Competition Newsletter No. 8/2010

Policy

1. Competition Council – The Single Market challenges and competition in sensitive sectors Report
The Competition Council launched its second report “The Single Market challenges and competition in sensitive sectors”, drafted in cooperation with the Romanian Center for Economic Policies (CEROPE) and the Romanian Academic Society (SAR). The report, which is currently open to public debate, deals with several competition issues in the following areas of the national economy: agro-food sector, food retail sector, public procurement, electricity and natural gas markets, electronic communications market, rail industry and insurance market. The report also deals with the impact of regulated prices in the economy. Moreover, through this report, the Competition Council intended to give a number of recommendations to policy makers so as to take all the necessary measures to eliminate any barriers in front of the smooth functioning of the envisaged sectors.
The full text of the Competition Council’s report is available at:
http://www.consiliulconcurentei.ro/documente/Raport%20concurenta%20sectoare%20sensibile_18766ro.pdf

Agreements

2. Competition Council – Fine - Body of Expert and Licensed Accountants
The Competition Council imposed a fine amounting to RON 4.056.264 (around EUR 950,000) on the Body of Expert and Licensed Accountants (CECCAR), for having fixed the level of the tariffs applied by its members. Following an investigation initiated by the Competition Council in 2009, it was found that since 2001, CECCAR has fixed through Regulation the level of the fees for the accounting profession, although in 2000 it had received warnings from the competition authority to refrain from such conduct. This is the largest fine percentage ever applied by the Competition Council – 9.2% of the revenues derived by CECCAR in 2009 and the largest fine ever imposed on a trade association. This is due to the seriousness of the infringement, which is similar to that of a cartel case, to its long duration – 9 years and to aggravating circumstances, namely the fact that the infringement continued following the opening of the investigation and warnings of the competition authority had been neglected. Consequently, the Competition Council ordered CECCAR to put an end to the anti-competitive practice and repeal the Regulation establishing the fees applicable in the accounting profession within three months as of the formal communication of the decision.

3. Competition Council – Ongoing investigation – Electrical and electronic equipment marketing and waste management markets
The Competition Council is currently investigating potential anti-competitive practices both between companies active in the manufacturing of electrical and electronic equipments (EEE) and between the various collective organisations active on the waste EEE management market. In addition, the current investigation deals with the allegations regarding a possible anti-competitive agreement between members of the Romanian Recycling Association (RoRec) and retailers involved in certain buy-back marketing campaigns carried out by some of them. Within the investigation, the Competition Council will also analyse the compliance with competition rules of certain sector-specific legal provisions, in particular those related to the information of consumers with regard to the management costs of WEEE (green stamp), as well as the conditions required for the authorisation and functioning of collective organisations.

Abuse of dominance

4. European Commission – Margin squeeze – Telecommunications
The EU Court of Justice has recently upheld the €12.6 million fine imposed by the European Commission on Deutsche Telekom for abuse of dominant position in the fixed telephony markets in Germany. In a decision issued on 21 May 2003, the European Commission found that Deutsche Telekom AG (DT) abused its dominant position through unfair prices for the provision of local access to its fixed telecommunications network (local loops). The Commission has found that DT charges new entrants higher fees for wholesale access to the local loop than what DT's subscribers pay for fixed line subscriptions. Such practice discouraged new companies from entering the market and reduced the choice of suppliers of telecoms services as well as price competition for consumers. The Court also confirmed that the approval by the German telecommunications Regulator RegTP of Deutsche Telekom’s wholesale prices did not absolve the latter from its obligations under EU competition law as Deutsche Telekom had sufficient scope to adjust its prices to end the margin squeeze. The Court’s ruling, confirmed the Commission's action against dominant undertakings which pursue a margin squeeze policy. Finally, it also underlined that decisions of national authorities under EU telecommunications law do not in any way affect the Commission’s power to find infringements of EU competition law.

Merger Control

5. European Commission–Clearance subject to conditions
Pharmaceutical industry
The European Commission cleared the proposed acquisition of SSL International by Reckitt Benckiser, both British pharmaceutical companies, active in manufacturing and selling of OTC pharmaceutical products. The decision is conditional upon Reckitt Benckiser's commitments to divest SSL's brands for mouth pain relief products in the UK and Ireland, where the merged entity would have had a very strong market position.

