EUROPEAN COMMISSION Brussels, 4.6.2015 SWD(2015) 113 final COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on Competition Policy 2014 {COM(2015) 247 final} EN EN TABLE OF CONTENTS I. LEGISLATION AND POLICY DEVELOPMENTS ................................................................................... 4 State aid ............................................................................................................................................... 4 1. State Aid Modernisation: reform in support of growth and jobs ............................................. 4 2. Monitoring, recovery and cooperation with national courts .................................................. 10 3. Significant judgments by EU Courts in the State aid area .................................................... 12 Antitrust & Cartels ............................................................................................................................. 14 1. Technology Transfer Agreements ......................................................................................... 14 2. Notice on Agreements of Minor Importance and accompanying Staff Working Document on Restrictions by Object ................................................................................................................... 15 3. Directive on antitrust damages actions .................................................................................. 16 4. Evaluation of access to file and complaints .......................................................................... 16 5. Significant judgments by EU Courts in antitrust and cartels ................................................. 17 6. Fight against cartels remains a top priority ........................................................................... 21 7. Continuing the close cooperation within the European Competition Network (ECN) and with national courts ....................................................................................................................... 24 Merger control .................................................................................................................................. 25 1. The White Paper "Towards more effective EU merger control" ........................................... 26 2. Simplification Package successfully implemented ................................................................ 26 3. Recent enforcement trends .................................................................................................... 26 4. Significant judgments by EU Courts in mergers ................................................................... 27 Developing the international dimension of EU competition policy .................................................. 28 1. Bilateral relations .................................................................................................................. 28 2. Multilateral cooperation ........................................................................................................ 29 II. SECTORAL OVERVIEW ................................................................................................................... 30 1. Energy & Environment ...................................................................................................................... 30 2. Information and Communication Technologies (ICT) and Media ..................................................... 34 3. Financial Services............................................................................................................................... 39 2 4. Basic industries and Manufacturing .................................................................................................. 50 5. The agri-food industry ....................................................................................................................... 56 6. The Pharmaceutical and health services sector ................................................................................ 60 7. Transport and postal services ........................................................................................................... 63 3 I. LEGISLATION AND POLICY DEVELOPMENTS EU competition policy's contribution to growth and jobs The European Union is the world's largest economic and trading area. The EU's unique asset and distinct comparative advantage on the global scene is its internal market, which encompasses over half a billion consumers and more than 20 million companies. Since its inception, the on-going process of improving and expanding the Single Market has gone hand in hand with the development of EU competition policy. Efficiently functioning markets in the EU will bring economic opportunities, improve productivity, drive down costs and boost competitiveness for companies of all sizes. This is key to creating growth and jobs in Europe. In addition, competition-friendly regulation and competition culture create favourable conditions for investments and innovation, which enhances consumer welfare and efficiently functioning markets, enables growth and contributes towards more convergence. Undistorted competition also fosters competitiveness in a global context. A competitive internal market also prepares European companies to succeed on global markets. State aid State aid control is an integral part of EU competition policy and a necessary safeguard to preserve effective competition and free trade in the Single Market. The Treaty establishes the principle that State aid which distorts or threatens to distort competition is prohibited in so far as it affects trade between Member States (Art. 107(1)). However, State aid, which contributes to well-defined objectives of common European