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European Union

Purchase of Coca-Cola & Schweppes Beverages

The Commission announced on January 22 1997 that it had cleared the acquisition by Coca-Cola Enterprises Ltd (CCE) of the whole of the share capital of Amalgamated Beverages Great Britain Ltd (ABGB), and its wholy-owned subsidiary Coca-Cola and Schweppes Beverages (CCSB), from Cadbury-Schweppes (CS) and CCE's parent company The Coca-Cola Company (TCCC). CCSB was established in the UK in 1987 to bottle and sell a range of soft drinks, including Coca-Cola, Schweppes, Fanta, Sprite and Canada Dry. The purchaser, CCE, is the world's largest bottler of Coca-Cola products.

Following a Phase II investigation, the Commission concluded that, although CCSB is dominant in the UK cola market, the change in ownership would not result in a strengthening of its dominant position, given that TCCC already has a substantial influence over CCSB. In particular, the Commission stated that it was not possible in this case to differentiate sufficiently between the opportunities arising from the proposed acquisition and those which already exist.

The Commission is also examining separately under Article 85 the new licensing arrangements under which CS licenses CCSB to bottle and market its brands.

Commission adopts green paper on vertical restraints

After extensive public consultation with the European Parliament, member states and the Economic and Social Committee, as well as producers, distributors and consumers, the Commission has adopted a green paper on vertical restraints in EU competition policy.

Vertical restraints — agreements between producers and distributors aimed at ensuring absolute territorial protection — are relatively strictly treated under EC competition law, and in the past the Commission has taken a hard line on practices such as export bans, resale price maintenance, refusal to supply and customer or use restrictions. However, to avoid having to make a case-by-case analysis of the many thousands of agreements within its jurisdiction, the Commission has adopted block exemptions setting out the types of distribution arrangements automatically exempted under Article 85(3).

The Commission is now reviewing its policy on vertical restraints, in part because of criticism that it applies Article 85(1) too broadly to agreements having little or no anti-competitive effect. In particular, concern has been voiced that too much emphasis is placed on the analysis of clauses and not enough on the economic impact of the agreements. The timing of the review coincides with the imminent expiry of two of the most important block exemptions (see below), Regulation 1983/83 on exclusive distribution and Regulation 1984/83 on exclusive purchasing, and will also take into account recent changes in distribution systems as well as the impact of the implementation of the single market rules.

The green paper puts forward four options for discussion over the coming months. The first is to maintain the present system, which has been in place for over 30 years. The second option consists of retaining the block exemptions but making these wider, more flexible and less regulatory. The third option proposes the introduction of more focused block exemptions. Under this option, the block exemption would only be available to companies with market shares falling below a certain threshold. The final option envisages a reduction in the scope of Article 85(1) which would enable parties with less than a certain market share to introduce a rebuttable presumption of compatibility with Article 85(1).

Interested parties have until July 31 1997 to make their comments on the green paper. However, the review process is likely to be lengthy and the competition commissioner Karel van Miert recently said that he did not expect any changes to be formally adopted before the end of 1999. Meanwhile, to allow sufficient time for these options to be fully examined, the Commission has extended the validity of the two existing Regulations covering exclusive distribution and exclusive purchasing until December 31 1999. These Regulations were due to expire at the end of 1997.

Directive on cross-border transfers adopted

Agreement was finally reached in January between the Council of Ministers and the Parliament on the text of the Directive on cross-border transfers. Because the Directive establishes requirements for transfers of Ecu50,000 (US$58,900) or less between member states, it will be of particular importance to private individuals and small businesses wishing to transfer money quickly, cheaply and reliably in the EU.

The Directive will require member states to ensure that transfers must be credited to the beneficiary's account within six working days, with interest becoming payable by the originator's bank should the transfer be delayed. The Directive also envisages that charges for the transfer will be paid by the originator only, and not deducted from the money received by the beneficiary; the originator's bank must reimburse either the originator or the beneficiary if 'double-charging' does occur. The originator's bank must reimburse 'lost' transfers in full up to a ceiling of Ecu12,500. Finally, banks must provide full written details to customers of the timing and cost of the transfer and the complaints procedure.

EU member states have until mid-1999 at the latest to implement the Directive.

Michael Reynolds
Allen & Overy

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