6. European Commission – Unconditional approvals
Vending services market
The European Commission has approved the proposed acquisition of Charden International, the Dutch parent company of Autobar, a vending machine operator, by CVC. CVC controls a number of companies in various industries via its investment funds. One of the companies in the CVC portfolio is Leaf International, a manufacturer of sugar confectionery and chewing gum with brands like Sportlife or Läkerol. Charden International is the parent company of Autobar that supplies, installs and operates vending machines for hot beverages, cold drinks and snacks, including confectionery.
The Commission's analysis showed that the merged entity would have neither the ability nor the incentive to shut off competitors, because competitors of Autobar in the vending services market will be able to source from alternative suppliers and sugar confectionery and gum make up only for a very small share of total vending sales.
Food services sector
The European Commission has cleared the proposed acquisition of a controlling stake in Frisch & Frost (F&F), a producer of frozen and chilled products in Austria, by Dutch company Lamb Weston / Meijer. F&F produces and sells frozen and chilled products. It supplies the food service sector, fast food chains and the retail sector in Austria and has a limited presence in some Member States in Central and South-Eastern Europe. Lamb Weston / Meijer (LWM) produces and sells frozen products of similar nature, serving customers in the food service sector, fast food chains and the retail sector and is mainly active in the Netherlands, France, Germany, the United Kingdom, Spain and Italy.
Water and wastewater industry
The European Commission has cleared the proposed acquisition of certain water and wastewater businesses of United Utilities group of the UK by Veolia Water UK Plc of the UK and Veolia Voda SA of the Czech Republic. The Commission found that the proposed transaction results in limited horizontal overlaps on the markets for outsourced operation and maintenance services (O&M) and design, construction and management services of water and wastewater facilities to regulated water companies and industrial customers.

7. Competition Council – Unconditional approvals
Vending services
The Competition Council cleared the acquisition by S.C. Novadex & CA S.R.L. of a percentage of the shares conferring control over each of the following companies, active on the market of vending machines for food and coffee products: S.C. Nordexim Coffee Services S.R.L., S.C. ATV Distribution S.R.L. and S.C. Premium Coffee Services S.R.L.
Electricity sector
The Competition Council cleared the economic concentration performed through the acquisition of sole control by Repower AG (Swiss company) over Elcomex EN SRL from Romania. Repower AG has as business object the production, transport, distribution and provision of electricity on the markets in Switzerland, Italy and Germany. In Romania, Repower is active through the companies Re Energie SRL and RE Trading CEE sro Praga. SC Elcomex EN SRL is a Romanian company having as business object the trading of electricity to industrial consumers.
Automotive industry
The Competition Council is analyzing the acquisition of joint control by SC New Kopel Romania SRL and Opel Southeast Europe Kft (Opel SE Kft) over SC Union Motors Car Sales SRL. SC Union Motors Car Sales SRL is currently under the sole control of SC New Kopel Romania and has as main business object the retail of cars and light motor vehicles (below 3,5 tons). SC New Kopel Romania SRL is part of Shlomo Group, the biggest operational leasing company as well as the biggest rental company in both Israel and Romania. Opel Southeast Europe Kft is part of Opel group, and has as main business object the wholesale of Opel cars, spare parts and accessories.
Aircraft industry
The Competition Council cleared the taking over by Eurocopter of certain assets held by SC IAR SA Ghimbav in connection with the maintenance, repair and overhaul services for military helicopters. Eurocopter Romania is part of the EADS group, which develops and markets civil and military aircraft, as well as communications systems, missiles, space rockets, satellites, and related systems.

State Aid

8. European Commission – Failure to recover illegal state aid – Referral to Court
The European Commission has decided to refer Italy to the Court of Justice for failure to implement a European Court of Justice decision ordering the recovery of illegal and incompatible state aid. The original Commission decision dating back to 2002 had found that a three-year income tax exemption and the possibility to contract reduced-interest loans with Cassa Depositi e Prestiti were in breach of EU state aid rules and required Italy to recover the illegal aid. Court confirmed the Commission decision in 2006. The Commission has decided to ask the Court to impose a daily penalty payment €65.280 for each day after the Court ruling until the infringement ends and a lump sum corresponding to €7.140 per day from the date of the first Court ruling until the second Court ruling. These payments would act as an incentive to ensure that the illegal aid were recovered rapidly from the beneficiaries.

9. European Commission – Opening of formal investigations
State aid in favor of Greek textile producer
The European Commission has opened an in-depth investigation to establish whether measures granted by Greece between 2007 and 2010 in favour of United Textiles S.A., a company in financial difficulties, are in line with EU State aid rules. In particular, the Commission has concerns that United Textiles received aid repeatedly since at least 2007, in breach of the EU rescue and restructuring guidelines.

10. European Commission – State aid partially illegal
The European Commission found that part of the state support granted in 2009 to fertiliser producer Péti Nitrogénművek infringed EU state aid rules. After an in-depth investigation, the Commission found that loans amounting to around €88 million granted by the Hungarian Development Bank MFB and covered by state guarantees constitute illegal state aid. The aid, which was not notified by Hungary, was nevertheless found to be compatible with the Commission's temporary rules for the economic crisis but the remuneration of the State was insufficient and the State must recover part of it.

11. European Commission – Authorization decisions
French scheme encouraging legal downloads of music
The European Commission has approved a French scheme that subsidizes legal downloads of music by French residents aged 12 to 25 years. The measure is aimed at combating illegal downloads and, thus, at creating the condition for an increased offer of music and lower prices for consumers. The Commission found the measure to be in line with EU rules allowing the fostering of general interest goals. In particular, the measure is well designed to achieve its objective, is limited in time and scope and contains safeguards to limit potential distortions of competition.

Source: European Commission & Romanian Competition Council