DATES FOR YOUR DIARY

ALERTS
Rome II
Proposed Services Directive

KEY ISSUES OF THE MONTH
Italian Presidency Priorities
Nutritional Claims
Rome II
Reduced VAT Rates
Altmark Case
Equal Opportunities

WHAT’S NEW
Electronic Commerce
1.1 New VAT regime
1.2 Spam

Content Regulation
2.1 E communications directive
2.2 Wanadoo fined
2.3 Broadband content workshop

Copyright
3.1 Fight against counterfeit goods

Advertising
4.1 Services Directive
4.2 Tobacco advertising update
4.3 Enforcement regulation

Audiovisual & General Media Policy 
5.1 Commission audiovisual programmes
5.2 Commission clears UEFA’s media rights

General
6.1 Cultural exception to remain
6.2 Packaging Waste


DATES FOR YOUR DIARY

25th August – Parliament returns after recess
2 September – EPC meeting with Commissioner Reding, Strasbourg
10th September - European parliament hearing on sexism directive
11-12th September – Informal Meeting of Ministers of Audiovisual Media, Siracusa
12th September – Safer Internet Hearing – including session on Spam, Luxembourg
11-13th September - Workshop: "Firms and Consumers facing E-Commerce, Strategies to Increase IT Adoption and Usage" Rimini, Italy
16th September – EPC Journalists Forum, Brussels
17th September – The Amsterdam Group conference - self regulation in advertising, Brussels
17th September - International congress on trustmarks in ecommerce, Luxembourg
1-2nd October – Informal Meeting of Ministers of Culture and Audiovisual Media, Florence
27-29th October WFA World Advertiser conference, Brussels
10-11 November – EPC Meeting, Rome

ALERTS

Rome II

Members are asked to send their comments on the EPC Rome II paper as soon as possible. The Commission will move to rush this piece of legislation through very quickly and it is important that EPC can contribute an opinion that comes from a broad base of members.

Proposed Services Directive

Members are asked to contribute any anecdotal evidence they can provide to the DG MARKT impact assessment on barriers to access to the services market (including advertising of services). All members have received a copy of the questionnaire. The deadline falls at the end of September (see item 4.1).
 

KEY ISSUES OF THE MONTH

Italian Presidency Priorities

The 6-month Presidency of the EU by the Italian Government started on July the 1st.

The main priorities of the Presidency can be summarised as follows:

- Audiovisual sector
The Presidency will continue to explore initiatives for improving the quality of the content of interactive media. It will urge the Council, the Commission and Member States to monitor the key audiovisual policy sectors (culture, the markets and technology) and encourage the development of media content through new technologies.

- Intellectual property rights
The Italian presidency’s priority is to reach political agreement on the European Commission proposal for a directive for the reinforcement and harmonisation of national laws on measures and procedures to ensure enforcement of intellectual property rights in all areas.

- “TVWF”
Work on overhauling the Television Without Frontiers Directive will continue according to the work schedule presented by the Commission in February 2003. Ministers will discuss TVWF at a special meeting in Florence (11-12th September), which will also tackle the issues of the protection of minors and human dignity, advertising, new interactive media and suggested Community support for the production of television programmes.

- Services of General Interest
The Presidency intends to stimulate discussion on the Commission Green Paper on economic services of general interest, with the conviction that further liberalisation of utilities is decisive for raising efficiency and for the proper operation of the internal market.

- Consumer Protection
Within the framework of the 2002-2006 consumer policy strategy, the Italian Presidency will give its support to work continuing in 3 main areas identified:

• achieving a high common level of consumer protection;
• effective enforcement of consumer legislation and;
• the proper involvement of consumer organisations in shaping policies concerning them.

Particular priority will be given to the proposal for a Decision on the new legal basis for financing Community actions in support of consumer policy 2004-2007.

- VAT
In the field of value added tax, the Italian Presidency will endeavour to reach agreement in Council on the revision of reduced rates. It will also continue with discussions on the proposal for a directive on the application of VAT in the postal services sector.

