application to the Member States.

Recruitment of disadvantaged or disabled workers

The Regulation contains definitions of “disadvantaged worker” and “disabled worker” that are broad enough to include, in the case of the former, any person who is a member of an ethnic minority, a migrant or unemployed and, in the case of the latter, any person who has a physical, mental or psychological impairment.

In the case of aid to promote the recruitment of disadvantaged or disabled workers, Member States may grant enterprises aid of up to 50 % (for disadvantaged workers) and 60 % (for disabled workers) of wage costs and compulsory social security contributions over a period of one year. Aid may also be granted to compensate for the reduced productivity of such workers and to adapt premises and provide special assistance.

Cumulation

The ceilings laid down in the Regulation apply irrespective of whether the resources are national resources or EU resources. On the other hand, only aid to disadvantaged and disabled workers may be combined with other State aid or with other EU support measures, provided that this does not result in a gross aid intensity exceeding 100 % of wage costs.

Transparency and monitoring

In order to ensure effective monitoring and a sufficient degree of transparency, the Commission requires Member States:

  • to notify it, within 20 working days using a standard form (Annex I), of the implementation of any aid scheme exempted by the Regulation;
  • to maintain detailed records of aid schemes exempted by the Regulation;
  • to compile an annual report on the application of the Regulation (Annex II).

At the end of the period of validity of the Regulation, aid schemes exempted under the Regulation will remain exempted during an adjustment period of six months.

Regulation (EC) No 2204/2002, initially scheduled to expire on 31 December 2006, was extended a first time until 31 December 2007 by Regulation (EC) No 1040/2006, then a second time until 30 June 2008 by Regulation (EC) No 1976/2006.

Background

Within the framework of Regulation 994/98, which allows the Commission to exempt certain categories of State aid, the Regulation is designed to exempt aid for job creation and aid to promote the recruitment of disadvantaged and disabled workers in order to simplify administrative procedures.

In the light of experience gained in applying employment aid provisions, the Regulation exempts employment aid where it is intended for areas that qualify for regional aid, or for small and medium-sized enterprises (SMEs) rather than large enterprises.

The Regulation takes account, however, of the guidelines on national regional aid and of Regulation 70/2001 on State aid to small and medium-sized enterprises.

References

Act Entry into force – Date of expiry Deadline for transposition in the Member States Official Journal
Regulation (EC) No 2204/2002 02.01.2003-30.06.2008 OJ L 337 of 13.12.2002
Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EC) No 1040/2006 28.07.2006 OJ L 187 of 08.07.2006
Regulation (EC) No 1976/2006 24.12.2006 OJ L 368 of 23.12.2006

Prospects for the internal gas and electricity market

Prospects for the internal gas and electricity market

Outline of the Community (European Union) legislation about Prospects for the internal gas and electricity market

Topics

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

Energy > Internal energy market

Prospects for the internal gas and electricity market

New measures must be added to the existing rules of the internal gas and electricity market in order to guarantee its integral operation. An inventory of the market in fact reveals that there is still malfunctioning and that the current rules do not allow it to be corrected effectively.

Document or Iniciative

Communication from the Commission to the Council and the European Parliament of 10 January 2007 entitled “Prospects for the internal gas and electricity market” [COM(2006) 841 final – Not published in the Official Journal].

Summary

The aim of the European Union (EU) is to set up a truly competitive internal market for gas and electricity to offer consumers a real freedom of choice at fair, competitive prices, to stimulate clean energy production and to improve security of supply.

Although the internal energy market is well established, malfunctioning (identified by the sector inquiry into the gas and electricity markets) persists, preventing both consumers and the economy from getting the full benefit of the advantages of opening up the national gas and electricity markets.

As current rules do not allow effective correction of this malfunctioning, new measures must be taken as the final step in achieving integrated operation of the internal energy market in Europe.

Advantages of creating the internal energy market

The opening of national markets in gas and electricity to competition visibly gives consumers the freedom to choose their energy supplier and, therefore, the opportunity to make savings. It also improves the security of supply by encouraging, on the one hand, investment in facilities, so that interruptions to supply can be prevented, and, on the other hand, diversification of transport routes and energy sources. The existence of a truly competitive energy market also contributes to sustainable development, notably by enabling suppliers of electricity from renewable energy sources to enter the market.

