Selected procurement indicators, 2006-08

	Value of procurement published in the OJ as a percentage of GDP	Value of procurement published in the OJ as a percentage of total public procurement
Austria	1.7	1.7	2.4	9.7	9.2	12.5
Belgium	2.4	3.2	3.6	16.3	21.7	23.8
Bulgaria	..	8.5	8.7	..	51.9	52.2
Cyprus	4.4	5.1	4.6	37.1	49.0	44.5
Czech Republic	5.2	4.1	5.3	19.4	16.2	21.0
Denmark	3.0	3.2	3.0	20.2	21.6	19.5
Estonia	7.3	7.2	8.2	42.8	42.3	45.3
Finland	3.1	3.6	3.9	19.0	22.1	23.6
France	3.4	3.4	3.7	19.7	19.4	21.1
Germany	1.7	1.1	1.2	10.2	6.8	7.1
Greece	5.6	3.5	2.8	59.9	36.4	30.0
Hungary	6.8	4.5	5.2	31.7	20.8	26.0
Ireland	3.3	3.4	2.5	26.1	24.3	16.0
Italy	3.0	2.3	2.3	21.1	16.5	16.4
Latvia	13.8	12.3	9.6	82.9	77.1	61.1
Lithuania	4.2	4.2	3.6	25.3	23.8	20.8
Table III.11 (cont'd)
Luxembourg	1.4	1.2	1.3	10.5	9.0	9.1
Malta	1.8	2.0	1.2	12.0	14.5	8.0
Netherlands	2.3	1.8	1.9	9.1	7.0	7.1
Poland	5.2	5.8	7.2	28.3	32.0	38.3
Portugal	1.9	1.7	2.5	12.4	10.7	14.9
Romania	..	7.3	7.4	..	33.6	36.9
Slovakia	3.1	3.6	3.7	11.9	14.1	15.2
Slovenia	5.0	6.6	5.1	25.9	43.4	32.8
Spain	4.2	4.1	3.6	28.9	26.7	23.9
Sweden	3.0	3.0	3.5	16.9	16.8	18.8
United Kingdom	4.6	3.9	4.4	25.4	22.3	23.5
Total	..	3.0	3.1	..	17.9	18.2

.. Not available.

Source: Eurostat (undated), Public procurement advertised in the Official Journal. Viewed at: http://appsso.eurostat. ec.europa.eu/nui/setupModifyTableLayout.do.

193. After a contract is awarded, contracting authorities are required topost an award notice on the TED website. There is an automatic reminder system to EU contracting authorities to ensure full compliance with the relevant publication obligations. According to the authorities, in 2008, 85% of the notices of intended procurement were followed by a contract award notice.[213] Although it is difficult to identify the exact nationality of successful suppliers/service providers, the Commission started to establish a methodology to monitor cross-border procurement, including from non-EU origin.[214] The authorities provide that, in 2007 (the latest year for which data are available), contracts of a total value of?12 billion (3.3% of total above-threshold procurement, and 3.9% of total procurement open to GPA partners) were awarded to suppliers originating from non-EU GPA signatories.

194. The EU is a party to the WTO Government Procurement Agreement (GPA), and the 27 EU member States must comply with the EU's obligations under the GPA. The GPA applies to procurement contracts of value above certain specified thresholds. As required by the GPA, thresholds in national currencies are to be notified by parties every two years.[215] The EU notified its GPA thresholds for 2010-11[216], which are the same as those under the EU procurement Directives. Commission Regulation (EC) No. 1177/2009 stipulates that, one of the objectives of Directives 2004/17/EC and 2004/18/EC is to allow the contracting entities and the contracting authorities to comply with the obligation laid down in the GPA. Thus, the thresholds under those Directives should be aligned to correspond to the euro equivalents, rounded down to the nearest thousand, of the thresholds set out in the GPA.[217]

195. Although the thresholds are the same, the coverage of the GPA is different from that of the Directives. The GPA covers entities, goods, and services, including construction services, as specified in EU’s Appendix I. In 2007, out of total? 367.2billion above-threshold procurement in the EU,? 309.6 billion (84%) was open to GPA partners.[218]

196. Article XX of the GPA requires each party to provide a mechanism by which a supplier may challenge alleged breaches of the GPA before an independent and impartial review body. These procedures must meet the minimum standards of Article XX regarding the nature of the review body, the procedures for the hearing, and the remedies available.