Nutritional Claims

The Commission has released its proposal for a new regulation on nutritional and health claims this month. The draft has been forwarded to the European Parliament and the Council, with a view to its entering into force by the end of 2005.

The Commission proposals are as follows:

• Any information about foods and their nutritional value used in labelling, marketing and advertising which is not clear, accurate and meaningful and cannot be substantiated will not be permitted.
• Health claims on alcoholic beverages above 1.2 % will also not be allowed as, the Commission argues, alcohol is known to cause other health and social problems. Only claims referring to a reduction in alcohol or energy content will be allowed.
• The use of health and nutritional claims regarding what is or is not contained in food will only be allowed if they comply with the conditions established by the Commission in a harmonised list. This list contains around 20 uncontested claims (e.g. low fat). For any other claims authorisation will be needed and this will depend on the results of scientific assessment carried out by the European Food Safety Authority.

"The implementation of this proposal will allow both industry and consumers to benefit from the correct use of claims," Byrne told reporters. "At the moment there are no legally binding conditions to regulate the use of such claims."

The European Consumers' Organisation (BEUC) welcomed the proposal as being a useful tool for consumers, helping them to understand what choices they are making when buying food.

However, the EPC has voiced strong disagreement with the proposal as far as advertising of foodstuffs and beverages in the media is concerned. Several EPC members have been actively lobbying members of the Commission and seeking press coverage in their own countries of our concerns.

Mr Balsemao has written to the President of the European Commission, Romano Prodi, urging him to "evaluate seriously the implications of proposed restrictions in advertisements for foodstuffs and beverages on Press freedom.” The EPC argues that the Commission's proposal obliges the nutritional properties and health benefits claimed for a particular foodstuff to be scientifically proven before they can be included on packaging in any advertisements for the product in question, a provision that may have a negative impact on press advertising revenue.

In the letter to Mr Prodi, it is also argued that self-regulation mechanisms already exist within the profession to prevent the use of incorrect or inaccurate claims.

A high level meeting with Commissioner Reding and others as yet unconfirmed has been arranged in Strasbourg for the 2nd September. At the meeting EPC members will explain to the Commissioners the negative effect this legislation (and other initiatives released by the Commission recently) will have on the media’s freedom to advertise. All members have been invited to the meeting and should reply to the EPC secretariat if they can attend.

Rome II

On July 22nd, the European Commission tabled its long-awaited “Rome II” draft Regulation which aims to harmonise the rules on which law applies in cross-border non-contractual civil disputes.

Mary Russell of DMGT has very kindly provided the EPC with an internal discussion paper giving a summary of the defamation element of the draft Regulation. This has been sent to all Corporate Affairs Group members. If you have not received a copy, please contact the EPC secretariat.

According to the discussion paper, the main elements of the draft Regulation are as follows:

• Rome II is seen as completing the process of harmonisation of Private International Law by determining applicable law in non-contractual disputes which involve facts and/or parties from more than one member state;
• The general rule of the Regulation provides that the applicable law will be the law of the country in which the damage arises (article 3). In most cases this will correspond to the law of the injured party’s country of residence/where the material was published;
  • Where both the claimant and defendant are habitually resident in the same country, the law of that country will apply;
  • If it is clear that the dispute is manifestly “more closely connected” with another country, the law of that other country will apply;
     
• There are some concessions to this general rule in the area of defamation:
  • Whatever forum is chosen by the claimant to hear and determine the action, that forum will not be obliged to implement a more draconian law in terms of freedom of expression than its own laws. This appears to have been added in response to media concerns that oppressive laws from other countries (particularly non-EU countries) could be imported into member states’ domestic jurisdictions;
  • the country of origin principle will apply to right of reply and corrections;
  • the Commission has abandoned its position that the applicable law is where the claimant is “habitually resident”. (The EPC and others had argued that, in the context of tight pre-publication deadlines, it would have been extremely difficult to ascertain where an individual is living at the current time, resulting in either non-publication of a story or “blind” publication without knowledge of the legal context);
     
