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EPC media alerts: February 2004

The monthly update on EU media issues

Market abuse

Memo sent to European Securities Committee in advance of ESC meeting on MADID - media concerns not addressed

With the deadline for transposition of the MADID into Member State law set for 12 October this year, discussions are now underway between the European Commission and the members of the European Securities Committee to agree technical details.

One such meeting was held on 17 February. Despite high-level communications with the European Commission and the ESC, the specific concerns of publishers in relation to the directive were not raised. The EPC will be working to get their concerns onto the agenda of future meetings between now and the October deadline.

Memo sent to ESC in advance of 17 February meeting:

This Memorandum from the European Publishers Council (EPC) to the ESC on the Level 2 Directive implementing MAD Article 6(5) and Financial Journalism is intended:

  • to highlight the discrepancies between the agreed text of the Directive on Market Abuse (MAD) and the Implementing Directive (MADID);
  • to call on the ESC to ask the Commission to clarify that Member States should implement MADID in accordance with the assurance given by Commissioner Bolkestein to the European Parliament in October 2002. This would mean that MADID should apply only to journalists who make investment tips, who should then disclose any interests in the shares they tip, and
  • to clarify that European media accept the text of the original Directive; in particular that journalists who fail to disclose interests in any shares they tip deserve to be punished.

The concerns of the media, editors and journalists arise therefore only from the Level 2 Directive (MADID) and are as follows:

In his statement to the European Parliament, Mr. Bolkestein wrote:
"....The only thing the Directive says is that when journalists recommend to the public certain stocks in which they themselves have invested they must state that fact."

In his letter to Reuters Editor-in-Chief, David Wright wrote:
".....the market Abuse Directive applies exclusively to the rather small category of persons making investment recommendations to the public. The rule does not apply to those who report on recommendations established by others."

Unfortunately, neither of these important assurances has been carried through into the text of the Level 2 Directive, which now extends to broad areas of journalism. For example:

  1. In relation to Mr. Bolkestein’s assurance: MADID’s wide and imprecise definition of "recommendation" could extend to conventional press commentary, analysis and opinion by the press on European issuers. Secondly, in any such case, MADID imposes obligations that extend beyond disclosure of interests into "fair presentation" and even disclosure of sources; and
  2. in relation to David Wright’s assurance: MADID expressly places obligations on financial journalists "who report on recommendations established by others" (and in ways that are both impractical and unnecessary).

By overturning these important assurances, MADID imposes impractical operational requirements and constraints on the media.

The legal advice taken by the European Publishers Council establishes that these requirements are unlawful on essentially three grounds:

  1. modifying the "essential elements" of the Level 1 directive;
  2. breaching Articles 5 and 151 of the EC treaty; and
  3. breaching Article 10 of the European Convention of Human Rights.

The European media has no interest whatsoever in unsettling the Lamfalussy process at this early pioneering stage by taking legal action. However, the implications of MADID are too important to be "swept under the carpet".

We are hoping that the Commission may yet respond to the overtures from the principal media trade associations to seek a solution.

As the EPC we would commend the proposal made by our Chairman, Mr. Balsemao to Commissioner Bolkestein and to Mr. Schaub, for supplementary guidelines to be drawn up by the Commission which clarify how Member States should implement MADID in relation to journalism.

The EPC hopes this memorandum provides the necessary information, clarification and proposed solutions for a swift resolution to these outstanding concerns.

State aids

European Commission delays key decisions which could absolve Public Broadcasters from State Aid Control

Following behind the scenes talks between Commission cabinets in early February in Strasbourg, the EU Commission is currently planning the adoption of some key Decisions which could exempt public service operators (including public broadcasters) from state aid control - currently exercised by DG COMP. It was originally feared that decisions would be taken on Wednesday, 17 February without prior consultation. A period of consultation has now been allowed for but unless changes are made to the drafts, public service operators could escape thorough scrutiny over the use of public money. In the case of publicly funded broadcasters, the European Publishers Council (EPC) fears that distortions of competition arising from the use of advertising revenues to support TV and new media services from publicly funded media will get worse.

Publicly funded media is the third-most state aided sector in Europe and the EPC has voiced its concern that the Commission should adopt a framework which allows for proper scrutiny and that private sector interested parties are consulted in an open and transparent way.

The EPC is calling on the Commission to ensure that the forthcoming decisions:

  • provide for an efficiency test of the public service in question or the effects of such measures on private competitors and
  • a continuation of the requirement of operators in receipt of state compensation to notify the amounts to DG Competition in Brussels.

It is believed that the Commission plans to adopt its decisions on the basis of Article 86 (3) of the EC Treaty. This provision allows for the adoption of Decisions by the Commission alone (i.e. without the involvement of the European Parliament or the Council), and by only a simple majority vote by the Commissioners.

Possible reasons behind Commission’s initiative:

  • Prodi’s wish to protect public service operators from competition rules.
  • A way of dealing with the fall out of the ruling of the European Court of Justice in summer 2003 in the Altmark case, which established strict criteria for the compatibility of public financing of public services with EU state aid rules (including transparency, the ex-ante-definition of the public service in question and an efficiency-test which compared the public service operator with competing commercial operators). This new test has already been used by the Commission in recent cases, such as an investigation into the legality of public compensation paid to Dutch public service broadcasters and is deeply unpopular with the publicly funded media in Europe.