interest without unduly distorting competition between undertakings and trade between Member States, may be considered compatible with the internal market (under Art. 107(3)). The objectives of Commission's control of State aid activity are to ensure that aid is growth- enhancing, efficient and effective, and better targeted in times of budgetary constraints and where aid is granted, it does not restrict competition but addresses market failures to the benefit of society as a whole. In addition to this, the Commission is effectively engaged in preventing and recovering incompatible State aid. 1. State Aid Modernisation: reform in support of growth and jobs In 2014 the Commission completed its ambitious State Aid Modernisation (“SAM”) reform1, which was launched in 20122 and aimed at promoting good aid that supports growth while contributing to Member States' efforts towards budgetary consolidation. Only one building block of SAM still needs to be put in place, namely a Commission's guidance on the notion of State aid, following important evolutions in case law and enforcement practice. SAM provides for more efficient decision making and procedures for granting growth- supporting aid that is not distortive to market functioning in the EU. Among the key 1 For a comprehensive overview of State Aid Modernisation see DG Competition webpage: http://ec.europa.eu/competition/state_aid/modernisation/index_en.html 2 Communication of 8 May 2012 from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, EU State Aid Modernisation (SAM), COM(2012) 209 final. 4 objectives of the reform are tangible cuts in red tape, the promotion of a better use of limited public resources by Member States and of a higher contribution of aid measures to growth. If successfully implemented, the reform will contribute to better allocation of public resources and promote higher efficiency and better quality of policy interventions. As a result of the reform, a significantly larger number of smaller and unproblematic measures should be exempted from prior notification, in exchange for strengthened controls at Member State level, greater transparency and better evaluation of the impact of aid. Obtaining these results will not happen automatically, but requires significant efforts by the Commission and Member States. Chart 1. Overview of the SAM package Main changes: less administration and more flexibility and clarity for granting aid One of the cornerstones of the State Aid Modernisation reform was the new General Block Exemption Regulation (GBER)3, which simplifies aid granting procedures for Member States by authorising without prior notification a wide range of measures fulfilling horizontal common interest objectives. According to Commission's estimates, three-quarters of today's State aid measures and some two-thirds of aid amounts could be covered by the new GBER. That proportion could increase to 90% of all aid measures provided Member States use the GBER to the full extent. This means that only cases with the biggest potential to distort competition in the Single Market will remain for ex ante assessment (notification). That increased scope of the GBER will have a strong impact on aid beneficiaries and on granting authorities, leading to faster access to the aid (through avoidance of the notification process) and reduction of administrative burden (simpler conditions, e.g. for demonstrating the incentive effect). Throughout the State Aid Modernisation process, the Commission followed a consistent approach in establishing new Guidelines containing the criteria for assessing State aid compatibility. A key objective was to encourage Member States to ensure that aid granted is addressing the key market failures and bottlenecks. The common approach to compatibility helps to ensure that aid is well designed to meet its objective and that competition distorsions remain limited. The main principles behind the common approach: 3 Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, OJ L 187, 26.6.2014, p. 1. 5  "Big on big, small on small" as SAM introduced higher thresholds for notifying aid aimed at addressing the well-known market failures (R&D&I aid, SME access to finance, regional aid). New categories of aid have been exempted from notifications, such as culture, sports, natural disasters, local infrastructures.  Focus on criteria that matters. The new guidelines provide for effect-based analysis of large projects, bringing public intervention closer to best market practices. The guidelines also include criteria for supporting large infrastructure projects in the common EU interest, in a way that they do neither crowd-out private investments, nor result in undue distortions of competition and trade in the Single Market. What makes an aid measure compatible with the internal market? State aid modernisation clarifies the criteria for finding that an aid measure is compatible and hence can be approved: 1) the aid measure must aim at an objective of common interest; 2) it must be targeted towards a situation where aid can bring about a material improvement that the market cannot deliver itself, for example by remedying a market failure or addressing an equity or cohesion concern; 3) it must be an appropriate policy instrument to address the objective of common interest; 4) the aid must change the behaviour of the undertaking(s) concerned in such a way that it engages in additional activity that it would not carry out without the aid, or it would carry it out in a restricted or different manner or location; 5) the aid amount must be limited to the minimum needed to induce the additional investment or activity; 6) negative effects on competition and trade between Member States must remain sufficiently