• There is still a distinction (as there was in the first draft) between how the rules apply to online and offline publication. Article 23 provides a carve-out for related legislation already in force, this includes the E-commerce directive which covers all online publication;
• For cases of unfair competition, the applicable law is that of the country whose market is most affected;
• For intellectual property disputes, the applicable law is that of the country for which protection is sought. A “freedom of choice” clause allows the two parties to mutually agree whose law should apply, thereby disregarding the choice-of-law rules.

The Commission has made some concessions since the meetings earlier in the year but it still has not proved the need for this harmonisation in this area. There continues to be a problem with the disparity of treatment of online and offline material.

Members are urged to send in a response to the EPC internal discussion paper on this issue. The Commission intends to move quickly on this issue and the result could be a law which restricts editorial freedom if EPC and others are slow to act.

Reduced VAT Rates

The European Commission has produced a report this month which examines the possibility of the harmonisation of the application of reduced rates of VAT in the EU.

The Commission makes no suggestion for immediate change to the regime at the moment but does stress in the report that there is a need to harmonise provisions and protocols to make the system more fair. The report does not make a decision about whether this would mean the complete abolition of protocols in the future or whether all opportunities to benefit from reduced rates should be offered to all Member States regardless of previously agreed protocols.

It is proposed that the scope of reduced rates be reviewed every five years rather than every two years, although the Commission states that it can present to the Council a proposal for a directive amending the rules applicable to rates before expiry of the five-year period.

As expected, the Commission did not propose a reduced rate of VAT on records, CDs or DVDs, because it felt that that unlike books, the rate of VAT on discs, videos or DVDs has been already harmonised. Commissioner Frits Bolkestein said when introducing the report that he considered the authorisation of Member States to apply reduced rates in this sector would bring in competition distortion.

The report will be examined for the first time by EU Finance Ministers at their informal Council on September 12th and 13th at Stresa (Italy). It is clearly expected that the United Kingdom and Ireland will put up resistance within the Council to any proposed changes.

Altmark Case

On July 25th the European Court of Justice gave a ruling concerning public service funding. The Court ruled that financial support representing compensation for public service obligations does not have any characteristics of state aid.

In its ruling, the Court argued that for State intervention to be classified as State aid it must be considered as an advantage granted to the beneficiary company, an advantage that the latter would not have acquired under normal market conditions.

Nonetheless, for such compensation not to be classified as State aid in a specific case, four conditions must be satisfied:

• The recipient undertaking must actually have public service obligations to discharge and those obligations must be clearly defined.
• The parameters on the basis of which the compensation is calculated must be established in advance in an objective and transparent manner.
• The compensation cannot exceed what is necessary to cover all or part of the costs incurred in the discharge of the public service obligations.
• Where the undertaking is not chosen in a public procurement procedure, the level of compensation must be determined by a comparison with an analysis of the costs.

Only if those four conditions are satisfied may it be considered that it is not a State aid within the meaning of the EC Treaty.

The Commission considers that the Court's ruling is a major precedent and will make it possible to establish a good framework for avoiding competition distortion as far as compensation is concerned. However, in the view of those who would challenge the vast amounts of money given to publicly funded broadcasters which are then used to distort competition, it is disappointing. Whilst clarifying the actions which would make contributions to PFBs by governments State Aid, the ECJ has given PFBs a framework which they could potentially use to avoid any challenges on competition issues. It will be interesting to see the Commission reaction to future challenges on state aid to broadcasting issues in the light of this judgement.

Equal Opportunities

Following the media frenzy surrounding the leaked version of the proposed Equal Opportunities directive, Commissioner Diamantopoulou is reported to have decided to drop the proposal in its present form and either rely on the new European Constitution and the Charter of Human Rights or release a substantially revised Directive which would essentially outline a general principle with the emphasis on subsidiarity, leaving the Member States to decide on measures to be taken to achieve the aim of the Directive.

