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 EPC Members' Newsletter: February 2003

 
EPC MEMBERS’ FEBRUARY NEWSLETTER 118



DATES FOR YOUR DIARY

KEY ISSUES OF THE MONTH
Takeover Bids
Market Abuse
Rome I
Duty to Trade Fairly
Public Sector Information

ALERT SECTION
Rome I Consultation
Takovers Directive


WHAT’S NEW
Electronic Commerce

1.1 OECD report on ecommerce and consumer protection
1.2 VAT on postal services
1.3 Report on the eEconomy
1.4 UK website non-compliance


Internet Regulation
2.1 Network Security Agency
2.2 Protection of minors from harmful content
2.3 OECD report on data privacy

Copyright
3.1 Digital Piracy
3.2 Database protection
3.3 Easyeverything case

Advertising
4.1 Nutritional claims directive
4.2 WHO meets with alcohol companies
4.3 Swedish alcohol advertising
4.4 Advertising of breast implants

Audiovisual & General Media Policy 
5.1 Monti in negotiations with IOC over rights to the Olympics
5.2 TVWF - broadcast v information society services
5.3 TVWF - use of short extracts

General
6.1 The draft Constitution
6.2 Study on contract law and non-contractual liability
6.3 Public health in the Constitution


DATES FOR YOUR DIARY

3rd March- Competitiveness Council, Brussels
4th March- EASA Advertising Self-Regulation Roadshow, Madrid
6th March- Consumer Affairs Council, Brussels
10th March- European Parliament Plenary session, Strasbourg
17-24th March- European Parliament Committee session, Brussels
21st March- European Council, Brussels
26th March – EPC Corporate Affairs Group meeting
28-29th March- Justice and Home Affairs Council, Brussels
2nd April – EASA (with EPC) meeting with Commissioner Byrne
3rd April- Publishers Round Table
12th –13th May 2003 – EPC Meeting, Athens
15-16th May 2003 - 5th Annual TV Meets the Web Seminar. Amsterdam
27-30th July 2003 - Seventh World Multi-Conference on Systemics, Cybernetics and Informatics. Orlando, Florida, USA.
17th September 2003- International congress on trustmarks in ecommerce, Luxembourg

KEY ISSUES OF THE MONTH

Takeover Bids

Rapporteur Mr Lehne was due to present his report on Takeover Bids at Parliament Committee this month. However, there has been much behind the scenes negotiation in an attempt to reach some form of compromise before the report is tabled.

As EPC news has already reported, the main sticking point for Mr Lehne and the German government has been the removal of the right for ‘poison pill’ defences against takeover bids in the draft Directive whilst allowing the retention of multiple voting rights, a defence used more commonly in Nordic states. Mr Lehne argues that this creates an un-level playing field and penalises those companies which do not use MVR. The Commission argues that it would be politically impossible to ban MVR.

Mr Lehne has been working closely with the German government to arrive at some form of compromise which would be acceptable to all. At Parliament he discussed the options which he felt were open to all parties:

  • The extension of article 11 to cover breakthrough;
  • The removal of article 9 and 11(although he conceded that this would be difficult to get through Council);
  • The extension of the possibility to use MVR until 2010;
  • Exemption for start-up companies for the first five years of trading;
  • Exemption for French double voting rights;
  • Compensation for shareholders if the voting structure had to be changed (he spoke of 10-20% compensation, leaving compensation to the Member States’ discretion and no compensation at all);
  • Leaving the issue of golden shares to the ECJ

Mr Lehne was keen to point out that he had come to no decisions as yet and he would table his report next month in Committee. The Trade and Industry Committee of the EP will start on an opinion shortly.

Meanwhile the Greek Presidency has attempted to produce a draft compromise text which will be discussed by Council working group. The Parliament expert group will also produce a report in the near future which will examine the constitutional problems related to compensation in return for loss of voting rights. There is concern that the Rapporteur’s move to remove double voting rights from the scope of the Directive will mean that the French leave the Nordic voting bloc as a minority. This could result in the banning of MVR when the proposal reaches Council level.

EPC is following the issue very closely and will report any new developments as they arise.


Market Abuse

The EPC took a group of publishers to see Mr David Wright at the Commission in order to get some clarification of how the Commission would use the CESR advice and whether certain wording provided in the advice from CESR relating to journalists could be changed.