limited; 7) the relevant acts and pertinent information about aid awards must be transparent (public). Partnership, transparency and evaluation as key institutional pillars of modern state aid control The SAM programme also implies a greater role for Member States in State aid control, including in designing State aid measures to fit the rules (particularly the GBER), taking responsibility for compliance of the aid they grant, and making the transparency and evaluation requirements work. Partnership Implementing SAM requires Member States to take responsibility for ensuring compliance with the State aid rules and for limiting the use of notifications to those cases where they are really necessary. It also requires Member States and the Commission to work together more closely to improve the efficiency of procedures. The new partnership arrangements with Member States are built on a pro-active support of Member States by the Commission through advocacy work and trainings. To oversee implementation and facilitate compliance with the new requirements for transparency and evaluations, the Commission has set up a High Level Group (HLG) with Member States as well as some dedicated working groups. The HLG looks at best practices in ensuring compliance and common challenges with regard to SAM implementation. Alongside that process and to facilitate the work of the central authorities in Member States, DG Competition's newly created State aid country co-ordinators network helps to address systemic issues in State aid enforcement at Member State level, works to help Member States prioritise their portfolio of cases and assists with providing training and guidance. 6 Transparency A way to ensure greater flexiblity and responsibility of Member States for compliance with State aid rules is to put emphasis on transparency. By providing third parties access to information about aid granted, transparency empowers markets and civil society to monitor the compliance, challenge poorly designed aid measures and signal breaches of the rules. Under SAM, the transparency requirement mandates Member States, as a condition for granting aid, to establish comprehensive State Aid websites containing information on aid measures and their beneficiaries, in a format that allows information to be searched, downloaded and easily used. Member States must publish full information on individual aid awards above EUR 500 000. The requirement will become mandatory gradually: there is a transition period until mid-2016 to ensure compliance. In order to guarantee tax confidentiality, the aid granted under fiscal schemes will only be published in ranges to prevent breaches of tax confidentiality, since knowledge of the exact amount of tax relief may allow a company's tax base to be reconstructed. Evaluation Evaluation of aid schemes is a new requirement introduced by State aid modernisation with the aim to gather the necessary evidence to better apprehend impact, improve enforcement and inform future policy-making by Member States and the Commission. It is also a complement to the major expansion of the General Block Exemption Regulation (GBER) and represents a necessary ex post safeguard, alongside transparency and monitoring, to promote quality and effectiveness of aid policies. Since 1 July 2014, evaluation is required for large GBER schemes in certain aid categories4 and is also provided for some notified schemes under the new generation of State aid guidelines5. Better targeted growth-fostering aid addressing market failures (R&D&I aid, SME access to finance, regional aid) One of the headline targets of Europe 2020 Strategy6 is for R&D&I investments in the EU to reach 3% of GDP. As smart and sustainable growth depends on firms' ability to innovate, State aid rules have been deeply revised with a view to unleashing the EU's potential to invest in more and better R&D&I. More precisely, the Commission has adopted a new R&D&I Framework and new provisions for R&D&I aid under the General Block Exemption Regulation (GBER)7, both of which entered into force on 1 July. In total, R&D&I State aid awarded under the previous rules amounts to an estimated EUR 62.4 billion for the period 2008-2013. Nevertheless, R&D spending in Europe has been lagging behind major global competitors, as it now stands a touch above 2% of GDP, compared to around 3% in the US and Japan. This is mainly the result of lower levels of private investment. The new rules on 4 Schemes with an average annual State aid budget above EUR 150 million in the fields of regional aid, aid for SMEs and access to finance, aid for research and development and innovation, energy and environmental aid and aid for broadband infrastructures. 5 Evaluation might apply to notified aid schemes with large budgets, containing novel characteristics or when significant market, technology or regulatory changes are foreseen. 