Mr Balsemao sent a letter on behalf of EPC to Romano Prodi, Head of the Commission, lamenting the lack of consultation involved in the procedure thus far and questioning Commissioner Diamantopoulou’s assertion that the Directive was at an early stage in its development.

Mr Balsemao also reminded Mr Prodi that the proposed legislation would be considered by the EPC and other media organizations as a serious infringement of press freedom and suggested that consultation on the matter should take place as soon as possible.

EPC has been invited to take part in a media consultation exercise which will be held in early September. A full report of the proceedings will be sent to all members.
 

WHAT’S NEW

Electronic Commerce

1.1 New VAT regime

On 1st July legislation applicable to services provided by electronic means, including radio and TV broadcasting provided on the basis of a subscription, came into force. The new rules stipulate that, when services of this kind are supplied for consumption within the European Union, they will be subject to EU VAT, and that, when they are supplied for consumption outside the EU, they will be exempt from VAT.

The new rules apply to the supply over electronic networks of software and computer services generally, plus information and cultural, artistic, sporting, scientific, educational, entertainment or similar services and broadcasting services.

The legislation will be applied for three years and may then be extended or replaced after a review.

For EU consumers, the new regulation may mean a 15 to 25% price increase. 3rd country providers of services are not content with the system either as the payment of VAT in EU countries for their services will add complication to their billing processes.

1.2 Spam

Member States have until the end of October to transpose the Privacy and Electronic Communications Directive into their national legislation. This Directive bans unsolicited commercial e-mail, otherwise known as 'spam'.
The Commission intends to go further than this. European Information Society Commissioner Erkki Liikanen unveiled the outline of a range of additional measures, which he plans to put forward in the autumn. These measures concern raising public awareness, filtering techniques to block ‘spam’ and, in particular, international co-operation, which will be a key element in the action plan.

The Commission was keen to highlight a “technical approach” which will make spamming more difficult. Companies in the sector have been urged to cooperate in developing filters, software and codes of conduct. In the area of raising public awareness (of their rights and responsibilities as citizens) Mr Liikanen called for a joint effort by the public authorities, industry and consumer associations.

In the UK as part of a drive to prove to legislators that industry is prepared to work with governments and consumers to improve awareness and compliance, The Interactive Advertising Bureau has developed a website entitled ‘All About Cookies’ (www.allaboutcookies.org) which is designed to provide guidance to all website owners on how to ensure they are compliant with the new legislation. It also provides the possibility for the website owner to use a link which takes the user to an FAQ page containing all the information they will need about cookies.

Content Regulation

2.1 E-communications privacy directive

The new directive on electronic communications networks and services, entered into force on 25th July.

According to the Commission, the main aim of the legislation is to introduce a comprehensive and technology-neutral piece of legislation, based on competition law principles. The new directive adapts existing EU rules to take account of the convergence between telecommunications, information technology and media in evolving markets, where the same services can be delivered over a variety of platforms and received via a range of different terminals.

The directive gives the Commission powers to oversee the work of national regulators through its introduction of a consultation mechanism which sets out procedures for consultation and co-operation between national regulatory authorities (NRA’s) and the Commission. Unfortunately only five Member States have taken the necessary action to transpose this directive into national law (Finland, Denmark, Sweden, United Kingdom, and Ireland). A number of others are close to completion.

2.2 Wanadoo fined

The Commission has adopted a decision against Wanadoo Interactive, a subsidiary of France Télécom, for abuse of a dominant position in the form of predatory pricing in ADSL-based Internet access services for the general public. The Commission found that, up to October 2002, the retail prices charged by Wanadoo were below cost. This practice restricted market entry and development potential for competitors, to the detriment of consumers, on a market which is key to the development of the information society. In view of the gravity of the abuse and the length of the period over which it was committed, the Commission is imposing a fine of €10,35 million.