The Commission timetable for action is as follows:

  • The CESR advice is only advice. There will be no direct copy out.
  • The first draft of the Commission proposal will be sent to the securities committee on 17th March;
  • It will be posted on the internet for comment by interested parties at the same time;
  • There will be a two month consultation period after which the final proposal will be released;
  • Parliament will then have three months to review it and comment. They have no call-back powers (although this might be changed in future). However if they campaigned vigorously on any issue they would have to listen to the MEPs;
  • The first set of rules will be agreed and voted on by the securities committee by September;
  • If the securities committee has not been able to reach a qualified majority in favour of the draft rules, they will have to be sent to the next ECOFIN Council;
  • The ECOFIN Council would have to achieve a qualified majority vote AGAINST the draft rules for them to be thrown out.

Publishers were still concerned that the advice from CESR relating to dissemination of information would apply to journalists. The point was made to the Commission that a journalist reporting 3rd party information would come within the scope of articles 101 and 103 of the CESR advice. It was argued that there should be a differentiation between the summarising of information which has already been disseminated and pure dissemination. It was decided that wording which removed journalists from the scope of articles 101 and 103 should be put forward. The Commission stated that it would try to accommodate the publishers’ request. The final wording sent to the Commission by the publishers was:

“For the avoidance of doubt, the rules relating to presentation and dissemination do not apply to journalists who merely report and/or comment and/or analyse investment recommendations from third parties"

The draft Commission proposal will be available on the DG JAI website on 17th March. There will be a hearing in Parliament’s Economic and Monetary Affairs Committee on the same day.


Rome I

EPC has reviewed the recent Commission Green Paper on the Rome Convention. This review has raised concerns that some of the suggestions made by the Commission could have an effect on subscription contracts and other areas of contractual law relating to publishers.

The Rome Convention applies to “… contractual obligations in any situation involving a choice between the laws of different countries”

The Commission in the Green Paper proposes to give the Rome Convention a new legal basis and change it to a Regulation. The part of the Green Paper which could cause EPC members most concern is the proposal for changes to article 5 which deals with consumer contracts. Until now very few cross-border consumer contracts fell within the scope of the Convention. Those which did were generally governed by the law of the place of business of the seller (articles 3 and 4). A limited number of consumer contracts were governed by article 5.

However, the Commission in its drive to ensure a high level of consumer protection, particularly in cross-border shopping cases, has decided that it might be a good idea to extend article 5 to cover all consumer contracts in a cross border situation. A number of suggestions are given as to how this might be approached. Worryingly the Commission seems to favour the inclusion of most cross-border contracts and the application of the law of the consumer’s habitual place of residence.

At the moment this is only a consultation document which is open until September for comment. However, given the speed with which DG JAI has moved to make Rome II law, it is important for all members to review the green paper and make comment to EPC as soon as possible. We would therefore be grateful for any feedback on this Green Paper and will be discussing it at the next Corporate Affairs Group meeting in March here in Brussels.
The link to the Green Paper is: http://www.europa.eu.int/eurlex/en/com/gpr/2002/com2002_0654en01.pdf.


Duty to Trade Fairly

This month has seen the debate on the follow-up to the Green Paper on Fair Commercial Practices in Parliament. The Patrie (Environment Committee) report was adopted at Plenary and the Thyssen (Legal Affairs Committee) report was adopted at Committee and will go to Plenary in March. Both reports comment on the follow-up to the Commission’s Green Paper. However there is concern that these reports are now obsolete as the Commission would appear to have made some significant changes to the draft Directive which is expected to be published in the second quarter of 2003.

The changes the Commission would appear to have made are as follows:

  • The Commission recognizes that although full harmonisation must be pursued, there are some issues which must be left to Country of Origin and Mutual Recognition rules;
  • The General Duty is likely to be limited to definite commercial practices;
  • The definition of ‘vulnerable group’ would only apply to those consumers if they have been definitely targeted;
  • Of the categories which sit alongside the General Duty, the Disclosure and After-Sales Care categories which caused most debate have been removed from the scope of the Directive;
  • Misleading the Customer and Abusive Practices categories remain;
  • The Disclosure requirement has been absorbed into the Misleading category and has a reasonable definition;
  • After-Sales Care has been absorbed into the Misleading category and will be limited to false claims of an after-sales service;
  • The Commission is still examining the endorsement process for codes but membership will still be voluntary;
  • The Commission has made it clear that codes must go beyond merely re-stating the law and must be Europe-wide.

