Committee on the Internal Market and Consumer Protection Ordinary meeting
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IMCO European Parliament
Follow its sittingsDirk Gotink
So for distance sales, we now have infringements and penalties harmonization and an escalation ladder if an importer or platform is not complying or is systematically not complying. On time lines, time lines is very sometimes a bit difficult because if we're with time lines, we're talking about phasing in the data hub, when economic operators need to start putting data into the data hub. And there, the most we could get was 31, 34. So voluntary use of the data hub from '31 by economic operators and obligatory by '34. And then you say, dear, but are you crazy?
This is very far away. And then.
you say, well, talk to the.
Speaker 4
member states. They all want to phase out their national systems, and their national systems have been very expensive. Some of them are quite new, so they want to still use that. Bear in mind that not all member states will get rid of their national systems because they need a plan B in case plan A doesn't work, the European data system. All in all, I think I mean, this afternoon, we will do most of the rest.
Dirk Gotink
But I think for Imco, the message is we have neglected our border for goods for a long time. We have underinvested in our border for goods. And, I think we're now, we've talked now maybe 20 years about the go border for people. Maybe it's time we start also talking a bit more about the border for goods, because globalization has turned around. It's coming our way now, and it will be a lot more important for us to control what comes in.
That means also, I think, for Imco that we need a more structured way to follow up on the work of the customs. We need we're setting up an agency just an hour away from here, yeah, in Lille, which will be a 300 person infrastructure. It will have a data hub, which will probably be the biggest collection of digital data that we have in Europe because it's the 27 data, piles of customs data together. We have, I think, about 80 delegated acts in the customs reform. So, and that's all coming also our way.
So I think we need a more structured approach. And then the last point is I think there's quite some work that nobody wants to talk about. It has to do with customs cooperation agreements with third countries. Usually, if you want trade to work properly, you need very good customs cooperation agreements. It's not some, it's not a very sexy topic, but I think it's a very important one for simply the economic relations with third countries.
That's it, chair. The rest will do this afternoon. Thank you.
Christian Doleschal
Thanks a lot for your good work. And tomorrow, we have the vote on this file. Thank you. And I will go to the next point, to point five, amending directive as regard to the simplification of intra EU transfer of defense related products and the simplification of security and defense procurement. I would give the floor to the rapporteur, and the rapporteur will report back from the second trial log held on Tuesday, 24 March.
And I now would like to give the floor to the rapporteur, Miss Annamaya Henriksen, for a maximum of five minutes.
Anna-Maja Henriksson
Yes. Thank you, chair. And I would like to report back now on the state of play of the trial of negotiations on the file simplification and intra EU transfer, so defense related products and European defense procurement. To date, we have had two trialogue negotiations. And as the chair mentioned, the second trialogue took place on March 24.
All co legislators share a common understanding of the need to reduce fragmentation.
Anna-Maja Henriksson
the European defense market and to improve the efficiency of existing frameworks, particularly in light of the current security environment. At the same time, progress remains gradual, reflecting the complexity and sensitivity of the outstanding issues. On intra-EU transfers, there is a broad convergence on the objective of simplifying licensing procedures. Also, a more systematic use of general transfer licenses is supported. Political discussions are currently focusing on the precise scope of the commission's empowerment, which remains a key political point for the co-legislators.
And regarding defense procurement, there is agreement on the importance of facilitating joint procurement through a temporary derogation. In this context, the introduction and scope of a European preference has become a central point of discussion, reflecting differing views on the balance between openness and strategic autonomy. So, in conclusion, the trial process will continue. It's not so easy. I will be open with that.
We have, still, a lot to discuss. And the continued engagement and flexibility from all parties will be essential to finalize the outstanding issues and to find an agreement on the most sensitive points. So, we will come back to this. The situation is that the parliament and the council are a bit far away still in some relevant issues. And we will continue to discuss, and we will try to do our best to find a solution.
Thank you.
Christian Doleschal
Thank you very much for your report and your good work on this file. And now I will come to the next point, the point six we have already done. Then we go to point seven, ECA special report 13 2026, single market for service. I will recall that the purpose of this exchange of use is to hear Mister Hans Lindblad, member of the European Court of Auditors, and present the findings of ECA's special report on the single market for services. I will welcome Mister Hans Lindblad and thank him for his participation in this exchange.
And after his short introduction, I would invite the MEPs to signal by hand their request to speak for a Q&A exchange. And now I will give the floor to Mr. Hans Lindblad for the presentation of the echo opinion for a maximum of ten minutes.
Hans Lindblad
Okay. Thank you very much. I think there's a presentation that could be shown. So, please, if we could start the PowerPoint presentation. Okay.
All have to do without it. Good morning, and thank you everyone for inviting me here today. It's my pleasure to present our special report, Single Market for Services Commission Action to Remove Barriers to Cross-Border Services Still Insufficient. Let me kick off this presentation by being very clear. This is a very important area.
First, it concerns one of the most very fundamental of our union, the right to provide and receive services across all 27 member states without unjustified restrictions. Secondly, the service sector is huge. Thirdly, free movement of services is key to promoting economic integration, unlocking competitiveness, boosting growth, and prosperity. And fourthly, it affects prices that people pay for services on a daily basis, so it affects people's wallets. And following the Droger report and the letter report, enhancing the single market is a commission priority and important part of their new strategy.
Next picture, please. So let me be a little more concrete. By services, I mean activities ranging from construction and transport to IT and employment services. And as I mentioned, services are very important and amount to around 70% of both GDP and employment in the union. At the same time, it only accounts for 20% of the trade between the member states, and this is a relatively low figure, and it indicates further potential gains.
And it's not a secret that for many years, service providers have faced considerable barriers to benefiting fully from the single market. And these include differing national regulations, burdensome administrative procedures, and restrictions on professional mobility. Actually, in fact, 60% of the barriers of the EU single market from more than 20 years ago persisted in 2023. According to a study conducted by the commission quite recently, reforms in the service sector could generate additional growth potential of 2.5 percent of EU's GDP just in a few years. Therefore, an untapped potential for significant economic gains could be realized by further integration.
Next, please. So, what have we analyzed? Well, we focus on the service director from 2006, and we assessed whether the commission has been effective in removing barriers hindering growth and development in the EU. We examined whether the commission had established a clear and comprehensive approach strengthening the single market, enforced single market rules for services successfully, put in place tools to facilitate cross-border services, and monitored if the commission monitored service integration and assessed costs, benefits, and impact of the directive. Next, please.
So, what did we find? Already in 2016, we found that the commission had not established a comprehensive strategy following the entry into force of the service directive. In the present audit, we found that the situation had not improved. We found that commission has not done enough to get rid of considerable barriers that EU businesses have faced for years. In other words, the efforts to reduce barriers remain insufficient, and business continue to face an uphill struggle in providing service cross border.
You know, our audit is focused on the commission, but the commission is not alone to blame. Member states also bear a fair share of responsibility. Barriers at the national level represent an important part of the problem, and action to remove them is well overdue. If we look at the timeline, the last ten years, we see that in 2015, the commission put forward a series of initiatives to simplify procedures for providers and reduce barriers. However, in 2021, the commission withdrew most of the proposals.
The appetite among member states, among parliament, you, to lock up the service sector lacked. In 2025, the Commission adopted a new strategy to boost further integration of the single market. However, this strategy is, according to us, unclear on what the commission aims to achieve, and the proposed action lacks ambition, and there is a lack of focus on economic impact. Moreover, the commission does not have relevant data needed to identify and monitor the barriers, and has not yet sufficiently analyzed costs, benefits, and potential impact of removing them. And businesses do not have the needed information to take up services in another member state.
When it comes to enforcing rules, the commission mainly relied on infringement procedures. However, it did not focus on cases with a significant impact. The commission did not, moreover, always take timely action when national laws were not in conformity with the directive or when adopting measures undermine market integration. For instance, single market rules were not always clear, and this undermined a consistent application among the member states. In addition, some member states delayed the implementation of the directive.
And moreover, the commission's processing of complaints from businesses against countries violating rules had weaknesses. On top of legislation and infringements, the commission and member states have various tools at their disposal to facilitate the functioning of the single market. However, these tools were largely ineffective. Next, please. So, what do we recommend?
