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European Union

International competition rules

With the adoption of a Communication by Sir Leon Brittan and Karel van Miert, the trade and competition commissioners, the European Commission has proposed the establishment of an international framework of competition rules. The Communication, which must still be presented to the Council, calls on the WTO ministerial conference in Singapore in December to agree to study, from 1997, the possibility of an international framework of competition rules.

An international framework of competition rules could help national governments tackle cartels and other anti-competitive practices that hinder effective access to foreign markets. Worldwide trade and investment are increasing rapidly, but the ability to police international mergers, joint ventures, licensing agreements and other alliances is limited. It is envisaged that eventually all WTO countries could adopt and enforce their own competition rules along common agreed principles. Initially, however, the framework may be limited to those countries which already have competition rules. The means to exchange information, notify other countries of investigations to avoid legal overlap on cross-border problems, and to request action on foreign markets should be developed. The Communication proposes that the WTO should set up a compliance mechanism for competition policy, similar to its trade disputes settlement procedures, so that common rules could be enforced.

The Commission is aware that it is too early to initiate a supranational jurisdiction, and certainly has no plans for an International Competition Authority. The Communication explains that countries would not be willing to accept such constraints on national sovereignty. Instead, the proposal suggests a gradual 'building-block' approach, using a WTO working group to build consensus and leave the more ambitious objectives until later. It also proposes the identification of a core of common principles for adoption at national level.

The Communication considers that globalization and liberalization are both bringing greater competition in Europe while encouraging European firms to seek new foreign markets. The absence of clear principles at global level hinders access to foreign markets. The initiation of global competition rules would prevent a disparity of rules, would reduce the compliance cost for companies who could avoid multiple filings, and increase their security against competitors who have been protected by lax competition rules.

Protection of copyright in Japan

The Commission has introduced a formal request to the World Trade Organization (WTO) for consultations with Japan on the problem of insufficient copyright protection in Japan. While the Japanese legislation provides for 50 years protection consistent with the rules in the Uruguay Round Agreement, the retroactive effect of the protection only goes back to 1971 (25 years) instead of to 1946. The result is that a large number of recordings from the 1950s and 1960s are not protected, leading to substantial losses for the music industry.

Earlier this year the Commission joined in a request made by the US to the WTO for consultation on the problem of copyright protection in Japan. Consultations took place and the Japanese government indicated that it would modify its legislation to comply fully with the Uruguay Round Agreement; however it did not state when it would take the necessary measures. Consequently, the Commission has decided to take independent steps which, if no progress is made during the forthcoming consultation period, will lead to the creation of a panel at the WTO.

Financial services Green Paper

The European Commission adopted on May 22 a proposal for a Directive on the sale of consumer goods and associated guarantees. The Green Paper, which is entitled Financial Services: Meeting Consumers' Expectations, does not contain any concrete measures which would change existing EU rules and practice, but does commit the Commission to listening to consumers' views on areas that need change. It is hoped that it will give rise to new debate, and the Commission has stated that it will organize a hearing of interested parties within the next few months.

One objective of the proposed Directive is to provide minimum harmonization of the rights available to consumers who buy defective goods. This objective will be achieved by providing consumers with 'legal guarantee' and a 'commercial guarantee'. Under the proposed Directive, all consumers, irrespective of which member state they are from, will benefit from a legal guarantee of two years from the date of delivery of the goods. Under this guarantee, the consumer will be free to choose between having the goods repaired or having a price deduction. If the claim is made during the first year of the guarantee, the consumer would be entitled to demand that the goods are replaced or the purchase price refunded.

In relation to the commercial guarantee, the proposed Directive states that it must provide an added value over and above the consumers' statutory rights. The guarantee must be transparent and therefore incorporated into a written document which sets out the procedures for making a claim, including details of any relevant time or geographic limits as well as the name and address of the guarantor. Furthermore, any advertising relating to the guarantee is considered part of the terms of the guarantee.

The Green Paper provides an analysis of what the EU has achieved so far in the area of financial services, as well as providing a summary of future challenges. Although the single market for financial services is still very new, the Green Paper notes that over 50 Directives covering banks, insurance companies and security houses have already been adopted. Notwithstanding this, the Commission acknowledges that there are many problems which have been identified and need to be addressed. These include the refusal to sell financial services to non-residents, the lack of information given to consumers, and the fraudulent activities of some intermediaries. Concerning the future, the Green Paper specifically discusses the problem of distance selling. Although a general distance selling Directive is being finalized, the Commission is still examining whether binding legislation will be required for certain types of financial services. The Green Paper notes that both the scale and complexity of the distance selling of financial services are increasing, as well as the expansion of cross-border business, and that this will therefore be a crucial area to monitor.

Michael Reynolds,Allen & Overy,Brussels

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