197. The Remedies Directive, Directive 2007/66/EC, which supplemented and amended the Directives 89/665/EC and 92/13/EC, introduced two features. First, following an award decision for a public contract, contracting authorities must wait at least ten days before signing a contract. This "standstill period" gives bidders time to examine the decision and decide whether to initiate a review procedure. If a review procedure is initiated, the procurement process is automatically suspended until the review body reaches a decision. Second, more stringent rules were stipulated against illegal direct award of public contracts. In both cases, national courts or review bodies may nullify signed contracts if these rules are not followed. Member States had until December 2009 to bring their legislation into compliance with this Directive. By March 2011, all Member States but one had transposed the Directive. The Commission is currently checking the implementing measures communicated by member States.

198. The rules governing the EU government procurement market are designed to ensure an open and transparent government procurement system. Nonetheless, suppliers from third countries do not have an automatic and enforceable right to participate in the EU procurement market, unless "an international agreement concluded by the EU in the field of public procurement grants them the right to do so (GPA or bilateral agreements with the EU)".[219] In this regard, participation in the GPA provides an enforceable right to the EU procurement market covered by the EU’s commitments under the GPA.

199. EU procurement Directives do not apply to contracts below thresholds, and to certain exempted sectors (such as the telecommunications and broadcasting sectors).[220] Public procurement that is not directly covered by EU legislation is covered by national rules. Member States are understood to have discretionary authority in such cases to allow the participation of non-EU bidders in their procurement market, and suppliers from third countries have no enforceable right. For example, press reports suggested some foreign firms were excluded from bidding for UK public sector IT contracts.[221] The EU considers that procurement below thresholds does not need to follow the detailed rules of the EU procurement Directives; nevertheless the general principles of EU law (transparency, equal treatment and non-discrimination) must be respected.

200. The EU strongly supports the accession of new members to the GPA, with long-term strategy to turn the GPA into a multilateral agreement.[222] At the same time, the EU is keen on negotiating bilateral agreements covering government procurement. The EU has a key objective to contribute through its bilateral trade relations to the setting of effective, modern, and international procurement principles, and to substantially liberalize public procurement markets. When negotiating with developing countries, the EU's main emphasis is on encouraging transparency and the creation/strengthening of regional procurement markets. The EU now includes substantial chapters on public procurement in all its bilateral trade agreements.[223] So far, it has such agreements with CARIFORUM, Central America, Chile, Colombia, Iraq, Mexico, Peru, South Korea, and Switzerland. The EU stated that it is firmly committed to ensuring eventual GPA accession by its bilateral partners, and that it works to ensure the procurement chapter in its bilateral agreements is consistent with the GPA. When negotiating with partners that are already GPA signatories, the bilateral agreements are intended to deepen the commitments undertaken in the GPA framework, either by enhancing the rules, or by broadening the market access commitments, or both.

201. The EU is an important player in the ongoing renegotiation of the text and coverage commitments of the GPA. The text was provisionally agreed in 2006, but cannot be brought into force until negotiations on the coverage of the Agreement have also been concluded. The present negotiation includes the launch of a new set of work programmes in the WTO Committee on Government Procurement, which will explore the interaction of the GPA with key social considerations including the access to procurement markets by small and medium-sized enterprises (SMEs), and the implementation of "green" procurement.[224] The EU reaffirms its commitment to the rapid completion of the GPA negotiations, which would increase coverage of the Agreement, ultimately leading to the expansion of the GPA membership.

(b) E-procurement

202. To modernize and simplify procurement procedures and in accordance with the e‑Government transition in some member States, the Commission adopted an Action Plan for e‑Procurement in 2004.[225] However, the Commission's evaluation suggested that less than 5% of total procurement budgets were awarded through electronic systems in 2010. The EU considered that e-procurement has the potential to yield important improvements in the efficiency of individual purchases, the overall administration of public procurement and the functioning of the markets for government contracts.[226] Thus, the Commission issued its Green Paper on expanding the use of e-procurement in the EU in October 2010.[227]