For the single market for services to reach more of its full potential, we recommend the commission. Firstly, to develop a clearer and more ambitious strategy. Second, use the European semester more actively to encourage and incentivize member states to carry out the necessary reforms. Thirdly, clarify legislation and focus on enforcement of infringement of rules on Keynes with considerable impact. Fourthly, reinforce the tools facilitating cross-border services.
And lastly, monitor and analyze the progress in completing the single market. Next, please. To summarize, I'd like to stress that it has never been more important for the EU to improve its competitiveness and productivity on all levels. We're lagging behind, but the clock is ticking, and data speaks for itself. There is an untapped potential for significant economic gains that could be realized by further integration.
We are in 2026, and the barriers to the service market are still, or since a long time, very well known. It's time to act and remove these barriers, and our report provides a number of key observations to support this integration. And we believe that if the commission acts on our recommendations, the EU will make an important step forward. So on that happy note, thank you very much.
Christian Doleschal
Thanks a lot for your presentation. And before I give the floor to the members, I would like to give the floor to the representative of the commission, Mehdi Hakim.
Mehdi Hakim
Thank you. Good morning, everybody. Thank you very much for giving us the floor. I would like to say that the commission welcomes the European Court of Auditors report. And we do share the conclusion that the single market for services remains far from complete and that many area barriers need to be addressed.
This underlines the importance of delivering on the 2025 single market strategy, ensuring that its commitment translates into concrete improvement for businesses. This is exactly why the commission has put a strong focus on services in the strategy, removing the most burdensome barrier and making it easier for companies to provide services in the single market. The commission has formally replied to the reports, taking note of the recommendation and accepting a number of them. Some are being addressed through the ongoing work. For example, improving the notification system under the service directive or the single market enforcement task force initiative, the SMET, focusing on services, while others are still under consideration as the commission determined the best way forward.
However, we'd like to reiterate that the commission ends at delivering if the commission can deliver results as was underlined by the European Court of the auditor, it also requires shared responsibility with member states in particular. Voilà. I will stop here. Thank you.
Christian Doleschal
Thank you very much. And now I will give the floor to the members. And the first speaker is Pablo Arias.
Pablo Arias Echeverría
Thank you very much, sir. I'm going to speak in Spanish. First.
And foremost, thank you to Mister Lindblad for having presented this report. Well, it's true that we do have a problem with the services sector in the single market. We spent far too much time discussing it, and we're talking about who is responsible for this. That's not what it's about. I'm very clear.
Obviously, the member states stop the commission from doing what they have to do to complete the single market for services. But we could talk about the responsibility of others as well. But okay, the economic cost of this has gone from 21% of global GDP to 15%, and we know what the real cost is of not completing the single market for services. So then I have a question for the commission. The Single Market for Services is clearly linked to others on the recognition of qualified people in the EU.
Speaker 10
That's one of the terrible 10. And certainly, it's linked with cross-border provision of services. And I wonder what the commission is doing in that respect. Thank you.
Christian Doleschal
Thanks a lot for your remarks, and I will give the floor to Elisabeth Grossmann.
Elisabeth Grossmann
Thank you, Chair. I'm going to speak in German. Thank you.
Very much for the presentations. A common market for services is, of course, extremely important. Having said that, however, I would like to focus on some of the points that were mentioned. We talk about guilt, but I would like to talk about some concerns. There are some concerns we have to get rid of.
And one of the concerns is social dumping. I come from Austria, which is a small country, and of course, we import a lot of services. We're a high-wage country. And obviously, we see the danger that there might be pressure on wages and salaries. And another concern that we need to get rid of is differing quality standards in terms of education and training.
We need to focus on qualifications and recognitions of qualifications so that on our markets, we can ensure safety. Because here, we're talking about very highly qualified jobs with a lot of responsibility. So these are some of the concerns we would need to get rid of. Thank you.
Christian Doleschal
And now we'll give, like, I would like to give the floor to mister Charlie Morse.
Charlie Morse
Oh, no? Well, I was not really prepared, but I don't mind saying a couple of words.
You're on the list. Sorry.
Speaker 13
It might be needed. Yeah. No. But there's no doubt that I mean, we have a plan. We wanna have a true single market for services.
Speaker 14
But as my colleague, Miss Grossman, said, we also need to understand that one of the reasons why it might be difficult is that we need to make sure that the people are also protected when we try to deliver this market for services. So while we need to look at the rules and see if we can simplify and make things easier for the companies, we also need to understand that the second part, the second leg, is also to protect people, and make sure that it doesn't mean that they will be paid less or being less secured, etcetera. So I do believe that we need to look into both, but there's no doubt that, taking the competition into account that we are faced with from other parts of the world, we really also need to look into how we can make a truly, and a better, well functioning single market for services than we have today. Thank you.
Christian Doleschal
Thanks for your unprepared, short statement. And I would like to ask if there are any other comments from the MEPs. If this, ah, Dick.
Dirk Gotink
Thank you, chair. This is a fascinating debate, of course, and the scorecard for every past commissioner on the internal market is quite nasty, to be honest. Maybe we should send them all a copy of your report, dear rapporteur. I think we immediately, even though there's only a few MMBs in the room, we immediately go to the source of the problem is that social standards are different. And then we say, and then we stop the discussion.
Speaker 4
But, I mean, we can go on like that, and then basically we get taken over by other developments. High wages don't mean zero competition. And protection, especially in the services sector, I would say a lot of people that work in the services sector are not in danger, are not endangered species. They're not, so their livelihoods are not in danger. If you work in a start up, you're not thinking about, oh, my what happens if I lose a job in two years?
Dirk Gotink
That's the whole point of a start-up. You know? So the mentality of protecting maybe everyone equally is maybe something we can work on, because I think there's this asymmetry in people that maybe need a bit less protection because they want to take more opportunities on the internal market and people that need more protection. And we are now doing everyone in the same way. And maybe that is something that we should also talk about with our colleagues from the EMPO committee because, obviously, this is cross cutting.
Speaker 4
But there is an asymmetry. We are protecting people that don't necessarily need the same levels of protection as people that are in a different kind of job. Thank you.
Christian Doleschal
Thanks a lot. And if there are no other comments, I would like to give the floor back, maybe first of all to Hans Lindblad, and maybe also to the commission. We start with Hans Lindblad.
Hans Lindblad
Okay. Thank you very much. I didn't realize, or hear that there were any specific questions targeted to me, but I could say that the posting of workers is a large barrier that we identified. Whether it should be there or not, that is a political issue and that adds up to politicians. But I can note that the mobility of services is smaller than for goods, and this is something that should be taken into account when setting up different regulations.
But at the end of the day, if we want to boost productivity, I think we need to do quite a lot to integrate the services market better. Thank you.
Christian Doleschal
Thanks a lot. And now I would like to give the floor to the Commission.
Mehdi Hakim
Thank you, Mr. Chair. I would just like to say that one of the lessons we have learned from the last 20 years is that certainly now we have to go more sectoral in our initiative, and that the horizontal approach is not enough. Just also, and that's why we are contemplating in our single market strategy also a sectoral approach like for construction services, for example. I think what is also important to reply with regard to the question, the point raised with regard to posting of worker, that indeed we are also trying to address that issue.
And it's not that we want to lower the standard. We want also to have a good balance between, on one side, the reduction of the burden, the administrative burden for the company, but also at the same time protecting worker rights and facilitating inspection. And this is also the spirit of the legislative proposal that is now being discussed by the co-legislator on the e-declaration for the posting of workers. And lastly, I think there was also a question concerning what the commission is doing with regard to recognition of professional qualification. There will be, there is now, what we call the skills portability initiative in this context.
So we are trying first to extend the scope of the profession for which there is automatic recognition. We're also trying to make the whole process faster by introducing digitalization. And lastly, we are also trying because sometimes we need competence that are outside of the EU to have an approach with regard to the recognition of qualification in third countries. Voilà. Thank you.
Christian Doleschal
Thanks a lot. Maybe because we have a bit of time, one last response from Pablo Arias.
Pablo Arias Echeverría
Thank you very much, sir. I'm going to speak again in Spanish. It's Solamente.
Just wanted to respond to Mr. Lindblad. I did have a specific question. Perhaps it wasn't understood correctly, but the question was, does the ECA or can they tell us or shed light on the direct economic impact of this barrier not completing the single market? How is that related to the fact that we've gone from 21% of world GDP to 15% today? Could you tell us about this perhaps in an upcoming report? It will be good to know where the blame lies.