EPC has asked Mr Abbamonte to attend the Corporate Affairs Group meeting in March to further explain the changes the Commission will make to the original text of the Green Paper in the draft Directive.

The draft Sales Promotion is the subject of compromise negotiations by the Greek Presidency this month. It is believed that the Presidency has produced a draft document which it is presenting to the other members of the Council. It is thought that the text will go to Internal Market Council in May for final approval.

A Regulation designed to foster better cross-border enforcement of consumer laws is currently being circulated around the Commission as part of an inter-service consultation. The draft Regulation would oblige Member states to use every means possible to stop an unfair practice emanating from within its borders which was directed at another Member State’s market. There is some concern over the effect this Regulation might have given Member States different consumer laws. In EPC’s opinion, the issues surrounding Rome I and the Directive on Fair Commercial Practices and Sales Promotions must be resolved before a position is possible on this draft Regulation. EPC will watch its progress through inter-service consultation very closely.


Public Sector Information

The vote on the draft Directive on Access to Public Sector Information took place in Strasbourg this month.

There were two last-minute amendments presented by Mel Read MEP and others which asked that a ’reasonable return on investment’ be allowed for information. The burden of proof for what is a reasonable charge would lie with the public sector body. These amendments were carried in plenary and made some fundamental changes to the draft Directive.

Other amendments accepted were:

  • the recognition that different member states would need varying periods of time to make the adjustment to giving public access to all documents;
  • the definition of what is ‘basic’ and what is ‘other’ information;
  • an inventory requirement on public sector bodies of all information they have available;
  • an amendment which stipulates that PSBs must only provide information which is ‘within the power of their disposal.

Obviously, this changes the Directive quite substantially as it goes to Council for the first time. The amendments which made the Directive applicable to libraries, museums and educational establishments were withdrawn at Committee stage. Now it seems likely that Public Sector bodies will be able to charge as most of the Member States support this amendment.

We now await a Common Position from the Council. There may well be further changes in the Common Position as Council is not happy with the draft Directive as it was presented by the Rapporteur.

EPC will follow the debate closely.
 

ALERT SECTION

Rome I consultation

EPC would be grateful if members could submit comments on the Green Paper as soon as possible. A summary has been sent to Corporate Affairs Group members. If you have not received a copy of this summary please contact EPC.

Takovers Directive

A briefing has been sent to EPC members on the potential implications of this directive for media companies. Please let us have your feedback as soon as possible.
 

WHAT’S NEW

Electronic Commerce

1.1 OECD report on ecommerce and consumer protection

The OECD has released a follow-up report on the guidelines it released for ecommerce. The guidelines were published in 1999 and have been used as a tool for internet businesses around the world. They focus on issues such as fair business, advertising and marketing practices; clear information about an online business’s identity, the goods or services it offers and the terms and conditions of any transaction; a transparent process for the confirmation of transactions; secure payment mechanisms; fair, timely and affordable dispute resolution and redress; privacy protection; and consumer and business education.

The study which has just been released examines in detail the developments which have been made in these areas since 1999. It also focuses on the new developments in ecommerce which have occurred since then. Particular emphasis in the study has been placed in the areas of payment cardholder protections, alternative dispute resolution, and cross-border enforcement co-operation. Attention has also been devoted to educating stakeholders about various aspects of the Guidelines. Finally, the Committee has held discussion
and exchanged information on emerging online issues like consumer-to-consumer (C2C) transactions via online auction sites, and online marketing and advertising to children.

A copy of the report in English and French can be obtained from: http://www.olis.oecd.org/olis/2002doc.nsf/LinkTo/dsti-cp%282002%294-final.

