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At the  initiative of  Mr Van Miert, the  Commission has  just published  the
Report  on  Competition  policy  which  gives  a  complete  overview  of  the
Commission's activities in  1994 in the  areas covered  by Union  competition
policy:  restrictive  practices;  the abuse  of  dominant  positions;  merger
control; the  control  of state  aid;  the liberalization  of areas  such  as
posts,  telecommunications and  energy, where  States  have given  special or
exclusive rights to certain  bodies; and international aspects of competition
policy.

The Report is  addressed primarily to other  Union institutions - Parliament,
the  Council, and the Economic  and Social Committee -  and to Member States,
and is intended  to provide them with  an account of what the  Commission has
been doing and an explanation of the competition  policy objectives which the
Commission has  been pursuing and  proposes to pursue  in the future. But  it
also seeks  to provide information on  competition policy  for businesses and
industry, and more generally  for the  public at large,  and thus to  improve
transparency. Competition law specialists  also need to be able to use  it as
a reference work.

The year 1994  saw a considerable increase both in  the number of cases dealt
with by the  Commission departments and in the  effectiveness with which they
were handled; legislative activity increased at the same time.

Restrictive practices and  abuse of dominant positions (Articles 85 and 86 of
the Rome Treaty)

The Commission adopted an unprecedented  number of formal decisions  in 1994:
there  were 33  of  them. At  the  end of  the  year there  were 1 058  cases
pending, which meant that the backlog had been reduced once again.

Detecting  and   prosecuting  cartels   remains  one   of  the   Commission's
priorities.  The  year  under  review  was  particularly noteworthy  in  this
respect: no fewer  than three "hard core cartels", involving large numbers of
firms, were  prohibited  in decisions  which also  imposed substantial fines.
The decisions  related to  key sectors  of the economy,  namely steel  (steel
beams),  cartonboard and  cement. In  another  decision, concerning  sporting
goods,  the Commission  severely  penalized  restrictions on  parallel  trade
between Member States. The  Commission took the  same severe stance in  cases
where a firm  exploited a strong position  on the market in  order unlawfully
to prevent competition on  the part of other firms.  A case which showed  the
importance of a strict  competition policy in the establishment of  a genuine
single  market was that  of rail transport in  Germany (Deutsche Bahn), which
was the first  in this  sector where the  Commission imposed  a fine for  the
abuse of a dominant position.

In applying the competition  rules, however, the Commission bore in  mind the
need  to support  the restructuring of  Community industry so  as to increase
competitiveness. It  took a  much more  sympathetic approach  in cases  where
firms,  rather  than   protecting  themselves  artificially  against  outside
competition,  preferred  to  step  up  cooperation  by  means  of  technology
transfer licenses,  joint ventures, what  were termed "strategic  alliances",
or mergers. Such  cases were particularly  numerous in  1994; the  Commission
authorized arrangements of  this kind  by means of  a formal  decision in  19
cases  and by means  of a  comfort letter in  even more. One  of these cases,
BT/MCI, provided a good illustration  of the Commission's pragmatic  approach
here: the Commission  found that the market  was one which was opening  up to
worldwide competition as a  result of trade liberalization and  technological
progress,  and  that firms  were  accordingly  obliged to  adapt  to the  new
environment.

Merger control

The number  of  merger transactions  notified  was  higher than  in  previous
years, going up  from 58 in 1993 to 95 in 1994. There was also an increase in
the number of  cases in which the  Commission expressed serious doubts  as to
the compatibility with  the common market  of the  transaction proposed,  and
authorized it only  after the parties had  undertaken to make  changes, which
in Proctor & Gamble for example  included the divestment of  certain sections
of the acquiror's  business. In the MSG  Media Service case, which  concerned
pay TV  in Germany, the  Commission prohibited the transaction:  this was the
second  case   of  prohibition   since  merger   control  arrangements   were
established  at Union level.  In the Commission's  view the  breaking down of
borders  facilitates  more  intense  competition,  in  which  only  the  more
efficient will survive, but it has to go hand in  hand with strict control of
mergers to  ensure that  they do  not endanger  the development of  effective
competition on the relevant markets.

State aid

There were several spectacular state aid decisions, notably  those concerning
the  reorganization of the  steel industry  and the  publicly-owned companies
Air France and Bull. But  the Commission took  more than 500 other  decisions
on individual measures or general schemes of  aid to firms. In most cases  it
decided to raise  no objection. It initiated proceedings  in 40 cases, and in
these it  ultimately took 15 positive  decisions, 3 negative decisions  and 2
conditional decisions.

The Commission believes it must  intensify supervision of state aid  in order
to maintain undistorted  competition and to facilitate the convergence of the
economies  of the Member States.  But it  is prepared to take  account of the
situation of  the firm,  its employees  and the  region. In  1994 it  adopted
guidelines on state aid for  rescuing and restructuring firms  in difficulty.
The  Commission  is prepared  to  allow  such aid,  especially  on  social or
regional grounds, if it  is linked to a restructuring plan that  will make it
possible to  restore  the long-term  viability of  the  firm,  and if  it  is
limited to the  strict minimum needed to enable  that plan to be implemented.
The Commission began consultations on  draft guidelines on aid  to employment
and a  revised version  of guidelines  on aid  for research  and development,
particularly in  order to take account of the thinking  in the White Paper on
Growth, Competitiveness and Employment. It  sought to reduce the level of aid
granted in the  economically more advantaged  central regions  of the  Union,
where aid could work against the policy of cohesion.

Liberalizing monopolies

Fresh progress  was made  towards liberalizing  sectors in which  competition
was restricted or indeed eliminated  entirely by special or  exclusive rights
granted to  enterprises entrusted with the  operation of particular services;
this is especially  common in posts, telecommunications, energy and the like.
Without wishing  to  call the  public  service  function into  question,  and
bearing in  mind the specific features  of each sector, the  Commission takes
the  view that there should be  demonopolization wherever possible. A lack of
sufficient  competition  makes  these  services  a  burden  on consumers  and
entails a loss of productivity throughout Community industry. 

The Commission continued  to pursue the liberalization  of telecommunications
in accordance with  the timetable laid down  by the Council, which  calls for
full competition by 1988.

In the  energy sector the  Commission worked  against the  background of  the
need to complete the single market  in energy and to ensure that  the gas and
electricity  markets  and  the  interconnected  networks   were  safe,  open,
transparent,  efficient,  competitive  and  respectful  of  the  environment.
Legislative  dialogue between  the  Commission,  Parliament and  the  Council
continued in a  search for agreement  on the  proposals for directives  which
would establish a single market in gas and electricity.

The international dimension 

There were several events over the course  of the year which illustrated  the
fact  that the process  of globalization of  the economy  is accelerating and
that competition policy must take account of this new dimension.

The BT/MCI  case clearly  showed that  in dealing  with individual cases  the
Commission would take  greater account of trade with non-Member countries and
of the worldwide  competition which existed in some industries. The Microsoft
case  provided  an  example  of  the  necessity  and  usefulness  of  genuine
collaboration  between   the  competition  authorities   of  the  Union   and
non-Member countries. The  Commission continued its efforts to develop a real
body of competition rules at international level, and even more important  to
establish effective  mechanisms to police them.  A working  party composed of
independent experts and  Commission staff began examining these  questions in
1994.

The economic integration of neighbouring countries,  especially the countries
of Central Europe, has been benefiting as a result of a systematic  effort to
apply competition rules  on a bilateral  basis in  accordance with the  Union
model.

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