Speaker 10
Of course, it's not about assigning blame today. We know that this hasn't worked and that it needs to work, and maybe you have a specific economic data that we could look at to shed light on this and bring pressure to bear on those who might be responsible for not completing this single market, and ultimately have a positive impact on competitiveness? Thank you.
Hans Lindblad
Okay. Thank you very much. I'm sorry for missing that. It was directed to me. Actually, it's not our job to measure the effect.
We audit what the Commission does. And we say that the commission should do this. They should analyze the effects of the single market. And we say that they haven't analyzed the costs, and they haven't analyzed the gains and the impact of the service director or changes. But we I refer to one study from the commission that pointed out that just to, well, taking down some of the barriers, not that much actually could boost GDP by 2.5 percent in a couple of years.
So there is a large potential. That is our message. But we can't say how much, but we urge the commission to do calculations and present data on this because we think it's important to answer this. And I think it's also important because money is a scarce resource, we have to prioritize and, sort of finding out which barriers are the most serious ones. Is it the terrible 10 or the others?
Could give us a help to start in the right, in at the right end of, well, harmonizing. Thank you.
Christian Doleschal
Yes. Thanks a lot. Pablo is fine. Perfect. Then I would like to thank you all for your valuable contributions and for the constructive exchange today.
I would also like to thank the speakers from the parliament. And with that, I conclude CICE ITEM on our agenda, and formally close the discussion. Thank you very much, and I will come to the next point of our agenda, the territorial supply constraints workshop. I would like to welcome the expert and thank them for participating in this workshop. I would like to say that the purpose of the workshop is to discuss the most relevant TCEs with members and provide a forward-looking perspective on how to tackle them.
And I will remind members that in its 2025 single market strategy, the European Commission identified unjustified TSCs in retail and wholesale amongst the terrible 10, most harmful remaining barriers to the internal market. And first, I would like to give the floor to our first expert, Professor Doctor Victoria Dascalova. For a maximum of fifteen minutes, the floor is yours.
Victoria Dascalova
K. Good morning. Thank you for the invitation to present. I'm truly honored to be here. I hope this study can contribute to the goals that the EU has.
Next slide, please. What I will do in this presentation, the objective of my report was to discuss the state of play regarding territorial supply constraints, or TSCs for short. So I will explain what they are, what the legal framework applying to them is, what the gaps in enforcement are, and, respectively, what opportunities we might have or lessons we might learn from other ex regulatory experiences. The method that I applied for this study was doctrinal desk-based research, and I also did a deep dive into recent enforcement actions by the European Commission. To foreshadow my findings, my conclusions can be summed up as follows.
Territorial supply constraints are practices which take a variety of shapes and forms. They can fall within the scope of the competition rules. I think, currently, the competition rules are best positioned to capture such types of practices. The scope of the rules is quite broad, but nonetheless, gaps remain. The advantage of the current computational framework is that it provides for other nuanced assessment, but then the challenge is how to address these gaps.
So this is roughly what I'm working towards, as a conclusion. Next slide, please. So, what are territorial supply constraints? There's no such definition in the treaties. So when we talk of territorial supply constraints, we have to explain what we mean.
For my study, I based my working definition on a study conducted by the European Commission in 2020, which defines them roughly as follows. We're talking about some unilateral practices or agreements, which occur in a vertical context, vertical meaning at different levels of the supply chain, in a business-to-business relationship. And they would have the object or effect to prevent or constrain traders from selling or purchasing goods across member states. Right. There have been some suggestions that this definition is potentially unfair or too broad, etc.
In my study, I would like to emphasize that this definition is neutral. So it does not contain a judgment as to whether the practice is justified or unjustified. And I would like to draw this distinction. I think it helps the discussion. So it's simply engaging in such practices with the object or effectors, to prevent or constrain traders to move goods, purchase, sell goods across member states, but that does not mean that they're necessarily unlawful, and I will get to that in a second.
Next slide, please. I was also asked to position these practices that we are talking about within the broader EU law framework. So, I've composed this table. Hopefully, it's helpful to you. If we start at the bottom, territorial supply constraints, as we define them, are put in place by private parties.
That means that the internal market rules, those are the articles 21 to 30, TFEU, and 34, 35, do not apply to such practices because such practices are not put in place by states. The internal market rules only apply to practices put in place by states or ministerial order, for instance, or a law, but they do not apply to rules by private parties. We also have other legislation, such as, for instance, the geoblocking regulation, but this is also not covering such practices because it applies only in the online shopping context and only concerning business to consumer relations, whereas we're talking about business to business relations. The UTP legislation, that's directive 2019, 633, also tackles relationships within the supply chain vertical relationships. But there, the focus is also slightly different.
It focuses on practices imposed by buyers on suppliers. So it was really, very much imposing, so to say, obligations on the retailers, whereas what we're looking at here is supplier imposed restrictions. Next slide, please. When we speak of territorial supply constraints, I'm waiting for the next slide. Yeah.
Thank you. What can we imagine? As I said in the beginning, one of my summaries was that they take many shapes and forms. Based on the commission report and also the cases by the commission that I read, I have put it into some categories. I've grouped them into certain practices as follows, such as refusals to supply, direct or indirect, for instance, outright rejection, we will not supply across border, or perhaps a refusal to respond to requests for an offer, requests for supplies.
It can also include a very far-reaching measure, which is the delisting of products. That's indeed quite drastic. And it refers to the pulling of products out of the market, yeah, or of, essentially not making them available for sale, in a given country. For instance, in some cases, there's also a market authorization needed. That would be the case in pharmaceuticals, for example.
That would mean, for instance, pulling the authorization from this jurisdiction so that the product cannot be sold there. We're also looking at quantitative restrictions, again, direct or indirect, such as, yeah, essentially, quotas. It can also be variations. Interesting example is in the commission investigation and decision against Nike, where Nike set a cap on the number of labels they would supply to their licensees, thus indirectly controlling the number of products that would be available for reexporting. We can also think of contractual obligations.
We can think of differential pricing, including of offers, which are then tied to the products being reserved for a specific member state, and differentiating pack product packaging or composition, again, with the intent to keep it limited to certain member states or respectively to make the export more difficult. Next slide, please. So now that we've looked at these practices, the question might be, what about competition law? To what extent can competition law capture these practices? There's good news and bad news, as I started already in the beginning.
The good thing is we have broadly worded prohibitions within competition law. So these articles on competition, they're quite flexible. They have shown that they have quite a broad scope. They have also been interpreted in some cases quite expansively, which allows for many practices to be captured. Furthermore, it is a rather nuanced regime.
One reason for that is that there are possibilities for exemption depending on certain conditions, certain requirements being fulfilled. So, for instance, there's an efficiency exemption. As I said, the fact that a good may not be sold in certain territory might be a perfectly lawful thing to do, if it, for instance, it falls under the criteria for exemption under the block exemption regulation on vertical restraints. This regulation allows for a rather nuanced regime, which considers the efficiency considerations, pro competitive effects of practices, but also the possible anticompetitive effects. Right?
And for instance, under this regulation, you could have an exclusive distribution system, to give an example, whereby you appoint certain distributors to be exclusive distributors for a given territory, and that would be allowed. However, there is the condition that they should allow for passive sales. So they may so the supplier cannot prohibit them from selling abroad if someone from abroad would spontaneously, without having been marketed to, would contact them. Yes? But here, I would like to make an important distinction.
The fact that there is this possibility for distributors to do that does not mean that there's an obligation for them to engage in such sales. So that is probably important to consider. Next slide, please. Yes. I have, I'm afraid you're not able to read this.
It's also, however, not a problem because the table is quite repetitive in some sense. It shows a certain pattern. It gives an overview of the extent to which each practice mentioned can be captured by each computational provision, so respect to the article 101 and 102. And the important thing to remember is that for article 101, we need an agreement. So that means that all the practices that are purely unilateral, so a supplier which decides not to sell, or to refuse to supply in a given member state purely out of their own decision, this would not be captured by article one zero one because for what article one zero one really targets agreements between companies.
So if there would be an agreement between a supplier and a distributor, and these two are separate undertakings. Yeah? So if there would be such an agreement which says you may distribute my product, but you may not sell it in this and that territory, that would fall under article one zero one. But if the company says, will not sell into that territory, or I will instruct my own distributors only to accept orders coming from a specific territory. That would not be covered by article 101.
So that's a limitation because there is no agreement. Regarding article 102, if you would be able to zoom into the table, you would see everything is possible as long as there is a finding of a dominant position. And that is the key limitation. As I said, much is possible with article 102. However, the intervention threshold is quite high.