1.2 VAT on postal services

The Commission will release a draft Directive to apply VAT to postal services in the next quarter. There is an anti-competitive situation at the moment and making all pay VAT would appear to be a sensible solution to the problem. However, for direct marketing about 30% of total expenditure in many countries comes from a combination of financial services, charities and government agencies – all of which are zero-rated for VAT in most EU Member States. Obviously any increase in VAT would cause these groups a lot of additional expense. At the moment the Commission is reasonably open to the idea of exemption for charities and Governments but for commercial operators it looks likely that the draft Directive will be quite a threat to business.

1.3 Report on the eEconomy

This month the European Parliament adopted a report by Bashir Khanbai MEP on the effect the eEconomy has had on European business. The report takes the form of a Communication which is in favour of stepping up the pace of reform, and proposing actions which will allow European business to get as much as possible out of the e-economy. The Communication also stresses the need to ensure that regulation in the area is not too restrictive as this causes an administrative burden to SMEs who rely heavily on ecommerce. Online security issues and the need to promote the use of ICT by members of the public were also addressed by the Communication.

1.4 UK website non-compliance

UK law firm Browne Jacobson have revealed research which will be of concern to many retailers in the UK. In a survey of 50 of the UK’s top 500 retailers websites, 24 failed to comply with the law relating to either their use of appropriate terms and conditions, the Data Protection Act, the Distance Selling Regulations or the E-Commerce Regulations. According to the survey, it was non-compliance with the data protection act which was most prevalent.

The top ten UK retailers were in complete compliance but the survey discovered that this was not the case for retailers further down the list with small businesses being the least likely to comply. The author of the study uses this data to berate retailers whose websites contravene laws already in place. EPC argues that so widespread a problem cannot possibly relate to lack of will to comply and is more likely to be a reflection of how difficult it is to keep pace with the constant changes to the law relating to ecommerce.


Internet Regulation

2.1 Network Security Agency

Commissioner Erkki Liikanen launched the Commission proposal to increase cyber-security in Europe by setting up a European Network and Information Security Agency this month. He explained. The objective of the Agency will be to serve as a centre of competence where both Member States and EU Institutions can seek advice on matters relating to cyber security. The agency will provide assistance in the application of Community measures relating to network and information security, ensuring interoperability of information security functions in networks and information systems and contributing to the functioning of the Internal Market.

The agency will work in an advisory capacity for the Commission by giving opinions. It will also coordinate network security activity at European level.

2.2 Protection of minors from harmful content

The Citizen’s Rights Committee of the European Parliament voted this month on new measures to combat illegal and harmful content on the internet. In a first-reading report, MEPs called for special emphasis be placed on protecting children and minors and for closer cooperation with the accession countries.

The Parliament has asked that the action plan cover new online technologies, including mobile and broadband content, online games, peer-to-peer file transfer, text and enhanced messages and all forms of real-time communications such as chat rooms and instant messages. Parliament has recommended that cooperation with countries where illegal content is hosted or produced should be enhanced. It proposes that the EU should financially support specific projects which can lead to European standards for industry self-regulation and for filter and rating techniques. Further support should be given to encourage quality-site labels. EPC will be attending a workshop on this subject in March and will provide an update for the next newsletter.

2.3 OECD report on data privacy

This report presents and analyses enforcement mechanisms that are available in OECD member countries both to address non-compliance with privacy principles and policies and to ensure access to redress.

The report is intended to form the basis for assessing the practical application of available compliance and enforcement instruments and their ability to meet the objectives of the OECD Privacy Guidelines.

The main findings of the report are that most countries do not have Government-backed codes of conduct relating to data protection although they do have private sector codes of conduct, best practices and seal or trustmark programmes that are either endorsed by a business federation, or widely used by the private sector. It also found that there is an increasing trend on the part of companies to appoint internal Data Protection Officers and in a few countries, there is a legal obligation to do so.

The report recommends further steps which could be taken by the OECD. These include:

  • Cross border coordination on compliance;
  • Education of users about software which improves privacy and security online;
  • Better coordination of self-regulatory systems;
  • The more widespread appointment of data protection officers in companies;
  • The provision of more ADR systems to deal with privacy disputes and
  • Focus on areas where most harm to consumers is done so as not to waste resources.

The report concludes by saying that OECD Member States are making good progress but that more effort must be made to develop a more coherent regulatory system in this particular area.