(c) Other objectives of the public procurement regime

203. Although the principal objective of government procurement in the EU is to ensure the best value for money, the 2004 Directives also mention the possibilities of reflecting social and environmental considerations in technical specifications, selection and award criteria, as well as contract performance clauses.[228] At the same time, member States have national legislation provisions, intended to achieve social and environmental objectives through the public procurement system. Currently, a key challenge for the EU (as for other GPA parties) is to find ways to accord due weight to such objectives consistent with its respective policy interests and goals while ensuring that their implementation does not undermine the GPA's core principles of non-discrimination, transparency, and fair procedures.[229]

204. To illustrate the interplay of these issues, below-threshold procurement in the EU is regulated by national legislation, which must follow the basic principles of the Treaty on the Functioning of the European Union (transparency, non-discrimination, and equal treatment). The procurement Directives stipulate detailed rules/methods for estimating the value of contracts[230], and an artificial split-up into smaller lots to circumvent the Directive represents an infringement.[231] Nonetheless, the contracting authorities may award contracts in lots with a view to accommodating social considerations, or promoting participation of SMEs in procurement, provided that the procurement requirement is not subdivided to avoid the application of the EU Directives.[232]

205. In this connection, to promote SMEs participation in the public procurement market, contracting authorities in some member States have suggested to award a specific call for tender into composite lots. One example is the 2006 Code on Public Procurement in France. The same Code also stipulated other measures to facilitate SMEs: bidders may be asked to indicate in their offers whether they intend to subcontract to third parties including SMEs (Article 48); and the economic monitoring mechanism within the Ministry of Economy, Finance and Industry must report the number of contracts awarded to SMEs (Articles 130 and 131). [233]

206. In Germany, many states have special laws and regulations to support SMEs; under the two main methods contracting authorities may split contract into lots; and a clause may be included in contract conditions requiring contractors to subcontract to SMEs.

207. Green public procurement (GPP) is "a process whereby public authorities seek to procure goods, services and works with a reduced environmental impact throughout their life cycle when compared to goods, services and works with the same primary function that would otherwise be procured".[234] The 2004 Directives clarified how public procurement can include environmental considerations, while national legislation in some member States also defined national criteria and approaches to GPP. Some have expressed the view that the EU procurement Directives lack flexibility, and tend to constrain member States' ability to achieve their social/environmental objectives through public procurement.

208. In July 2008, the Commission issued a communication "Public procurement for a better environment",[235] which proposed that 50% of all public tendering procedure should be green by 2010, where "green" means compliant with core GPP criteria set out by the Commission in the Communication. The Communication also provided guidance on how to reduce the environmental impact caused by public sector consumption, and how to use GPP to stimulate innovation in environmental technologies, products, and services. The EU stated that the GPP is a voluntary policy.[236]

(d) Future directions

209. In 2010, the Commission issued a Communication announcing a future review of its public procurement regime.[237] The Commission finds that as the interaction between EU rules and national rules can be complex, there is a need for simplification of procedures.[238] It seems that the levels of participation by firms from other member States in procurement procedures remain low compared to the import penetration in the private sector, indicating a potential for more cross-border trade. The Commission has announced its intention to prepare a legislative proposal by the end of 2012, with a view to simplifying and updating the European rules to make the award of contracts more flexible and to enable public contracts to be put to better use in support of other policies. There is recognition, however, that legislative changes need to be consistent with the EU's international commitments, notably the GPA, in particular regarding the thresholds for applying the EU public procurement rules. The Commission is currently undertaking consultations and an economic impact evaluation of the current EU procurement directives, as well as an impact assessment, examining the various possible policy options, taking into consideration the implementation of the EU's international commitments, such as the GPA.[239]

210. As noted, the policy challenges are to be considered not only in the context of the EU's own Procurement Guidelines but also in the Future Work Programmes of the Agreement on Government Procurement (after the revised GPA text comes into force), in which the EU will play a significant role. This is an important context in which the EU will be able to provide input of its own experience with green and social and "other" objectives in the procurement process.

(v) Competition policy

211. Competition policy in the European Union remains a central pillar of the Single Market, protecting consumers from abusive practices and ensuring that entry to particular lines of business or geographic localities is not deterred by anti-competitive practices. Over time, competition policy in the EU has been progressively refined through developments such as the "more economic approach", which have enhanced the relevant authorities' focus on the economic effects of changes in market structures and of companies' behaviours in such markets. Arguably, this has brought about a higher level of convergence/harmonization with the competition policies of major economic partners, thereby reducing (though not eliminating) the scope for conflicts of jurisdiction with those partners and enhancing possibilities for beneficial economic integration.