Yeah? So, essentially, the gap that emerges from this analysis are practices which are unilateral but by nondominant companies. And as you can imagine, there are only that many companies that can be dominant. So that leaves a certain gap in the legal framework. Of course, there is the question to what extent that gap is problematic as a matter of policy, but yes.
Next slide, please. Now I will, if I may have the next slide. Yes. I will give some perspectives from the unfair trading practices legislation. And here, I include a couple of different instruments under this banner.
So, of course, we have at the EU level the directive on unfair trading practices in the agri food supply chain. Can also consider the regulation platform to the business. But in addition to that, we have a lot of legislation at the member state level, which targets unfair trading practices. Their focus is slightly different, as I mentioned, from territorial supply constraints because they focus really on buyer, buyer led restraints, buyer power, let's say. And the rationale is quite similar to that of what we're discussing.
It's the perceived weakness of competition in certain areas. And the approach is essentially a lower standard for dominance or an easier to establish finding of a bargaining power imbalance. So, essentially, the dominance question is put aside or mitigated, and the focus is on the practices instead. And there's a simple prohibition, respectively. It could be a blacklist or a graylist, as in the UTP directive, but the approach is prohibition.
There's not really a possibility for exemption or for analysis. So that is, that is generally the structure of such legislation. Next slide, please. So what does that mean? What is the insight?
The unfair trading practices legislation has an advantage, which is that it's simpler to interpret, so it may make it easier to enforce. However, what might be potentially problematic is the fact that there's no discussion of efficiencies. And some of these practices can be efficient under certain circumstances. And then there's also the further question of aligning with the competition law regime, especially for vertical restraints. What could be interesting to consider, in view of possible future legislation, is the enforcement dimension.
So what is especially interesting about unfair trading practices legislation is the fact that it recognizes the so-called fear factor. The fact that, sometimes wrongful behavior, unlawful behavior may take place, but may go unnoticed or unannounced, unenforced due to fear of punishment within, yeah, this the business relationship. So it is this fear which has kept many unfair trading practices unannounced to authorities or unenforced in court under private law even where there would be a clear legal basis, precisely because of this fear. So what it does then is, for instance, it tackles issues such as contracts that are made orally or frequent changes to contracts or the possibility of anonymous complaints or group complaints in order to make enforcement possible. I will move to the concluding remarks.
I believe I'm running out of time. If I may have the last slide, please. So as I already foreshadowed, my conclusions, territorial supply constraints take many different shapes and forms. Luckily, the competition law provisions have a rather flexible scope, which allows for many of them to be captured, with the notable exception of those practices imposed unilaterally by nondominant undertakings. Competition has developed elaborate assessments to provide for nuanced assessment of such practices, taking into account pro-competitive and anticompetitive effects.
And an insight from the UTP legislation is that it can sometimes be more pragmatic to avoid a complex assessment. However, that should be done with a careful understanding of which practices are justified as such and can be prohibited as such, and those which may be efficient and where a more nuanced assessment may be necessary. Thank you very much.
Christian Doleschal
Thank you very much for your interesting introduction. And I would like to give the floor to the members we have on the speaking list. First, Diego Kotnick.
Thank you.
Dirk Gotink
Very much, chair, and thank you very much to the speaker. Very interesting, legal analysis. It explains a lot why, or at least presumably, the commission actually doesn't have the legal instruments to go after a big chunk of the territorial supply constraints that we often talk about here. My question would be, so that gap that you recognize between unilateral and nondominant, what share of the TSCs are we talking about? Do you have sort of a, I don't know, a ballpark figure for us?
And because then we would also know if where the commission does have leverage to act. And then, secondly, regarding the UTPs, I find it fascinating. Apparently, the agri committee is more effective in getting legislation to somehow deal with these issues than Imco. Where do you see on the nonfood side then the way that we should fill the gap that exists somewhere between 101 and 102. Thank you very much.
Christian Doleschal
Thanks a lot. And then I will give the floor to Elizabeth Grossman.
Elisabeth Grossmann
It's important that we look at these territorial restrictions. We need to tackle them because they undermine the faith in the supply chain, particularly in small member states, Slovenia, Croatia, for example. Sometimes we see certain articles being 50% or sometimes 20% more expensive than in Germany. And it's possible to compare more directly on internet platforms. And people don't understand why things are so much more expensive, which is why a lot of people buy on the Internet, which is obviously damaging to regional and local economies. So it's urgent for us to take action here.
And I'd ask you to focus on what legislative initiatives can be taken. If legislation is insufficient and if there's no market dominating position, then no action can be taken. We've got to adapt our legislation. And I'd like to ask you where exactly we should attack.
Thank.
Speaker 19
Thank you very much, Chair. Thank you very much, professor Dascova, also for your valuable presentation. So the evidence is clear that territorial supply constraints continue to undermine the proper functioning of the single market, particularly for consumers in smaller member states often facing significant price differences or quality for identical products. Given that this issue is persistent, we can say that the current framework, including the EU competition law and the unfair trading practices directive, is not delivering results that was also shown in your presentation. And consumer organizations are calling for legislation to address the territorial supply constraints.
We can all agree that at the time when the EU is focused on simplification and reducing unnecessary burdens, any new action must be strictly targeted and proportionate, and we must avoid penalizing legitimate business behavior or restricting market freedom. But simplification must not become an argument for inaction. Where clear gaps persist, our response must deliver tangible solutions for consumers. And this raises the question of to what extent the problem stems from insufficient enforcement and implementation of existing rules, and to what extent the main challenge lies in the substance of the rules themselves, namely the gaps in the legal framework. In your view, where should the EU draw the line between legitimate business strategies on one side and practices that effectively undermine the single market on the other side?
And how do we ensure that each actor involved in the value chain is held accountable for such undermining behavior? And we do not put all the blame on either the manufacturers or the retailers. Thank you very much.
Christian Doleschal
Perfect. Thank you very much. And now I will give the floor to Dimitris Theodoros.
Dimitris Theodoros
Thank you, sir. Please, colleagues, let me speak in my mother tongue, Craig. Thank.
Thank you very much indeed, the chair. Well, I would like to thank the two presenters for their very interesting presentations and also what we've heard from the commission about as well. Now we're about these TSCs, which have an effect on consumers. And there's already quite a lot of data supporting this. We've got a report from 2020 as well, which feels that there is a cost of about €15,000,000,000 per year to EU consumers.
Now there's also quite an important political momentum as well. And our prime minister in Greece contacted the president of the commission, asking for action to be taken on this by the EU and asked for measures to address TSCs. That was in the annual report on the single market. Now there's a proposal to put an end to TSCs, which don't respect competition legislation. So I'd like to ask a representative of the commission about these unjustified differences in price of goods.
What are you going to do about this? What about the practices that are unfair competition? The different languages are used also on labels, and that's not necessarily justified either, because the goods are not available in all member states. So, what about unfair trade practices which affect cross-border sales of goods as well? What do you intend to do about these issues?
Thank you.
Christian Doleschal
Thank you very much. And now I will give the floor for the answer to the expert.
Victoria Dascalova
Honorable members of the committee, thank you very much for these questions. I will try to answer them to the best of my knowledge. I will start with the first question, which is regarding the share of territorial supply constraints. So how many do we have of those? I, unfortunately, cannot answer this question as it falls outside my field of expertise.
I'm a legal expert. I haven't done an empirical study. There are other empirical studies which were quoted by the other members which give certain indications of the cost to consumers, etcetera. But, I cannot say exactly what is the share of territorial supply constraints. And but that is actually a very good question, because it prompts us to think further of where are these TCs and perhaps is more investigation into that necessary.
What I can say is looking at the enforcement practice of the commission, indeed, we see that we see certain TSCs practiced by big companies and it's, let's say, not so small companies which gave the trigger for these investigations to be started. Sorry. I'm being a bit vague right now. I can give a concrete example. For instance, in the case against the beer brewer, AB InBev, it was a Dutch retailer, Albert Heijn, which was active cross border, which suffered these territorial supply constraints.
But the reason why that was the case was because this is a rather big retailer, which is active cross border. Yeah. What is a very interesting question in my view is, to what extent there are smaller retailers who may also suffer from such practices, but where this flows really under the radar, where cross border sourcing, for instance, is not even attempted, because of, for instance, the fear factor, or because of lack of clarity regarding the legal framework. So I think this is also a question for further investigation, but I do not have the empirical evidence, unfortunately. I cannot say much about that.