Copyright

3.1 Digital Piracy

EPC news reported last month that the new Commission proposal to crack down on piracy and counterfeiting was viewed by many in the content provision business as inadequate and not even equivalent to the TRIPS agreement protection.

This month a Stanford professor has been putting forward the other side of the argument to the UK government. Prof Lessig has been advising Downing Street on how it can ensure that new laws protecting digital information from piracy do not result in the erosion of the public's right to share and use intellectual property.

It is thought that Professor Lessig’s advice may result in a rethink of UK Government plans for protection of digital information. He contends that making copyright laws too restrictive will lead to less creativity in all walks of life as it becomes more difficult to share ideas online.

A spokesman for Intel at a conference attended by Professor Lessig argued that companies were not lining up to destroy the public domain but providing the technology to “keep honest people honest...” The debate continues. EPC expects to attend a Rightswatch meeting in the near future to discuss options for publishers.

3.2 Database protection

A reference has been made by a Greek court to the European Court on the question of databases and sui generis protection.

The database in question is a list of football fixtures which the company uses to forecast the result of matches.

The court has been asked to provide guidance on the scope of article 7 of the database Directive (the sui generis right). It has also been asked to deliberate upon whether lists of fixtures enjoy protection as databases over which there is a sui generis protection. Finally the Court has been asked to give a decision on hoe exactly the database right has been infringed in this case. EPC will report on the answer the ECJ sends the Greek court.

3.3 Easyeverything case

A UK court has ruled that the internet café chain Easyeverything has infringed copyright by allowing customers to download music and copy it onto CDs. Easyeverything has said it will appeal the judgement, claiming that ‘consumers have the right to record music or video in order to consume it at a more convenient time’. However the British Phonographic Industry is of a different opinion. It claims that illegal copying jeopardises the livelihood of recording artists and quoted the British band Blue in its press release as saying: “when you buy our music rather than just taking it off the internet … that shows you respect the time and work put into getting it out there in the first place”.


Advertising

4.1 Nutritional claims directive

EPC has received an advance copy of the Commission’s proposal for a Regulation on nutritional claims. This Regulation will make it very difficult for manufacturers and advertisers to market food with labels such as ‘diet’, ‘light’ or which claim to give other beneficial effects due to their ingredients. Producers will now be obliged to back up every claim they make with scientific evidence. The marketing of foods which are beneficial to the health of children (no added sugar etc) will be banned altogether as no advertising of health claims can be directed at children if this Regulation is passed in its present form.

Obviously this Regulation is of great concern to all EPC members. The draft Regulation is at a very early stage in the legislative process and is currently being circulated amongst other DGs prior to its release. EPC will follow developments in this area very closely.

4.2 WHO meets with alcohol companies

Representatives of the alcohol industry met with WHO officials in Geneva this month to discuss the public health consequences of alcohol use. This is part of an ongoing process during which WHO has entered into dialogue with all stakeholders in the issue.

Part of the meeting was dedicated to the marketing of alcohol to young people. WHO is keen to put mechanisms in place that would help develop effective policies for marketing of alcohol to young people. A spokesman for WHO said “We see next week’s meeting as an opportunity for WHO to engage in a positive and transparent way with the alcohol beverage industry, and for the industry to be proactive in suggesting how they can contribute to solving some of these problems.”

4.3 Swedish alcohol advertising

A court in Sweden has found that the Swedish laws banning alcohol advertising are not compatible with European legislation. The Swedish government has reacted to the judgement by proposing that there be an EU-wide ban on alcohol advertising, which would bring all other Member States into line with the Swedish position...

4.4 Advertising of breast implants

Advertising for breast implant surgery should carry clear bold health warnings, and before-and-after photographs should be banned in the opinion of the European Parliament! In adopting the report by MEP Catherine Stihler, Parliament agreed that more focus should be placed on promoting and securing acceptance of women as they actually are “rather than allowing unregulated advertising practices to impose an ideal conception of beauty as the norm”. This Resolution sets out the Parliament’s position in advance of any legislative proposal being put forward by the Commission.


Audiovisual & General Media Policy

5.1 Monti in negotiations with IOC over rights to the Olympics

Competition Commissioner Mario Monti announced that the commission was in negotiation with the IOC to ensure fair access to rights for new media to broadcast footage of the next Olympics in 2004. He stated that it was not clear whether the IOC would supply live image or sound rights to Internet Service Suppliers and mobile operators. He reminded the audience at the conference on competition issues that events such as the Olympic Games are extremely prized by content providers and can be a driving force behind the roll out of new communication services via Internet and mobile telephony networks.

