Brussels, 08/05/2001 (Agence Europe) - Other than the adopting of a joint proposal from Commissioners Pascal Lamy (trade), Erkki Liikanen (enterprise and information society) and Mario Monti (competition) presenting the European strategy in the face of the dispute opposing the EU against South Korea in the shipyard sector (see below), the Commission took, on 8 May, three important decisions concerning competition, commented upon at length before the press by Commissioner Monti, responsible for the dossier. The first concerns the State guarantees given to German public banks, with the formal request to the German government to modify, by March 2002, the system enforced to bring it into line with the European legislation concerning State aids; the second is the authorisation of restructuring aids in favour of Philipp Holzmann AG; the third in the ban on the dual pricing system practised by the pharmaceutical company Galxo Wellcome (GW) in Spain. Here, in the details, is the content of these three decisions:
The German government now has two months, as of the date of receiving the letter that has just been sent, to accept our request. It will then have until the end of September to present detailed proposals and end March (2002) to implement them, stated Mr Monti. It will generally retain the choice of specific solutions to favour, as long as they are in accordance with Community law, he added. The Commissioner indicated that a prorogation could nevertheless be a granted, if the Commission considers it necessary and justified, to allow for a harmonious transition of certain public banks. It is necessary to examine this case by case, adapted to a changing environment, he noted. The modifications should take place on the basis of a global model, foreseeing the abolition of the "Gewahrtragerhaftung" and a revision of the "Anstaltslast" in order for the State interventions to be subject to Commission checks. Within this global model, Germany will be able to prepare specific solution for certain banks (notably the break-up of the Westdeutsche Landesbank into two entities, see EUROPE of 12 and 13 February, p.11, but the Commission indicated that it does not have, at present, detailed information on all the solutions considered. If the government decided, improbably, to reject the appropriate measures proposed, the Commission would then find itself forced to enforce the following stage foreseen by the rule applicable to State aid, namely the implementation of a formal procedure against Germany.
Holzmann had opened bankruptcy procedure on 23 November 1999 after having discovered debts of EUR 1.2 billion which had not been included in its accounts records. With the support of Chancellor Schröder, the government had announced in December this same year that the public bank, Kreditanstalt für Wiederaufbau (KfW), had announced a loan of EUR 76.7 million over 18-30 months, together with a.State guarantee of EUR 63.9 million. On the basis of this commitment, the banks came to an agreement on an improvement plan representing in total over EUR 1.5 billion, for financing in which they participated at over 90%. After an initial examination, the Commission had decided in January 2000 to open an indepth inquiry as it doubted that measures envisaged were compatible with the common market, mainly concerning the return to viability and the measures foreseen to offset competition distortion. In addition, the Commission had received very little information on the plan envisaged, for which it only had a very summary version. After having received the missing elements in April, the Commission was able to close the formal procedure and decided to authorise aid. The decisive element was that aid was relatively low compared to all the financial measures envisaged and competition distortion had been offset by measures of considerable magnitude limiting the presence of the enterprise on the market with, above all, a reduction in the number of staff, the closure of regional offices and disinvestment (rationalisation plans, sale or closure) in subsidiaries where Holzmann was present, mainly in Germany but also in other Member States. Commissioner Monti specified that this positive decision did not yet mean that the company was out of trouble but that it now had a precious tool for getting back on the road to profitability. In order for the operation to be a success, it is necessary for the measures envisaged to be taken very rapidly and for the situation in the construction sector in Germany not to worsen. In its assessment, the Commission also considered that Holzmann had modified the restructuring plan foreseen at the end of 2000 and that it had obtained in this context, from banks, a new credit line of EUR 256 million, as well as a credit line of EUR 63.9 million from KfW, both for one year. These measures had become indispensable because of the delay in the sale of assets as well as the fact that aid had not yet been released.
The Commission considers that this system is detrimental to the integration of the national markets and reduces price competition for GW products. It did not accept any of the arguments put forward by the company. On one hand, it considers that GW is not content with accepting prices fixed by Spanish authorities as, in fact, there is always a possibility of negotiation. For four products, GW has even negotiated price rises. On the other hand, the parallel trade level depends on other factors of a non-regulatory kind such as exchange rate fluctuations. Finally, the Commission was not convinced by the argument that the losses suffered due to parallel trade seriously affect the R&D budget devoted to the development of medicines. "Pharmaceutical companies (…) cannot put in place distribution arrangements which perpetuate the partitioning of the single market into national markets", commented Mr Monti. Also, "parallel trade is often the only form of competition possible in the pharmaceuticals sector, given the patents held by companies", he added. GW, which had no fines imposed on it, will nonetheless have to put an immediate end to the system and must inform the Commission within two months of the measures it has taken to this end.