The second question about how to fill the enforcement gap, that is a difficult question. As I said, what I did was a preliminary study, setting the scene. Regarding the solution, I know my colleague will give some indications as to what might be desirable in a potential instrument. But I think it's key for such whatever such approach may be, I think it would be key to consider what can be prima facie unjustified and where more nuanced assessment is necessary. So I think that's one thing to consider.
And the other thing also to consider is the economic aspect. So where is territorial supply constraints really problematic? Because we take it as a given that whenever there's a restraint, there is necessarily a penalty for the consumer, and that came up in a lot of the questions. But basic economic theory, and I'm saying basic in the sense that there is probably much more nuance that colleagues who are economists can add. So this basic theory tells us that price discrimination, different prices, can also be beneficial sometimes.
So indeed, the price can go up for some consumers, but the price can also go down for some consumers. So that's we need a careful economic assessment there. So in that sense, that would also be part of this exercise of figuring out how to fill the enforcement gap. There was also a question about what legislative initiatives can be taken. Where should we attack?
That was, at least in the translation. There is the possibility of an instrument like the unfair trading practices directive. Again, I would follow these prescriptions of separating what's clearly unjustified from what is not, in designing such an instrument, and maybe also seeing where the market itself may remedy the problem. That's also something to consider. There was also a question, regard, that was the fourth question that I received.
Where exactly is the problem? Is the problem in the enforcement or in the substance? As I've explained in my presentation, in terms of substance, there are some gaps. So more attention is needed, provided that it is well substantiated with evidence. Regarding enforcement, that is an interesting question.
One thing that I noticed when doing this study, for instance, we have a rather elaborate guideline, draft guideline on article 102 published by the commission just last year. But this guy, these guidelines, they're focused on exclusionary conduct only. So they don't look at territorial supply constraints, for example. Maybe there's not a perceived need to discuss the substance more, but maybe that's something to look into for the commission to clarify the substance. But that also links to the enforcement, which is, of course, a matter of priority.
To what extent is that a priority? To what extent do those who are in charge of that have the incentives and the institutional abilities to engage in that? That is also a relevant question. So the commission has far-reaching powers. Is it incentivized to use them?
At the member state level, are member state authorities aware of the impact that, going after TSCs can have for their markets and consumers? Maybe more is possible within the member state authorities as well. Yes. And that was, I believe, I have addressed all the questions. I hope I'm not missing something.
Thank you very much.
Thank you.
Christian Doleschal
And now we'll give the floor to our next expert, professor doctor Ben van Rumpy, associate professor of EU competition law at the European Institute in Leiden, also for a maximum of fifteen minutes. The floor is yours.
Ben van Rompuy
Thank you very much, mister chair, honorable members. It's a pleasure to contribute to the discussion today on an important issue that I've been following closely for a while. Of course, I can also personally relate. Like many of you, I experience cross border price differences in daily life. I'm Belgian.
I live and work in the Netherlands. I have family near the German borders. So I do my shopping strategically, and it's clear. These price differences are persistent. They're striking sometimes for the same retailers just across the border, but it is important to stress that these differences are a symptom that can have multiple causes.
Territorial supply constraints are one of them, but, certainly, they are not the only one, and I will come back to this. So how can we effectively tackle unjustified TSCs? And with unjustified, I mean those that have no legitimate commercial justification that are just there to partition markets to sustain artificial price differences. Well, my perspective today is forward-looking. But even so, I think the starting point should be the existing toolbox.
Now, my colleague has already mentioned competition law on the future of competition law. Therefore, I can be very brief. But then I would like to turn to the national rules on relative market power, which we haven't discussed yet. And on that basis, I want to put forward five considerations for the design of any potential instrument, EU-level response to unjustified TSCs. Next slide, please.
Next slide, please. Well, I will continue. On competition law, indeed, there we go. Competition law is the main and largely, the only illegal framework we have currently for tackling unjustified TSCs. The instrument has proven capable of addressing both direct and indirect TSC.
So direct into, TSCs are explicit restrictions on cross-border sourcing of goods. Indirect means are practices that have the same effect, but that are achieved via indirect means. So, for instance, deliberately limiting the language options available on products. Now this came up in the questions as well. In my view, there is room to use the competition rules more proactively, particularly at the national level.
But that said, reliance on competition law will not be sufficient. As doctor Daskalova already mentioned, indeed, the main issue is that competition law only captures unilateral conduct of dominant undertakings. But it is exactly in this space that national rules on relative market power become relevant. Next slide, please. So the current EU law framework allows member states to adopt stricter national rules on unilateral conduct.
And several member states, such as Germany and France, have long maintained such rules that address exploitative conduct in a vertical business-to-business relationship that is characterized by imbalance in bargaining power but falls short of dominance. Several member states have more recently introduced such rules, such as Belgium, Austria, and Romania, and I should stress that these rules are not related to the UTP directive. In my view, these rooms, as they offer a tool to plug the enforcement gap left by competition law, are of relevance. In principle, they could address TSCs, especially so because we know that these constraints typically arise in a relationship where the buyer is dependent on the brand portfolio of the supplier. An example in my briefing paper I highlight is actually Switzerland, who introduced these rules precisely to attack TSCs.
So Switzerland, as you know, is a high priced island relative to its neighboring countries, and this led to the accusation that international brand manufacturers were using TSC-like practices to artificially impose premium prices in Switzerland. So in 2021, the Swiss legislator responded by expanding the abuse of dominance provision in national competition law to companies with relative market power, and it explicitly defined as a possible abuse preventing buyers from sourcing goods at prices and conditions in other markets. So these instruments could be used and could target the TSCs. Now that is the theory. Looking at the national regimes at the EU member states today, I do have to stress that there's potential, but at present, it's not a structural solution for the simple reason that not all member states have these rules, but also there is no harmonization.
So there's quite a number of differences in the scope of the conduct that is being prohibited. There's very different enforcement mechanisms, and the threshold of relative market power or economic dependence is also differently defined. And in some cases, that might raise problems for applying them broadly to the TSCs. So I believe that the case for EU action, whether it's legislative or non-legislative, follows from this enforcement gap. Competition law or EU law generally does not consistently capture unjustified TSCs, and fragmented national rules or relative market power cannot provide a coherent answer to date, or a coherent internal market response.
So this brings me to the next question. If we were to design an instrument, what would it need to look like in order to be effective? And I would like to highlight five considerations that, in my view, are critical to that design. Next, slide please. First of all, a targeted TSC instrument cannot be effective in isolation.
Because even if we were to address unjustified TSCs and remove them, cross-border sourcing may still not take place because it might still be restricted by various other regulatory barriers. And this is especially clear for prepackaged food, where we have a whole body of EU and national rules on packaging, composition, marketing, etcetera, that would still continue to hinder cross-border trade. For instance, the food information to consumers regulation imposes mandatory consumer information on allergens or nutrition, ingredients, etcetera, that must appear on the packaging in the language of the member state of sale. And in most cases, this is the national official language. But, in this country, in Belgium, for instance, that's even defined at the regional level.
Right? So in Flanders, products must have a Dutch label. In Brussels, Dutch and French. In Wallonia, French. And this has practical consequences.
And in the briefing paper, I highlighted the example of Picnic, which is a Dutch online supermarket, because it illustrates how there is a practical impediment to including all EU languages on the packaging of products. Certainly, for some products, this might be feasible, but it will not be cost effective or practical for many other products to include all languages. So that means that manufacturers produce different versions for different markets, and that will still limit cross-border movement. Now the example of Picnic, this Dutch online supermarket, it announced that it would offer cheaper imported brand products from Germany and sell them in The Netherlands, and they translated the labels on the website and on the app. But the relevant authority was quick to point out that EU law requires that, actually, the languages of the local language are on the physical label.
And so this was not sufficient. So what they do now is they overstick. And overstickering can work as a workaround for smaller retailers, for smaller wholesalers, but certainly at scale, it is not very viable. Digital solutions like QR codes are being explored. But, unfortunately, for food, currently, they're not a substitute for physical labeling, as long as digital access and literacy of consumers cannot be assumed.