Continued malfunctioning

In practice, the EU is still a long way from achieving its objective of a real internal market in which each consumer has the legal right to choose his supplier and exercise this right simply and effectively armed with the facts, and the current rules do not effectively prevent market malfunctioning.

The legal and functional unbundling of system operators vertically connected to suppliers and producers has proven insufficient to guarantee equal access to the networks. The traditional operators thus maintain their dominant position and new companies wishing to enter the market encounter many problems caused by discriminatory access conditions, lack of available network capacity, a lack of transparent data on the network situation and poor investment.

National regulators do not have the powers or independence necessary for succeeding in their mission. Their powers vary considerably from one Member State to the next, hindering cross-border trade and access to consumers in other Member States.

New set of rules for completion of the internal energy market

  • Provision of non-discriminatory access to the networks through unbundling

Current legal and functional unbundling has proven insufficient in removing the conflict of interests arising from vertical integration. Clearer separation between operation of transmission systems and production or supply activities must be introduced to ensure that operators maintain, operate and develop the networks in the general interest of the network users.

The separation may be based either on complete ownership unbundling, due to transmission system operators being both operators and owners of the system, or on introduction of an independent transmission system operator for maintenance, development and operation of the systems, which remain the property of the vertically integrated companies.

Complete ownership unbundling appears to be the most economically effective way to ensure development of a real internal energy market. Not only does it eliminate the different interests of system operators but also avoids the need for excessively detailed and complex regulations ensuring independence of vertically integrated system operators.

  • Strengthening of the role of regulators at national and Community level

The regulatory framework and therefore the powers of the regulators must be strengthened to ensure the conditions of transparency, stability and non-discrimination necessary for development of competition and for investment.

Better coordination of national regulators at European level is, in addition, needed to mitigate the market segmentation resulting from the regulatory differences between Member States. In this sense, it is possible either to improve the present approach, with the disadvantage of continuing to rely on voluntary agreements between 27 national regulators often with different interests, or to formalise the role of the European Regulators Group for Electricity and Gas (ERGEG) into a European Network of Independent Regulators (ERGEG +), or lastly to set up a new single body at Community level.

  • Cooperation of transmission system operators (TSOs)

To enable free circulation of gas and electricity within the EU, it is essential to establish compatible technical rules and regular exchange of information, increase investment in the network and, in particular, in cross-border interconnections, and move towards regional system operators.

  • Reduction in possibilities for unfair competition

Due to the monopolies held by the traditional operators before liberalisation, the lack of integration and their natural characteristics, in particular low elasticity of demand, the gas and electricity markets are particularly exposed to the risk of dominant positions.

Greater transparency, recourse to the ‘use-it-or-lose-it’ principle, genuine access to gas storage facilities and maintenance of incentives in favour of new storage capacities would facilitate the transition to a more competitive gas and electricity market.

  • Encouragement of investment in electricity power plants and gas infrastructures

Creating a stable environment for investment is a priority. Other factors may also influence investment, such as the award of emission certificates or specific incentive measures, for example for production of electricity from renewable energy sources.

  • Consumer protection

Consumer protection and public service obligations must be an integral part of the process of opening up the gas and electricity markets. An energy consumers’ charter must therefore protect their essential rights: the right to relevant information on the different suppliers and supply possibilities, the right to a straightforward procedure for changing supplier, protection against energy poverty for the most vulnerable consumers, protection against unfair commercial practices, etc.

Background

The internal energy market has been put in place gradually, starting with Directive 96/92/EC laying down rules for the internal market in electricity and Directive 98/30/EC laying down rules for the internal market in natural gas, which were replaced respectively by Directives 2003/54/EC and 2003/55/EC.

The Commission draws conclusions from the review of the internal gas and electricity market drawn up by its sector inquiry, and announces that a third legislative package will be added to the current rules.

Related Acts

Report from the Commission to the Council and the European Parliament – Progress in creating the internal gas and electricity market [COM(2008) 192 final – Not published in the Official Journal].

The report presents the progress made on the internal gas and electricity market since the opening of national markets to competition on the 1st July 2007. Among the main advances it highlights regional initiatives which have stimulated cross-border cooperation.