(a) Legislative framework

212. As outlined in the previous Review of the EU, Council Regulation No. 1/2003 implements the rules on competition laid down by Articles 101 and 102 of the Treaty on the Functioning of the European Union.[240] Article 101 prohibits anti-competitive agreements between undertakings that "may affect trade between Member States"[241], except for those beneficial, on balance, to economic efficiency and consumers. Article 102 prohibits, as incompatible with the internal market, the abuse of a dominant position, without exception.

213. Article 101 does not apply to agreements of minor importance (de minimis) where the aggregate market share of the undertakings is small (for example, less than 10% for competitors, or 15% for non-competitors). Also, it does not apply to agreements or practices in the insurance sector, and the motor vehicle business. Furthermore, block exemptions apply automatically in case of certain restrictive agreements, both vertical and horizontal, if they tend to improve economic efficiency. For block exemptions to apply to a given agreement, the parties' combined market shares must be below a level (depending on the type of block exemption) at which it can be assumed that the parties do not have market power. Moreover, in order to benefit from block exemption, an agreement must not contain "hardcore restrictions" of competition such as price fixing, output limitation or market sharing. Where an agreement falling under a block exemption restricts competition, the Commission and/or the competition authorities of member States may withdraw the benefits of these exemptions. The Commission did not withdraw these benefits during the Review period (2009-2011).

214. The main regulation governing merger control at the EU level is Council Regulation No. 139/2004, 20 January 2004 (the Merger Regulation), implemented by Commission Regulation No. 802/2004, 7 April 2004. Under the Merger Regulation, all concentrations with a "Community dimension" are subject to exclusive review by the European Commission prior to their implementation. These are mergers where the parties have a combined worldwide turnover of?5 billion and each party has a Community-wide turnover of?250 million. Mergers with a combined worldwide turnover of?2.5 billion are also examined by the Commission if: (i) the parties' combined turnover exceeds?100 million in at least three EU member States; (ii) each party has a turnover of?25 million in the same three EU member States; and (iii) the individual Community-wide turnover of each party exceeds?100 million. If these thresholds are not met, mergers may be subject to review under national laws of the member States.

215. The aim of the Merger Regulation is to examine whether a concentration would significantly impede effective competition, notably through the creation or strengthening of a dominant position. In such cases, the concentration is prohibited, or conditionally approved if the parties provide remedies to fix the identified problem. All other mergers must be unconditionally approved. In accordance with the stand-still obligation, no merger can be consummated unless approved by the Commission. Most mergers are approved within the initial (first phase) period, without the need for an in-depth (second phase) investigation. In 2010, there were 274 merger notifications to the Commission (up from 259 in 2009), of which 253 were unconditionally approved in the first phase, 14 were conditionally approved in the first phase, 3 were approved after a second-phase investigation, and 4 were withdrawn.[242] No merger was prohibited.

(b) Enforcement procedures

216. The responsibility for public enforcement of competition policy across the EU is shared by the European Commission and the national competition authorities of the member States. The system that has evolved for allocation of enforcement work between these two levels of authority is itself an interesting illustration of policy design and application within a multi-level system of governance. Overall, significant enforcement responsibility lies with the national authorities to the extent that this is deemed consistent with effective policy administration and the sound administration of the Single Market.

217. The EU established its European Competition Network (ECN) to facilitate cooperation among the responsible authorities and enhance the efficiency of policy application within the system of shared jurisdiction. Within the ECN, the Commission and member States' competition authorities share information and attempt to agree on the allocation of cases. Cases are to be dealt with by a single competition authority as often as possible. Where an agreement or practice substantially affects competition in more than one member State, the Network members seek to ensure that the case is assigned to the authority which is well placed to deal with it. If more than three Member States are substantially affected by an agreement or practice, the Commission will be particularly well placed to handle the case.[243]

218. In its 2009 Report on the functioning of the enforcement system after the first five years, the Commission noted that the challenge of boosting enforcement of the EU competition rules, and ensuring their consistent and coherent application, had been largely achieved. It indicated that enforcement of the EU competition rules had greatly increased since the entry into force of Council Regulation 1/2003. Between May 2004 and March 2009, more than 1,000 cases were pursued on the basis of the EU competition rules involving a wide variety of sectors. Discussions on case allocation arose in very few cases and was resolved swiftly.[244]

219. Nevertheless, the Commission maintains its authority to enforce relevant provisions of the Treaty directly, and is an important player in the overall system of competition law enforcement. In particular, the Commission may conduct investigations and take decisions either following a complaint or on its own initiative, when it suspects there may be a violation of the Treaty concerning competition policy.