So, in short, we need to look beyond just an instrument tackling TSCs alone. Next slide, please. Secondly, which unjustified TSCs should we then prohibit? Well, I believe it's important here to distinguish between direct and indirect TSCs. So these direct in TSCs, so explicit restrictions, refusals to supply cross border, they are more related to a legislative prohibition, similar to what the geo blocking regulation, for instance, prohibits.
It clearly defines discriminatory practices that are not permitted. Indirect TSCs are much more challenging. Let's take the example of packaging differentiation. Packaging differentiation might reflect legitimate commercial choices, and it might as well be a deliberate market-partitioning tactic. How do we know what it is?
Well, the difference is often only visible on the basis of purpose-based evidence. So in the competition law investigations tackling indirect TSCs, typically, action was only taken when there was a sudden commercial change. Suddenly, packaging changed, for instance. Secondly, there was internal evidence that this was part of a deliberate strategy to prevent the product from showing up in another member state. And third, this was often only in conjunction with action taken against explicit restrictions.
That, of course, makes it difficult to replicate in any kind of instrument because you typically do not have access to this internal evidence, etcetera. So that poses challenges to see whether indirect TSCs are justified or aren't justified. And this is a dilemma. If we design a credible instrument, we probably need to focus on a narrow set of restrictions which are readily observable, but then there's the risk that manufacturers can simply circumvent it by using these indirect, less observable means. A further question I think that should be addressed is whether any prohibition should only apply to an existing supply relationship.
If there's a sudden commercial change in an existing supply relationship, this is probably more difficult to justify on commercial grounds. But then we would exclude new refusals, new relationships from that prohibition. Third, who should be the addressees of a potential prohibition? Well, I think that applying a prohibition on unjustified TSCs to all suppliers would clearly raise proportionality concerns. For one, extending a prohibition like refusal to supply to non-dominant undertakings is quite a big step.
But secondly, we also know that TSCs typically rise in these relationships where there is economic dependence on the brands of the supplier. So some threshold would be needed. And here, we could indeed look at these national rules or relative market power, and consider a similar threshold of economic dependence. But I have to stress, one of the complexities of using article 102 is you have to first establish dominance in a certain market, which is a very fact-specific exercise. However, if you look at enforcement at the national level with these rules on relative market power, we see similar challenges. Because you have to establish that in that bilateral relationship, there is a situation of economic dependence of the buyer on the supplier, and that is not necessarily easier, in terms of evidence and then fact finding.
So we need a threshold, but if we set the threshold too strictly, then large retailers, supermarket chains might actually fall outside of the scope, or they would only be within the scope when it really concerns the must-have products. But there, actually, the abuse of dominance route might be available. Another question is the sectoral scope. Should it apply horizontally? Most evidence points to fast food consumer goods, but actually, the evidence so far has remained limited.
So TSCs might also be a problem in other sectors. It's just less documented. So, also, there, it's not easy to carve out what the scope ought to be. Fourth, justifications. Next slide, please.
This was mentioned by the previous speaker. Any instrument would probably also need to allow for justifications because TSCs can indeed have efficiency gains. Gains. Now if we were to opt for a very narrow blacklist of obvious practices, then probably the justification framework can be limited. This is again the geo-blocking regulation framework.
You have a clearly defined discriminatory practice and a very limited narrow ground for justifications. So there's no case-by-case balancing needed. However, if the instrument also wants to attack indirect TSCs, then the justification framework must be more extensive and more balanced. And then we're probably in a framework such as the services directive where something is prohibited unless it can be objectively justified. So here again, there's a key balance that needs to be struck between providing legal certainty and providing flexibility, but I think all depends on the scope of what would be prohibited.
And then finally, on enforcement and remedies, and this already has been mentioned, the effectiveness of any instrument would need to be supported by an enforcement framework. There is this fear factor. So probably public enforcement would need to complement private enforcement, but then we need authorities with capacity to investigate, to address complaints, and to do these fact finding exercises. Again, our experience with the geoblocking regulation is that enforcement is very uneven across the different member states. And now finally, on remedies, the priority should obviously be access to products on nondiscriminatory terms, but maybe financial penalties to ensure deterrence should also be considered.
So taken together, come to my conclusion, I think these five considerations suggest that any workable EU instrument against unjustified TSCs would have to be carefully scoped. And in my view, it probably would work best if it were to focus on a limited set of clearly identifiable restrictions applied only in a relationship where there is this imbalance in power, and supported by an enforcement framework and scope for justifications. Whether such an instrument meeting all those conditions would then cover enough ground to make a material difference, I am afraid that at the moment, the available evidence does not allow us to answer that question with confidence. Thank you very much.
Christian Doleschal
Thank you very much. And now I will give the floor to the members. Are there any questions or comments? Pablo Arias. Thank you, chair.
Pablo Arias Echeverría
I'm going to speak in Spanish. Well,
I'd like to start by thanking Mister von Rumppey and also Doctor Dascalova. Well, this is not just a minor issue. Let's be clear that it's a problem we've been looking at for a long time now, and competition rules are not adequate to help us address it. So I have a very clear question. We've got competition rules which are not adequate, or it's not adequate just to apply those to solve the problem.
Is that right? Or do we have to adapt those competition rules to current conditions, in other words, online sales and these types of things? So that's more or less my question. If you have a list about what can and can't be done, if you ban something, I think we'd have a more serious problem if it's not justified. It's all fine having penalties, fines, but I don't like bans, although sometimes they're necessary.
So, as I say, my question is about competition rules. Do they need to be adapted to current and future conditions? Or is it just the fact that those competition rules are not enough? Thanks.
Elisabeth Grossmann
Well, I'm going to repeat my question once. But thank you very much indeed for these interesting presentations, which I think explain the reasons underlying territorial supply constraints. But I'd like to ask a specific question about how we go about solving this. Obviously, in the smaller member states such as Austria, Croatia, Slovenia, Belgium, they are seeing obviously higher prices for the self same product. And even within the same chain, for example, pharmaceutical product, cosmetics products, this type of thing, DM, Mueller, which are active across the board.
In certain places, they cost between 20-50% more. And so we understand that consumers are going to be upset about that. We need very specific solutions to be found. For example, tighter implementation of existing legislation or new European rules. So I'd like to very specifically ask where we can address these points from a point of view of legislation.
Thank.
Biljana Borzan
You too for organizing this timely and necessary discussion. For years, I've been working on issues specific to newer member states of the union. And when I worked on dual quality of products, a lot of market players in Croatia complained that in East Europe, we had lower quality products because they were unable to buy better quality products because of TESCOs. The last study of the commission has shown that half of market operators encounter such restrictions, such as refusing to sell products. In Eastern European countries, there is a new problem now, and this is the biggest growth of food prices in the EU when we compare Croatia to the other countries of the EU.
Speaker 24
The food prices have grown a lot more. The biggest difference is in the price of bread, which has grown by 60% in Croatia, while in the rest of the Union, the growth was 38%. Fish, meat, sugar, eggs, fruit, and milk are similar. But, also, in Hungary, Bulgaria, Poland, Baltic countries, the prices have grown even more, and this problem does not pertain to the food. Only my colleague Elizabeth spoke about cosmetics.
Biljana Borzan
You can pay maybe €10 more for certain products than in Germany. Dishwasher tablets are much more expensive, deodorants, and other products. According to the last Eurobarometer, prices are the biggest problem for all Europeans, and especially in the newer member states. And I believe that we have a huge job in front of us, and I'm happy that this issue is being worked on, because it's troubling European citizens very much. And I believe that market competition rules are not enough.
And finally, question. Most legal cases are in Western Europe, but a lot of Eastern European countries have cases like that. What is your experience with our markets? And what are the solutions that you think will have the best results? Thank you.
Thank.
Speaker 25
You, chairman. I'll be speaking French. Well, I do apologize for arriving late. I would have liked to hear the first speaker as well, Doctor. Dascalova.
I was in the jury committee, and things are obviously moving quite fast here. But I do have a question for her. Firstly, I understood that one, if I well, if I've correctly understood, one aspect that can sometimes justify price differences is the fact that the information is included in different languages according to the countries. Now I find it difficult to understand how that in itself can justify such a range of prices. Also, the fact that you have access to the information on the product in your mother tongue is a community-acquired right for somebody who wants to sell in the EU.
The entry ticket will be to respect the community, a key. So there are specific measures? I mean, we're the leading market in the world, and it's a privilege to come and sell on the European market. So certainly, you have to meet certain conditions, respect the rules. And we make these people who want to come and sell to EU citizens respect these rules.