6 Communication of 3 March 2010 from the Commission, Europe 2020 A Strategy For Smart, Sustainable And Inclusive Growth, COM(2010) 2020 final, available at http://eur-lex.europa.eu/legal-content/EN/TXT/?qid= 1427303331326&uri=CELEX:52010DC2020 7 Communication from the Commission, Framework for State aid for research and development and innovation, OJ C 198, 27.6.2014, p. 1, available at http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv: OJ.C_.2014.198.01.0001.01.ENG 7 R&D&I aid are aimed at enhancing market efficiency and mobilising private investment in projects that would otherwise not be implemented due to market failures (notably in the form of knowledge spill-over effects, imperfect information on the risks and benefits of R&D&I activities and coordination problems for cooperative research). The new rules are therefore designed to go hand in hand with other EU initiatives aimed at promoting R&D&I activities, such as Horizon 20208. New R&D&I State aid rules: main features The Commission has cut red tape by allowing Member States more flexibility in implementing R&D&I aid. In particular, a new category of aid for research infrastructure is covered by both the new GBER and the new R&D&I Framework, while the scope for aid for pilot projects and prototypes has been expanded. Moreover, aid for innovation clusters has been made more flexible. Notification thresholds have been doubled for aid for R&D projects and re-doubled for EUREKA projects and projects carried out in the context of EU Joint Undertakings. The new R&D&I Framework increases legal certainty, for instance the general non-economic activities of research organisations and the limits of certain ancillary economic activities for which public funding falls outside State-aid rules have been explained in more detail. A comprehensive guidance has been given for the first time on how to avoid State aid in the area of public procurement of R&D services. To help industry overcome financing gaps, the new rules on R&D&I aid establish more flexible and simpler criteria under which the aid is more likely to be found compatible with the internal market. Under the new R&D&I Framework, the allowed aid intensities have been increased in particular for close-to-the-market aid categories (applied research, including demonstrators and pilots, ranging from 60-90%, and innovation aid in general set at 50%, including for innovation clusters). In addition to the new R&D&I State aid rules, the Commission has set up a simpler, more flexible and generous State aid framework for the provision of risk finance to SMEs and mid- caps. Following extensive consultations with Member States and stakeholders,the new rules, contained in the new Risk Finance Guidelines and in the new GBER, entered into force on 1 July9. SMEs across the EU remain heavily dependent on traditional bank lending which is still limited by the refinancing capacity, risk appetite and capital adequacy of banks. The financial crisis has exacerbated the problems with approximately one third of SMEs being unable to receive the necessary finance in recent years. Given the pivotal importance of SMEs and mid- caps for the whole EU economy, that situation has a significant negative impact on growth and job creation. The new rules aim to enhance the incentives of private sector investors - including institutional ones – to increase their funding activities in this critical area of SME and mid-caps financing, mirroring other EU initiatives designed to promote wider use of financial instruments in the context of new support programmes such as Horizon 2020 or the Programme for the Competitiveness of Enterprise and SMEs (COSME)10. In sum, the new risk finance regime will provide the framework for seamless support of new ventures from their creation to their development into global players, so as to help them overcome the critical stages – the so-called “valley of death” – where private financing is either unavailable or not available in the necessary amount or form. State aid framework for the provision of risk finance to SMEs and mid-caps: main features 8 For an overview on Horizon 2020, the EU Framework Programme for Research and Innovation, see http://ec.europa.eu/programmes/horizon2020/ 9 Communication from the Commission, Guidelines on State aid to promote risk finance investments, OJ C 19, 22.1.2014, p. 4, available at http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52014XC0122(04) 10 For an overview on the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises, see http://ec.europa.eu/enterprise/initiatives/cosme/index_en.htm 8 The new block exemption provide a radically enlarged scope, covering a much wider range of companies, irrespective of their location in assisted or non-assisted areas, including SMEs in later growth stages. Furthermore the new rules allow for a wider range of financial instruments (equity, quasi-equity, loans, guarantees or hybrid instruments) and funding structures whereas before they required 70% of the budget to be provided in the form of equity via private/public investment funds. Risk finance measures of up to EUR 15 million per SME are now block-exempted (compared to the previous annual tranches of maximum EUR 1.5 million in GBER and EUR 2.5 million in the Guidelines). In addition, the new Guidelines set out compatibility conditions for amounts above EUR 15 million, without imposing any specific cap, as long as the aid measure is granted in cases where market failures have been convincingly demonstrated. Also, the new regime is a better reflection of market practices as it allows capital replacement operations as long as they are combined with the injection of new fresh capital into the company Finally, the new risk finance regime tailors the private participation ratio according to the inherent riskiness of the development stage of the final investee whereas the previous GBER required a private participation rate of least 50% in non-assisted areas and 30% in assisted areas. Moreover, while the previous GBER did not cover fiscal incentives to private investors the new regime has introduced more flexibility by bringing tax incentives to natural persons (including business angels) under the scope of the block exemption and by setting out detailed rules for fiscal incentives to corporate investors under the new Guidelines. Regional aid is an important instrument in the EU's toolbox to promote greater economic and social cohesion, Following the adoption in June 2013 of the revised regional aid guidelines for the period 2014-2020 the Commission took the necessary measures to ensure