Three years after the deadline of July 2004 for implementation passed, it nevertheless appears that the requirements of the directives on electricity and gas have not been appropriately implemented in certain Member States.
A notable finding of this report is that regulatory oversight, unbundling and regulated supply tarifs, as well as the communication of Public Service Obligations, are not satisfactory.

Communication from the Commission to the European Council and the European Parliament of 10 January 2007 entitled “An energy policy for Europe” [COM(2007) 1 final – Not published in the Official Journal].

Communication from the Commission of 10 January 2003 entitled “Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors (Final Report)” [COM(2006) 851 final – Not published in the Official Journal]

Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC [Official Journal L 176, 15.7.2003].

Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC [Official Journal L 176, 15.7.2003].

Harmonisation of Member States' legislation on designs

Harmonisation of Member States’ legislation on designs

Outline of the Community (European Union) legislation about Harmonisation of Member States’ legislation on designs

Topics

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

Internal market > Motor vehicles > Interactions between the automobile industry and specific policies

Harmonisation of Member States’ legislation on designs

Document or Iniciative

Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs.

Summary

This Directive applies to design * rights registered:

  • at the Member States’ central industrial property offices;
  • at the Benelux Office;
  • under international agreements which have effect in a Member State.

Conditions of protection

To qualify for protection, a design has to be new and have an individual character.

The Member States protect designs by registering them and conferring exclusive rights on their designers.

Term of protection

The design is protected for one or more periods of five years, with a maximum duration of 25 years. The protection confers on the holder the exclusive right to use the design and to prevent any third party from using it.

Rights conferred by registration

The registration of a design shall confer on its holder the exclusive right to use it and to prevent any unauthorised third party from using it.

Restriction of rights

The rights conferred by a design right do not extend to:

  • acts done on a private basis and for non-commercial purposes;
  • acts done for experimental purposes;
  • acts of reproduction for illustrative or educational purposes;
  • equipment on board ships and aircraft registered in another country when these temporarily enter the territory of the Member State concerned;
  • importation into the Member State of spare parts and accessories for the purpose of repairing such craft;
  • the execution of repairs on such craft.

Also excluded from protection are:

  • items incorporated into a product which are not visible during “normal” use of this product;
  • the characteristics of a product’s appearance which are solely dictated by its technical function;
  • the characteristics of a product’s appearance which have to be reproduced in order to allow the product to be mechanically connected to, or placed in or around, or in contact with another product;
  • equipment on board ships and aircraft which temporarily enter the territory of another Member State;
  • spare parts and accessories which are imported into that Member State for the purpose of repairing the aforementioned craft.
  • designs which are contrary to public order or public morality.

Invalidity

A design right can be declared invalid, in certain cases defined in the Directive, even after it has lapsed or been surrendered.

Relationship with other forms of protection

If in a Member State, designs are protected by legal provisions concerning unregistered designs, copyright, trade marks, patents and utility models or any other provision, these provisions still apply side by side with the specific legislation on the protection of designs.

Key terms used in the act
  • Design: means the appearance of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture and/or materials of the product itself and/or its ornamentation.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Directive 98/71/EC 17.11.1998 28.10.2001 OJ L 289 of 28.10.1998

Related Acts

Proposal for a directive of the European Parliament and of the Council of 14 September 2004 amending Directive 98/71/EC on the legal protection of designs [COM(2004) 582 final – Not published in the Official Journal] [adoption: codécision COD/2004/0203].
This proposal concerns design protection of spare parts intended to restore the appearance of complex products such as motor vehicles. It aims to complete the Internal Market through the process of liberalisation begun and partially achieved by Directive 98/71/EC.

Council Regulation (EC) No 6/2002 of 12 December 2001 on Community designs [Official Journal L3 of 5.1.2002].
This Regulation establishes a unified system for obtaining a Community design to which uniform protection is given with uniform effect throughout the internal market. It aims to remove the obstacles and sources of distortion of competition at Community level. It also aims to encourage creativity and innovation by providing reliable and uniform protection throughout the entire territory of the European Union.