Following the 17 February meeting, the Commission issued a press release which included the following statements:

"Today, the Commission has decided to begin consultations on a decision which will establish instances in which prior notification of envisaged payments to the European Commission will no longer be required. The draft will now be transmitted to the European Parliament, the Member States, the Economic and Social Committee and the Committee of the Regions for further consultation. In addition, the Commission services will start consultation on a new Commission Framework which will set out clear criteria for the assessment of such compensation payments which are not automatically exempted under the above decision."

Click here for the full press release.

EPC White Paper to expose anti-competitive behaviour of publicly-funded media

Later this month, the EPC will be publishing a frank exposé of the most egregious examples of anti-competitive behaviour by the publicly funded media showing, amongst other things, how this distorts the advertising market for TV and other media, including the press and new media. This "White Paper" is being drawn up by EPC in association with the private TV and radio broadcasters of Europe. Francisco Pinto Balsemão says that "Although some anti-competitive behaviour is currently under scrutiny following a stream of complaints from private media companies over the past 11 years, we want to make sure that Decisions taken this week strengthen, not weaken the existing procedures".

Country of origin and mutual recognition

EPC voices concerns over proposal to merge Rome I and II

The proposal by EP Rapporteur Diana Wallis to merge Rome I and II into one legal instrument to "reduce the complexity of the legal situation" has been met by concern by the EPC. According to the EPC, with the proposals at different stages (no official decision on Rome I to date), merging the two would compromise the quality of the discussion and the outcome particularly as the Commission would like to see both Rome I and Rome II based on the "country of residence" principle - a principle strongly opposed by the EPC in favour of the principle of "country of origin" and "mutual recognition".

Recent proposed amendments to Rome II asking for the country of origin principle to be use in cases of defamation (cases most pertinent to the media) were not accepted by EP committees held at the end of January. These amendments which support the EPC’s case may be re-tabled via the Legal Affairs Committee which will vote on amendments presented so far once the Wallis report is completed.

Support for the EPC position might have been expected from the Council of Ministers since the Irish Presidency lists "mutual recognition" in judicial areas as one of its priority issues. However, it does not specifically name Rome II.

Changes to both Rome I and II might affect law applicable to subscription contracts if they are made across borders.

Meanwhile, it seems that the Rapporteur is prepared to consider the case for taking defamation and privacy out of the scope as it relates to media, given the lack of evidence of any significant numbers of cross-border cases, or of cases involving ordinary citizens, as opposed to celebrities and politicians. EPC is helping gather evidence for the Rapporteur.

Mutual recognition denied for seven years in Unfair Commercial Practices Directive

A seven-year derogation from Mutual Recognition has been included in the current text of the Unfair Commercial Practices Directive. An amendment was also accepted which could mean the inclusion of consumers in the formulation and development of codes. Since consumer groups always oppose Mutual Recognition, this is not good news for the EPC. The vote goes to Plenary this month.

TV without frontiers

Commission details focus groups’ remits

The work of focus groups mentioned in last month’s edition has now been detailed as follows:
Focus group debates:

  • regulation of audiovisual content
  • the level of detail in the regulation of advertising
  • the right to information and right to short reports

The EPC has requested that the Commission involve it in focus group meetings where audiovisual content is under discussion.

Studies will be available on the following issues:

  • comparative study on the impact of control measures on the television advertising markets in EU member states and certain other countries (due for completion 2005)
  • study services covering the following domains: I) study on national systems of State aid for film and audiovisual productions; ii) study on co-regulation measure in the media sector; iii) study on "must carry" requirements for radio and television services
  • study on the impact of measures concerning the promotion of the distribution and production of TV programmes (meeting taking place 24 April)
  • study on co-regulatory measures in the media sector
  • study on the regulatory treatment of interactive television

Meanwhile, the draft Communication on Advertising is in inter-service consultation, due for adoption by the Commission on 18th March.

Advertising

Tobacco: German company in with a chance of successful case against tobacco ad ban

The Court of First Instance has not yet dismissed the case of Kreuzer Medien GmbH against the Council of the European Union and European Parliament on advertising and sponsorship of tobacco products. Whilst there is still a chance within the legal process that it might, the first signs are positive and indicate that the company may have a chance of success. Parties are still preparing written exchanges, a process that could take another five to six months. This complaint is in addition to the complaint filed by the German Government last September 2003.

Copyright

Plenary set to vote on IPR directive

The European Parliament votes in plenary next week (w/c 8 March) on the Enforcement Directive on Intellectual Property Rights. Intense discussions between the Parliament, Commission and Council have been taking place weekly in the hope of reaching some kind of compromise at first reading. As a member of the Anti-Piracy Coalition, the EPC is actively involved in lobbying for a strong directive to combat piracy. The latest text, which has been put forward by the Presidency and now supported by the EP Rapporteur is now under discussion by the Parliament's political groups who must decide whether or not to accept it or put forward further amendments, forcing a second reading. The EPC feels that the compromise on offer falls short of what was expected but given the political dynamics is prepared to accept it.

For more information on any of the following issues, contact Heidi Lambert Communications Tel: +44 1245 476 265.

Internet regulation
Market abuse
Tobacco advertising
Children's advertising
Jurisdiction and applicable law
Duty to trade fairly
Sales promotion

Contacts

Angela Mills, Director of  EPC: Tel: +32 2 231 1299 (Brussels) or +44 1865 310 732 (UK) angela.mills@epceurope.org.

Heidi Lambert: Tel: +44 1245 476 265 heidilambert@hlcltd.demon.co.uk.