the continuity of the regional support systems of the 28 Member States after the expiry of the regional aid maps on 30 June 2014. By 16 September, the Commission had adopted approval decisions on the 28 regional aid maps covering the period between 1 July 2014 and 31 December 2020. With the adoption of the new General Block Exemption Regulation in May 2014, the full set of rules applicable to regional aid to be granted in the period 2014-2020 was in place. The new regulation further extended the range of regional aid measures which are exempted from the notification obligation (from 1 July 2014, the exemption also applied to ad hoc regional investment aid measures below the notification thresholds, transport aid schemes and operating aid schemes for Outermost Regions). Those changes will enable the Commission to focus its future enforcement activities on the potentially most distortive regional aid measures. In 2014, the Commission also adopted several decisions on a number of regional aid measures to support large investment projects. It took final decisions approving regional aid for investments by Porsche (cars) and Propapier (paper) in Germany. Regional aid to BMW (electric cars) in Germany was partially approved, partially prohibited and another formal investigation into aid for Ford Spain (cars) could be closed as Spain decided to withdraw the notification. The Commission also decided to open formal investigations into aid for Audi in Hungary and for Autoeuropa in Portugal (both the car sector). Following a preliminary examination, the Commission approved aid for Hankoog and Apollo in Hungary (both tyre production), for Premursa (theme park) in Spain and Baltic New Technologies (refinery) in Latvia. Finally, the Commission adopted a decision on the Bulgarian forest land swap case in which it ordered the recovery of all illegal and incompatible aid granted in the context of the land swap transactions concerned. 9 2. Monitoring, recovery and cooperation with national courts Increased monitoring of existing State aid to ensure a level playing field Over the years, the architecture of State aid control has evolved. Today, 32% of aid is granted under block-exempted schemes which are not examined by the Commission prior to their entry into force11. Overall, 88% of aid is granted on the basis of previously approved aid schemes or Block Exemption Regulations12. In that context, it is essential for the Commission to verify that Member States apply the schemes correctly and that they only grant aid when all required conditions are met. To this end, the Commission introduced in 2006 a regular, ex post, sample-based control of existing aid schemes ("monitoring"). After a modest start covering about 20 schemes and 10 Member States in each monitoring cycle, the Commission considerably stepped up monitoring since 2011. Building on the Court of Auditors recommendations13 and anticipating the further evolution of the State aid control architecture, the Commission practically almost quadrupled the size of the monitoring sample in the last three annual cycles to 75 schemes in the current 2014 review. It also extended the scope of its control. The 2014 cycle covered all Member States, all main types of aid approved as well as block-exempted schemes. The Commission follows-up systematically all irregularities and uses the means at its disposal, as appropriate, to address the competition distortions that these may have induced. In some cases, Member States offer to voluntarily redress the problems detected (to amend national legislation, to recover the excess aid granted etc.). In other cases, formal action may be necessary. In 2014, the Commission adopted two final decisions in cases where it had opened a formal investigation procedure in 2013, considering that the additional information provided by the Member States set aside the doubts on the misapplication of the schemes that had triggered their monitoring14. Four other formal investigation procedures relating to issues detected in the context of monitoring were still ongoing in 201415. Restoring competition through recovery of State aid granted in contravention of the rules To ensure the integrity of the Single Market, the Commission has the power and the duty to request Member States to recover unlawful and incompatible aid which has unduly distorted competition and trade between Member States. In 2014, further progress was made to ensure that recovery decisions are enforced effectively and immediately. 11 This percentage concerns aid in terms of volume. Banking schemes are not considered here. See latest publicly available figures (2012), Scoreboard, EU 27 (2006-2012) available at http://ec.europa.eu/competition/state_aid/ scoreboard/graph8.jpg 12 See previous footnote. 13 In its 2011 report on the efficiency of State aid procedures, the Court of Auditors considered that, in view of the importance of aids granted under existing aid schemes, the Commission's monitoring activity should be reinforced. See the recommendation n° 1 of the Court of Auditors Report (recital 96, p. 41, publicly available under http://eca.europa.eu/portal/pls/portal/docs/1/10952771.PDF 14 Case SA.18042 Tax Exemption for biofuels, Commission decision of 9 July 2014; case SA.18832, Bio fuel Environmental protection, Commission decision of 12 June 2014. 15 Cases SA.14551 Taxation au tonnage, Commission decision of 6 November 2013; SA.15373 Enterprise Capital Funds, Commission decision of 20 November 2013; SA.20326 Mesures de dispense partielle de précompte professionnel en faveur de la R&D, Commission decision of 4 December 2013; SA.27573 Programmes de formation continue pour des entreprises individuelles en Chypre, Commission decision of 4 February 2014. 10