 

Technology transfer agreements

Technology transfer agreements

Outline of the Community (European Union) legislation about Technology transfer agreements

Topics

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

Internal market > Businesses in the internal market > Intellectual property

Technology transfer agreements

Document or Iniciative

Commission Regulation (EC) No 772/2004 of 7 April 2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements.

Summary

Intellectual property legislation confers exclusive rights on holders of patents *, copyright, design rights, registered trademarks and other rights protected by the law. A holder of intellectual property rights is authorised to prevent any unauthorised use of its intellectual property * and to exploit such property, in particular by licensing it to third parties. Technology transfer agreements * concern the licensing of technology.

Such agreements will usually improve economic efficiency and be pro-competitive as they can reduce duplication of research and development, strengthen the incentive for the initial research and development, spur incremental innovation, facilitate diffusion and generate product market competition. However, licensing agreements may also be used for anti-competitive purposes, e.g. where two competitors use a licensing agreement to share out markets between themselves or where an important licence holder excludes competing technologies from the market.

In order to strike the right balance between the protection of competition and the protection of intellectual property rights, this block exemption regulation creates an area of certainty for most licensing agreements. The guidelines specify how Article 101 of the Treaty on the Functioning of the European Union (TFEU) (ex-Article 81 of the Treaty establishing the European Community (TEC)) should be applied to agreements not falling within the area of certainty.

Scope

The scope of the new rules not only covers patent and know-how * licensing agreements but also applies to design and model rights and software copyright licences. In cases where the Commission does not have the right to adopt a block exemption regulation, e.g. for agreements on patent pooling or the granting of copyright licences in general, the guidelines provide clear guidance on the future policy regarding the application of the rules. This regulation does not, however, concern licensing agreements relating to the subcontracting of R&D activities.

Implementing conditions

In order to determine the area of certainty applicable to licensing agreements, this regulation distinguishes between competing and non-competing undertakings, regarding the former as undertakings which compete on the relevant technology market and/or the relevant product market.

The regulation stipulates, however, that the following are exempt from the restrictions laid down in Article 101(1) TFEU (ex-Article 81(1) TEC):

  • agreements concluded between competing undertakings where the market share does not exceed 20 % of the relevant market;
  • agreements concluded between non-competing undertakings where the market share does not exceed 30 % of the relevant market.

These exemptions are granted on condition that the agreements do not contain certain restrictions that have serious anti-competitive effects. In this respect, the regulation lists a whole set of hardcore and excluded restrictions (Articles 4 and 5) that have serious anti-competitive effects and are, therefore, prohibited. In other words, anything not expressly excluded from the block exemption regulation is exempt. In the absence of hardcore restrictions, undertakings that sign agreements not exceeding the market share thresholds may consider their agreements to be compatible with European competition legislation.

Market share is calculated on the basis of market sales value data relating to the preceding calendar year. If the market share is initially not more than 20 % or 30 % but subsequently rises above that level, the exemption continues to apply for a period of two consecutive calendar years following the year in which the 20 % or 30 % threshold was first exceeded.

Withdrawal of the exemption

Regulation (EC) No 1/2003 empowers the competent authorities of European Union (EU) countries to withdraw the benefit of the block exemption in respect of technology transfer agreements having effects incompatible with Article 101(3) TFEU (ex-Article 81(3) TEC) in their respectively territory or in a part of that territory and where such territory has the characteristics of a distinct geographic market. EU countries must ensure uniform application throughout the common market of the EU competition rules.

The Commission may also withdraw the benefit of this regulation where:

  • it finds in any particular case that a technology transfer agreement has effects which are incompatible with Article 101(3) TFEU;
  • it notes the existence of parallel networks covering more than 50 % of a relevant market. In this case, the Commission may declare by regulation that this regulation is not applicable.

Agreements already in force on 30 April 2004 which satisfy the conditions for exemption provided for in Regulation (EC) No 240/96 are not prohibited during the period from 1 May 2004 to 31 March 2006.

Background

Regulation (EC) No 772/2004 falls within the framework of Regulation No 19/65/EEC empowering the Commission in accordance with Article 101(3) TFEU to exempt certain types of agreement. It replaces Regulation (EC) No 240/96 of 31 January 1996, which expired on 30 April 2004.