2.3 Broadband content workshop

Industry and Member States' representatives attended the 'Broadband Content Workshop' in Brussels, held by the European Commission in mid July, to address issues related to the development of broadband content, applications and services.

The workshop focused on the main problem of boosting broadband take-up and development which the Commission preamble described as “ funding more advanced multimedia services depends on the availability of broadband for these services to run on, while funding broadband infrastructure depends on the availability of new content to run on it.”

The meeting allowed stakeholders to give their views on the role of public policy in facilitating the removal of barriers. The barriers were identified as: the relatively limited amount of users, the need for new business models, the necessity to address a large variety of needs and preferences and the need to boost the single market for electronic communications. Piracy issues, the need for effective interoperability and security issues were also raised.

The group will meet in October to discuss ways of removing the barriers identified.

Copyright

3.1 Fight against counterfeit goods

The Council of Ministers adopted a regulation this month which is designed to bolster the fight against counterfeiting and piracy. The regulation, which gives agents the right to seize goods they suspect of being counterfeit, without requiring an application by the rights holder, will enter into force at the beginning of July 2004.

The new regulation extends the scope of counterfeiting to other intellectual property areas including geographical indications, designations of origin and plant varieties (counterfeiting of flowers and plants).

The trends currently observed reveal that the number of counterfeit or pirated goods has increased and that counterfeiting activities are increasingly linked to organised crime. The Commission claims that this new piece of legislation with give SMEs and others who could not afford to lodge complaints in the past, the chance to act against those who copy their products for profit.

Advertising

4.1 Services Directive

In order to remove legal barriers to the freedom to provide services and the freedom of establishment, the Commission's services (DG MARKT) are now in the process of preparing a draft Directive, which the Commission is due to adopt by the end of 2003.

The report identified several barriers affecting services in the internal market and drew particular attention to the cross-border problems of the commercial communications sector.

This new draft text will be accompanied by an impact assessment, which will estimate the costs and benefits of the Directive. For this purpose DG Internal Market has circulated five questionnaires concerning the inputs, promotion, establishment, distribution of services and other miscellaneous aspects.

Particular areas of interest for EPC members are the barriers which remain in the market of advertising services across borders. Any members with anecdotal evidence of barriers in this area should complete a questionnaire and return it to the EPC secretariat as soon as possible.

The final deadline for responses is the end of September.

4.2 Tobacco advertising update

Commissioner Byrne has not let up the pressure on the tobacco industry over the Summer period. In a speech made to an anti-smoking congress in Finland at the beginning of August he laid out his future plans for further tobacco controls in the EU.

These plans include the display of photographs on the packaging of cigarettes (the Commission continues negotiations with tobacco companies in this area) and, more importantly, the threat to work with DG Employment Commissioner Ms Diamantopoulou to ban smoking in the workplace.

As yet there is no concrete proposal, as this is a public health issue and does not come within the competence of the EU. However, DG Employment is combing health and safety legislation to ascertain whether it would be possible to use this to effect a ban on smoking in the workplace. The approach is similar to that taken with the tobacco advertising directive, which was presented as an internal market measure.

EPC will follow developments closely as it is felt generally that if the Commission has decided to look for a way of implementing any new legislation in this area, it will find a way.

4.3 Enforcement regulation

The Commission released its proposal for a regulation on cross border enforcement of consumer law in July. The regulation is designed to catch unscrupulous traders who operate across borders in order to avoid prosecution. It provides for increased cooperation between enforcement authorities which should help to stem the increasing tide of complaints about illegal activities relating to cross-border trade. There is some concern that this regulation, although well-intentioned, could cause problems for honest traders. Unless it is made very clear that country of origin rules apply, it is envisaged by that some Member States could use the regulation to enforce their more stringent consumer laws on operators who think they are trading legally.

EPC is lobbying to ensure that this situation does not occur. Debate will begin on the regulation in the Autumn.