Mr Monti expects the IOC to make its proposal in the near future and was confident that a solution to the issue could be found before next Summer.

5.2 TVWF - broadcast v information society services

EPC has seen a Greek Presidency paper for discussion at this month’s Council Working Group on TV Without Frontiers.

The Presidency has proposed that the Working Group should discuss how the Member States differentiate between television broadcasting and information society services in their legislation. Members of the group are reminded of the EU definitions:

  • broadcast- programmes intended for reception by the public
  • information society services- services supplied on individual demand.

They are also reminded that the former is covered by TVWF and the latter by the ecommerce Directive.

Members of the group have been asked to discuss if this differentiation should still apply in the light of developments in digital television.

5.3 TVWF - use of short extracts

Members of the same working group have also been asked to examine the possibility of including provisions for access to short extracts of events subject to exclusive rights in any future review of the Directive.
There is a Council of Europe Convention on Trans-Frontier Television which asks signatories to examine whether it is necessary to include these rights in their legislation on access. Very few EU States have done this (Germany is a notable exception) and consequently access to short extracts is becoming increasingly difficult for those who wish to report on an event to which the exclusive rights are owned by another broadcaster.

The Working Group will discuss whether there is specific legislation in their country on this issue and whether they plan to introduce such legislation. They will also debate the question of how the right to information can be guaranteed to the public if a broadcaster exercises its exclusive rights on events of high interest.


General

6.1 The draft Constitution

The Praesidium of the Convention on Europe, chaired by M. Giscard D’Estaing, has published its draft Constitution this month. The first sixteen articles of the new European Constitution have caused a storm of controversy and over a thousand amendments to be submitted by the deadline for amendments at the end of February.

Whilst most of the debate has been in the area of who will be the new European President, what the new Europe will be called, whether God or Allah be included in the text and the highly controversial use of the word federalism, more concern should really be focused in the direction of what the competencies of the new EU will be.

At the moment according to the text, the EU will have exclusive competency in the area of customs union, common commercial policy, CAP and CFP considerations and the monetary policy of all Member States who have joined the Euro. There is shared competency in issues relating to the internal market, public health, consumer protection and environmental concerns amongst others. Areas where the Commission has no competency and can only advise include education, sport, culture, industry and employment.

There is some confusion as areas like the internal market seem to appear in both exclusive and shared competencies. As yet there is no explanation of exactly what will be in each area of competency. This will be clarified by Part Two of the Constitution which is expected in the middle of the year.

The Commission has raised concerns with EPC that the current form the Constitution will take is going to allow Member States to put obstacles in the way of internal market measures which are good for business.

EPC is monitoring the situation closely and will report on developments as they arise.

6.2 Study on contract law and non-contractual liability

The Commission has awarded the tender for a study on property law and non-contractual liability law as they relate to contract law. The aim of the study is to determine whether competition imbalances, or real or likely obstacles to the smooth running of the internal market might arise as a result of areas of interference, problems in enumeration of facts, or even differences in terminology or concepts between property law and contract law, and between non-contractual liability law and contract law. The aim is not to examine property law or liability law as a whole, nor to compare national systems of law, but to analyse the problems and obstacles resulting from differences in systems of law in contract and commercial practice.

The contract has been awarded to Professor Christian Van Bar of the University of Osnabruck and Professor Ulrich Drobnig of the Max Planck Institute in Hamburg Germany.

6.3 Public health in the Constitution

Eurocare, an NGO dedicated to preventing alcoholism is lobbying members of the Constitution’s negotiating groups to have public health issues included in the EU’s list of competencies. In Eurocare’s submission, Member States would still have sole competency in the area of health services but competency in the area of public health would be shared. This would mean that issues like tobacco and alcohol advertising could be legislated on from a public health stance rather than an internal market one. This would make it more difficult for Member States to challenge Directives like the one on tobacco advertising because its legal basis would be more secure.

However, it is unlikely that this move will be politically acceptable to many (if any) of the Member States.

 
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