Key terms used in the act
  • Technology transfer agreement: a patent licensing agreement, a know-how licensing agreement, a software copyright licensing agreement or a mixed patent, know-how or software copyright licensing agreement, including any such agreement containing provisions which relate to the sale and purchase of products or which relate to the licensing of other intellectual property rights or the assignment of intellectual property rights, provided that those provisions do not constitute the primary object of the agreement and are directly related to the production of the copyright products; assignments of patents, know-how, software copyright or a combination thereof where part of the risk associated with the exploitation of the technology remains with the assignor are also deemed to be technology transfer agreements.
  • Intellectual property rights: industrial property rights, know-how, copyright and neighbouring rights.
  • Patents: patents, patent applications, utility models, applications for registration of utility models, designs, topographies of semi-conductor products, supplementary protection certificates for medicinal products or other products for which such supplementary protection certificates may be obtained and plant breeder’s certificates.
  • Know-how: a package of non-patented practical information, resulting from experience and testing, which is secret (that is to say, not generally know or easily accessible), substantial (that is to say, significant and useful for the production of the contract products) and identified (that is to say, described in a sufficiently comprehensive manner so as to make it possible to verify that it fulfils the criteria of secrecy and substantiality).
Act Entry into force – Date of expiry Deadline for transposition in the Member States Official Journal

Regulation (EC) No 772/2004

1.5.2004 – 30.4.2014

OJ L 123 of 27.4.2004

Related Acts

Commission Notice – Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements [Official Journal C 101 of 27.4.2004].
The purpose of these guidelines is to provide guidance on the application of the block exemption regulation and on the application of Article 101 TFEU (ex-Article 81 TEC) to technology transfer agreements that fall outside the scope of the regulation. For example, in the case of agreements pooling patents or the granting of copyright licences in general, the guidelines provide clear guidance on the future policy on applying the rules. The block exemption regulation and the guidelines are not prejudicial to possible parallel application of Article 102 TFEU (ex-Article 82 TEC) to licensing agreements. The criteria set out in the guidelines must be applied in the light of the circumstances of the individual case, thereby ruling out any mechanical application. The Commission will monitor how the regulation and the guidelines are being applied under the new implementation arrangements introduced by Regulation (EC) No 1/2003 in order to determine whether any amendments should be made.

Motor vehicle liability insurance: freedom to provide services

Motor vehicle liability insurance: freedom to provide services

Outline of the Community (European Union) legislation about Motor vehicle liability insurance: freedom to provide services

Topics

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

Internal market > Motor vehicles > Interactions between the automobile industry and specific policies

Motor vehicle liability insurance: freedom to provide services

Document or Iniciative

Council Directive 90/618/EEC of 8 November 1990, amending, particularly as regards motor vehicle liability insurance, first Council Directive 73/239/EEC and second Council Directive 88/357/EEC on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance.

Summary

The Directive applies to the provision of third-party motor vehicle insurance by an insurer established in one Member State in respect of vehicles registered in other Member States.

Two classes of risk, namely class 10 (motor vehicle liability) and class 3 (damage to or loss of land motor vehicles or other land vehicles), are now to be included in the second Directive system which distinguishes between large risks and mass risks with corresponding degrees of supervision by home and host countries.

Classes 10 and 12 (Italian motorboat risks) are now to be included in the freedom-of-services provisions of the second Directive, and thus may now be covered by way of provision of services by insurers in other Member States.

A new group of classes entitled “motor insurance” is to be introduced for the keeping of gross premium statistics in respect of the business written by each insurance company by way of provision of services in a given country.

The Member State of provision of services must require the services undertaking to become a member of, and participate in the financing of, its national motor insurers’ bureau and its national guarantee fund. The membership contributions should be based only on the premium income from this insurance class in the State in question or the number of vehicles insured, i.e. an annual membership fee or minimum contribution may not be required.

Insurers must appoint a representative in the Member State of provision of services, responsible mainly for collecting information and representing the insurer in relation to persons pursuing claims or seeking redress before the courts or authorities of that State. The Member State of provision of services may require the representative to help it verify the existence and validity of insurance cover.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Directive 90/618/EEC 29.11.1990 20.05.1992 OJ L 330 of 29.11.1990