Is there a way of doing that without making the consumer bear the price? And then another question may be mainly for Madam Daskalova on the question of competition, and more specifically the ultra-peripheral regions. We in France have several in the West Indies, but it's a similar case with other island territories, which are attached to the EU or supposed to be, where there is not free and unfair competition there. We have people with monopolies who impose prices defying all competition to active clients because they're on an island, so they can't go elsewhere to do their shopping. So well, IMCo committee is going to Martinique in May to address this particular question.
So I'd like to hear your view on this. How can we impose the rules of competition on those territories? So companies that cover pretty much all of the supermarkets, furniture shops, car repair places, that they bring in the imports there, and they are creating prohibitive pricing there. So, do you have any ideas? Can you think of any specific cases where we can do this to the benefit of citizens and ensure that competition applies in these places where there is zero competition right now, and therefore very high prices?
Christian Doleschal
Yes. Thank you very much. And I now give the floor to Miss Grapini.
Okay. I
Maria Grapini
I will speak Romanian. Of course, it is very important that we debate this issue. Biliana, my colleague, just said that two terms ago, we talked about the double quality of products. We have the problems of labeling the price and the content. We have found that under the same packaging, under the same name and brand, the content was different.
This was misleading to the consumer. And the explanation that was then given to us was that they adapt the products to the taste of the local consumer. Well, if they do that to adapt to the local taste in that specific country, then the packaging should be different, the branding should be different, and the price should be different. The very serious matter that I see here is very serious, and it is related to the fragmentation of prices. From a point of view of consumer rights, it is unacceptable for the same product to have different costs because at the end of the day, there is a production cost for every product.
And the profit rate of the trader is paid by the consumer. And this problem can be solved not only, as your colleague said, through the intervention by the commission, but also with the help of specialized institutions competent in the field in member states. Prices are currently different. Labeling is uncompliant, although we have worked on labeling rules. But the consumer in Romania, Bulgaria, Switzerland, or Austria should be able to read labels in their own language. And label should contain all the information with regard to the conduct of the product, all the information that we asked to be mentioned on the label at the time.
So what are the measures to be taken for us to reach our objective, which is having a correct price in the whole of the single market? Because this is hardly a single market, may I say. What are we to do? What would be the steps to be taken? This debate suggests that we would need to make some legislative adjustment or to come up with new regulations, or we should strengthen supervision with the help of national authorities and, of course, through the Commission.
But also, should be trained to be more active and to notify when there are issues, because there are no sufficient complaints from consumers. So what do you think the steps should be to solve this problem?
Ben van Rompuy
Apologies. Thank you very much for these questions. Maybe I can address the final one first. Indeed, I mean, of course, let me be clear. It's very important that we have this mandatory information, rules.
Of course, consumers must have access to this information in their local language. I just wanted to point it out that that could then be a burden for importing products from a neighboring member state and selling it in that member state if it doesn't comply with these rules. As to the packaging, we do indeed see that, you know, bags of chips with paprika in one member state are blue and in another member state are red. It's very difficult to say whether this is indeed a legitimate response to what consumers in these member states want or whether it's a tactic to avoid parallel trade. And that is the complication.
So, really, to find that out, as I mentioned, we need investigatory powers. And this is why competition authorities are well placed to look at these things, because they have the fact-finding powers to see whether it's legitimate or not legitimate. For a third party, this is very difficult to assess, without that evidence. So I do think that national competition authorities could do more, which have not been very active in this area, and they do have the investigatory tools. But that brings me to the first question.
Competition law is indeed not sufficient. And the honorable member, if I understood correctly, said I do not like bans as such, but I would like to point out that practices which are aimed at partitioning national markets are under competition law considered to be inherently anticompetitive. We don't even need to establish anticompetitive effects. They are, contrary to the internal market. So if you want, this is also kind of a prohibition of some sort.
As soon as we establish that indeed this is the primary aim of these practices, then they are anticompetitive, and therefore incompatible with the rules. The problem being that this does not capture nondominant undertakings, and that fits the logic of the competition rules, which, of course, is only concerned with unilateral conduct when we have such market power. So in that sense, the competition rules are not an adequate fit to cover all of these, and we would need to complement them. One way is indeed to consider these national rules on relative market power because they are intended to plug this gap, to also apply, for instance, the abuse of dominance prohibition in a relationship of economic dependence. But I think if you want to structurally address these unjustified TSCs, then probably we need to look at an instrument that does prohibit these practices.
But it wouldn't all be that different from what competition law does in practice. On the prices that have increased, indeed, I've may mainly been referring to food because of the additional complication of labeling. But, of course, we see the same problem with household products. In my briefing paper, I referred to cases involving books, cosmetics, etcetera, do it yourself products. It's much, much broader than food indeed.
And in most of these other products, thankfully, the labeling issue is of less concern because there we can indeed explore QR codes as an alternative for information on safety and other things. Most enforcement has been mentioned, has focused on western member states. I also point out in my briefing paper that, unfortunately, most of the studies to date and most of the available evidence to date have focused on the Benelux and Austria and Germany. So, indeed, it is we don't have enough evidence across the board. It's only a partial picture.
So it would be necessary to have more information on this. I do refer to certain national cases, also enforcement at the national level, but certainly more could be done there. So I acknowledge that the focus of the debate has been perhaps too much on these few member states to date. Of course, the inflation has put this practice under the spotlight, but TSCs are not new. And they have been there for a long time.
It's just because of inflation of prices that we now are, of course, more concerned with their effects. Maybe finally, on the information on the languages, yes, of course, that must be in the entry ticket of doing business in a member state. Of course, you need to have the labels in the local language. That makes sense, but it is an extra impediment. It makes it more difficult if I want to sell soda from Denmark in the Netherlands.
I will need to over sticker them, for me to be able to do so because they will not be, have not have the Dutch language on them. So it is indeed an entry tech, but it makes it more expensive and therefore maybe not worthwhile anymore to engage in this parallel trade because it's an extra cost. And, again, I see smaller retailers and wholesalers do this, but at scale, it's probably not an effective workaround. I believe these were the most.
Victoria Dascalova
And there was yep. I believe there was also a question for me. Hope I can be heard. And that, if I understood correctly, was a question about how to address the monopolistic or quite concentrated conditions in peripheral regions in France, if I understood it correctly. I must say this is not exactly my core expertise, but perhaps I can offer some remarks?
So in general, indeed, in more peripheral regions, it can be a problem. Competition can be a problem. You can have monopolies, tight oligopolies, duopolies. It's not just an issue for France. A good example is Australia.
For instance, they have similar problems as well. Now the question is what to do about it, and that's the more difficult question, I'm afraid. And there, we also hit a similar barrier as with the discussion on TC. So for instance, refusal to supply, refusal to deliver. So what competition law can do a lot, but it can police the markets.
But the fundamental premise is that the market is there, that competition law cannot redesign the structure of the market. It can control perhaps more strictly mergers and acquisitions, for example. But the system that has been chosen for an open market with free competition also puts a limit to what competition law can do. And the other aspect that I believe is also linked to our discussion in terms of the remedy that competition law can offer. We have principles in the EU.
They're also in the charter of fundamental rights, such as the right to conduct a business, the freedom of contract, right to conduct a business. So even if we may say with competition law, this market is not perfectly competitive. We have higher prices. There is some action that can be taken, but we cannot, yeah, I mean, we can take far reaching measures, but these measures need to be proportionate, need to be in line with other principles, such as these principles of freedom to conduct a business, freedom of contract. So for example, if someone refuses to supply or decides to, as might be a case in a more peripheral market, that some products are not even offered because it's more profitable to offer the more expensive product.
To what extent can a competition authority force the supply of this product? The intervention for a threshold for such a remedy is very, very high precisely because it has to be compatible with other principles such as freedom to conduct a business, article 16 of the charter, so just to put it on the table. So this is also important to remember. We can do a lot with competition, but we cannot redesign the market. Yeah.
It's also the market has to function. Maybe also industrial policy can help in that respect. For the newer members, the newer member states. I'm from such a member state. I'm from Bulgaria.
Yeah. Also, prices can be quite high. It could be one reason, could be indeed that the retail has not developed. We don't have so much modern retail that can also push against such TSCs and complain to the authorities as in the case of the Benelux with these strong retailers. But, yeah, indeed, I would also say that that is a good idea to pay attention to what is happening in the newer member states.
It's, I think, a consumer perspective, quite visible, the differences. But I'll stop here.