Audiovisual & General Media Policy

5.1 Commission audiovisual programmes

The design of the new generation of funding programmes for the audiovisual sector was the subject of a public hearing organised by the European Commissioner for Culture and Audiovisual Media, Viviane Reding in July.

The hearing gave all interested parties the opportunity to take part in a public consultation on what the follow-up to the ‘Media Plus’ and ‘Media’ training programmes should be.

It covered:

• the distribution of European audiovisual works;
• the promotion of the European industry in Europe and world-wide;
• the development of European audiovisual works;
• the training of European professionals in the audiovisual industry;
• access for financing for SMEs active in the audiovisual sector;
• the effect of enlargement of the EU on the European audiovisual market and possibilities for international co-operation.

The consultation was based on activities carried out under existing programmes and on a series of questionnaires. It will contribute to the Commission communication on the future of audiovisual policy and the media programmes due at the end of 2003 or the beginning of 2004.

5.2 Commission clears UEFA’s media rights

The Commission has taken a final decision exempting UEFA’s new joint selling arrangements for media rights to the Champions League. This means that UEFA can continue to sell the rights to its Champions League brand while bringing football within the reach of more broadcasters as well as Internet and telephone operators, and permitting clubs to market part of these rights individually.

According to the new system:

• UEFA will continue to market centrally the rights to live TV transmission of the Tuesday and Wednesday night matches. The main rights will be split into two separate rights packages giving the winning broadcasters the right to pick the two best matches;
• UEFA will initially have the exclusive right to sell the remaining live rights of the Champions League;
• UEFA and the football clubs will be able to offer Champions League content to Internet and UMTS operators;
• Individual football clubs will have the right to exploit TV rights on a deferred basis and to use archive content;
• UEFA will not sell the rights for a period longer than three years and will do so through a public tender procedure allowing all broadcasters to put in bids.

Commenting on the decision, Competition Commissioner Mario Monti said: “The Commission's action will provide a broader and more varied offer of football on television. It will give an impulse for the emerging new media markets such as UMTS services”.

UEFA’s proposed new selling arrangement will be operational from the beginning of the 2003/2004-football season.

General

6.1 Cultural exception to remain

The European Convention’s Praesidium finally agreed that any decision on EU trade agreements with third countries would generally be decided by majority vote, with the exception of cultural and audio-visual services, ‘if these [decisions] could damage cultural and linguistic diversity in Europe’. In essence this means that a new cultural exception has been inserted to the Constitution.

This new provision has reassured the French authorities, which can now specify the categories covered by cultural activities, as well as maintaining the right of veto on cultural issues. This ability was of paramount importance to the French government in the negotiations on the Constitution.

However, many argue that in fact, this was not necessary because the new treaty included the following principle in the EU's objectives, "the Union respects the wealth of cultural and linguistic diversity and will ensure the safeguarding and development of European cultural heritage". All agreements with a third country that damage cultural or linguistic diversity will therefore be illegal due to their incompatibility with the objectives of the Union. It will be interesting to see if there are any further changes to the text of the Constitution before its adoption later this year.

6.2 Packaging Waste

This month the European Parliament completed its the revision of the Directive on Packaging and Packaging Waste. The revision more than doubles the minimum recycling targets which are already in place and sets a date of 31st December 2008 for these targets to be met.

The European Parliament wants the deadline to be extended until 31 December 2023 for Ireland, Greece and Portugal, and for the new Member States to set their own deadlines as long as they are within 18 months of the Directive coming into force.

The main issue affecting publishers is the proposal that the European Commission contribute to waste prevention by encouraging the establishment of European standards to reduce as far as possible the environmental impact of packaging and ensure that packaging cannot be marketed if the manufacturer has not taken all measures to reduce the environmental impact as far as possible without damaging the essential functions of packaging. This issue has gone to the conciliation process as Parliament and Council could not agree. EPC will continue to monitor the conciliation process in order to ensure that no onerous packaging requirements are imposed on publishers.