Christian Doleschal
Thank you very much. Are there any other comments? No. Okay. Then I get the floor also.
Thank you.
Ben van Rompuy
Mister Acharya, I still wanted to briefly address something I forgot on the price differences. Of course, there can be many reasons for a 50% premium price in one member state versus the other. There can be costs, different competitive conditions, and other barriers for this. But we also have to be careful even if we allow retailers, wholesalers, or enable them to source from wherever they want. A risk of this might be that indeed in member states where prices are now lower, the price might increase.
And, of course, in those where the prices are higher, the price might decrease. But in the end, this might therefore not be beneficial for all consumers. So that is also something to take into account. As I mentioned in the briefing paper, studies have, for instance, also shown that the same supermarket chain buying the same private label products from the same manufacturer sells it at very different prices in Belgium and the Netherlands, for instance, indicating also that it's not a given that a retailer will pass on the reduced cost to the consumer. So there's also that complication.
Yeah. So price is a very, very complicated issue, in this respect.
Christian Doleschal
Thank you very much. And now I will give the floor to the European Commission to Ms Geraldine Vargas from the DG Grow for maximum fifteen minutes.
Geraldine Vargas
Thank you. Thank you, Mr. Chairman, for giving me the floor. Thank you for this committee to organize this very interesting discussion on TSCs. I mean, the previous speaker has just mentioned it. This is not an easy issue.
It's complicated. And I think it's very important to benefit from the views expressed in this committee, and also from the insight developments from the experts. So thank you very much for this occasion. That was my first comment. My second comment would be that not a long time ago, EVP Sejeuner came to this committee for a discussion on the single market.
And he had some questions on the territorial supply constraints. And I think he, well, to report what he said, he emphasized the willingness of the commission to address TSCs and also the need to deal with this issue in a cautious way. So these were my first two remarks. So if you can go to the next slide, please. I would like first to say that many of you know that, in the single market strategy, which was published last year in May, the commission indicated that it would like to address to identify tools to address TSCs.
So what is the purpose of the single market strategy? It is an action plan to create a more simple and seamless single market, and priority in this action plan is given to the Terrible 10, the most harmful single market obstacles, and TSEs are part of this Terrible 10. What are the TSEs? This has already been mentioned. How did the commission define TSEs?
So TSCs are nonregulatory barriers set by private operators, large manufacturers, that fragment the single market, making it very difficult or impossible for retailers to buy products in one member state and resell them in another. This cross-border business is to the detriment of consumers in terms of choice and prices. And our focus is on daily consumer goods because that is what is important for consumers. We have heard about food products, and we have heard about shampoo, detergents, grocery shopping. What does the commission announce in the single market strategy?
That it would develop tools to act against unjustified territorial supply constraints to cover situations beyond those captured by competition law, such as unilateral practices of large manufacturers. The initiative is scheduled for the end of this year. So, next slide, please. So, why did TSEs come so much on the forefront? Well, because of inflation, because of soaring consumer prices.
There was a willingness from the government to act on any element which would contribute to raising consumer pricing. And in July, this committee organized a public hearing on the rise of consumer prices in the internal market, and the commission had the honor to participate in this hearing and mention territorial supply constraints. What do we consider? We consider the wholesale price. Why?
Because it is a component of consumer pricing. But as has been mentioned by the experts, consumer pricing depends on many other factors such as VAT and also the price of rent. Even in the same member states, even in the same city, prices may be different because of the location of the shop. So TSEs are an element of consumer pricing, but what we need to consider are wholesale prices, which are, of course, independent from the elements I've just mentioned. In 2020, the Commission published a study which confirmed that TSEs apply in the single market, and they contribute to significant price differences for products consumers use daily.
The commission has tools to act against territorial supply constraints. That has also been said, and competition law is our only tool today to act against territorial supply constraints, and the Commission has been using this tool. It has been using this tool in two milestone cases, ABINBEV in 2019 and Mondelez in 2024, and those companies have been fined heavily because it was evidence that they have fragmented the single market to maintain different pricing in different member states. Competition law is an efficient tool, we have heard that, but we have heard about gaps. I would not mention talk about gaps, but more that the competition law is restricted by its own legal basis.
And in this situation, we have heard it, it's anti competitive agreement and abuse of dominant position on the market. Several member states and also MEPs have called to address all territorial supply constraints beyond the situations captured by competition law. And in September 2024, the commission launched a fact-finding exercise with member states in the single market enforcement task force and also organized stakeholder dialogue. If I can to the next slide, please. So we carried out this fact-finding with member states.
We sent a questionnaire to the member states. And what did we learn? Well, on this slide, you have what we learned. I'm not going to comment on this one, which relates to documents that are in the annex to this presentation. But we managed to identify, if I can, you could go to the next slide, please, that the most reported practices by member states were differentiation in packaging and labeling, refusal to supply, and unfair price differentiation.
We have heard this from the experts as well. So these were the three TSEs mentioned more often by member states as being applied on the markets. We have also asked member states about justification, and we had very few feedback on justification, so it was very interesting that mister Van Rugby came again on this issue. And we also organized a stakeholder dialogue to hear the views of the most relevant stakeholders, retailers, manufacturers, and consumers. This was also attended by many national authorities.
Next slide, please. So the fact-finding confirmed the need to address this issue because retailers face such practices outside situations captured by competition law, because consumers are limited in their choice of products and face price disparities depending on where they purchase the daily consumer goods. But also, what this fact-finding revealed was that there was a need for a careful assessment of the situation in all its aspects. Such practices that have been said may be justified. They may be justified by national regulatory requirements like labeling.
We have talked a lot about labeling, but may I, if I refer to what I've just said, labeling is only one of the territorial supply constraints. There are others. So there may be a lot of discussions on labeling, but there are other practices fragmenting the single market. So that's all this background information fed into the single market strategy, and that's why we have this commitment of the commission in the single market strategy to address this issue. If I can have the next slide, please.
So what do we do at commission level to implement this action announced in the single market strategy? Well, we have published a call for evidence. The deadline to reply is on the 24th of this month. We have encouraged stakeholders and all those interested to reply to this call for evidence. We are going to launch a public consultation very shortly, which will allow us to gather even more viewpoints.
We are also carrying out targeted surveys and in-depth interviews. We will organize a validation workshop with stakeholders in the third quarter of this year, and we have a change of views with member states in different fora, including the European Competition Network. We are also supported in this exercise by the Joint Research Centre of the Commission, which is carrying out an economic study on all the impact actions on TSEs may have. We have heard that there was a need to really have a broad view on TSEs, and we do hope that this economic analysis will help us have this broad view. Can I have the next slide, please?
I would like to mention that in the call for evidence, the commission has put forward possible policy options. I would like to emphasize that we are open to any views expressed as regards other options. But something I would like to mention is that we need to have an action going beyond competition law. So this is why it should be a single market action. And we have proposed two non regulatory actions, a self regulatory action such as a code of conduct where stakeholders would themselves identify practices hampering the sourcing of products and the possible justification, and would deal with this issue through different mechanisms.
We have an option two, which is also nonregulatory, which would be guidelines designed by the commission. But of course, these actions would be non regulatory, so non binding. We have also identified two legislative options. One, we have heard a lot about today, which is on economic dependence. We have also heard that was a difficult tool to handle because it requires case by case analysis again.
I mean, a bit like competition law where everywhere many people complain that it takes too long. But, I mean, but this is a tool we consider. And, also, I would say, to take on board what missus Dasascova has mentioned, something which would be a bit in the taking as a precedent, the unfair trading practices directive with identification of unfair practices, I mean, TSCs, which would be prohibited together with possible justification. So we have proposed four instruments, two non regulatory and two regulatory, and we do hope that we will have a lot of feedback to enlighten the pros and cons of all these policy options. I think I will stop here.
And, of course, I am ready to reply to any questions if I can. And I would like to thank the experts again. Thank you.
Christian Doleschal
Thank you very much. Are there any comments from the colleagues? No? Okay. Then I will thank all the experts for your interesting discussion today, and I will inform you that the PowerPoint presentation slides will be published online on the Imco web page shortly.
And I will come to the next point. We have coordinators meeting in fifteen minutes, and we have a vote at 12:30, but not in this room, so, in Room 2 Q 2. And, we make a break until then. Thanks a lot, and see you later. Thank you very much.
Are we here at 13? At 01:00, we are also in 202.
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