220. The Commission may impose fines and/or periodic penalty payments. The Court of Justice reviews the Commission’s activities and may rule against the Commission’s decisions. Since 2009, the Court has ruled against the Commission's decisions in fines and in the rejection of the complaint in some cases. The Commission must, before taking a decision, consult the Advisory Committee on Restrictive Practices and Dominant Positions, which is made up of representatives of Member States’ competition authorities.

(c) Major recent developments

221. With regard to substantive aspects of policy implementation, a major development in the EU since the 1990s has been the progressive implementation of a "more economics-based approach" in the enforcement of all aspects of competition law. While this focused initially on cases and enforcement methodologies relating to Article 101 and mergers and acquisitions, it has now been extended to the area of dominant conduct, with the issuance of the Commission's Guidance paper on the enforcement of Article 102 in 2009.[245] An insistence on substantive analysis is now pervasive in most, if not all, aspects of the Commission's antitrust work. Courts adjudicating competition law cases in the EU are also moving away from formalistic applications even with respect to the market integration standard. An important consequence of this trend has been to move the EU closer to the substantive approaches to antitrust enforcement of some of its major trading partners, potentially reducing the scope for inter-jurisdictional conflicts in this policy area.[246]

222. The EU's competition policy regime also covers state aid, which, by favouring certain firms over their competitors, may distort competition (section (3)(ii)).

223. During the period of the global financial crisis, measures taken by a number of the EU member States have limited the application of competition policy in the financial services sector (Chapter IV(1)(ii)).These measures have been criticized by some in that they may perpetuate rather than relieve the underlying sources of instability, or have other undesirable effects. [247] It has also been argued that much experience shows the health of financial and other markets is unlikely to be well served by the suspension, in times of economic distress, of basic rules to prevent anti-competitive practices.[248] The Commission agreed with these comments.

224. An important focus of the Commission's enforcement efforts in recent times has been on the pharmaceutical industry, which relies heavily on intellectual property rights. In January 2008, the EU launched a major inquiry to examine why fewer new medicines were being brought to market and why generic entry seemed to be delayed in some cases. The inquiry found that citizens waited more than seven months after patent expiry for cheaper generic medicines, costing them 20% extra in spending. The delayed market entry of generic medicines could be attributed to both the regulatory framework,[249] and certain companies' behaviours. The inquiry showed that originator companies used a variety of instruments to protect the commercial life of their products without generic entry.[250] In particular, 22% of the patent settlements were potentially problematic, relating to medicines worth more than?200 million. The EU considered that these instruments, although can be fully legitimate, may under certain circumstances violate the European competition law. In 2010, the Commission carried out a monitoring exercise, focusing on patent settlements concluded in the pharmaceutical sector. This exercise found that compared with 2008, the number of settlements increased while the number of potentially problematic patent settlements decreased (down to 10% and the amount of money covered by these settlements was down to? 1 million).[251] The decrease of the latter indicates an increased awareness of the industry that settlement agreements may attract the scrutiny of the competition law.

(d) International cooperation

225. Apart from the above-noted internal cooperation mechanisms (e.g. the ECN), the European Union is also a leading player in inter-jurisdictional cooperation on competition law in important fora including: the International Competition Network (ICN); the UNCTAD Intergovernmental Group of Experts on Competition Policy; and the OECD Competition Committee. The EU considered that these multilateral fora provide important platforms to advocate principles of sound competition enforcement and to develop a competition culture globally. This will enable competition authorities worldwide to respond more efficiently to cases involving multiple jurisdiction.

226. The EU includes competition policy in a number of bilateral agreements. Since 2008, the EU has signed bilateral trade agreement with Colombia and Peru, idem with the Andean countries, and an EPA with Caribbean that contain a chapter on competition. Regarding the EPA with Central Africa, only Cameroon signed it and a full EPA is still under negotiation; negotiations on a competition chapter started in 2008; however, there have not been any discussions on this topic since then.

(vi) Intellectual property rights

227. Since its previous Trade Policy Review in 2009, the EU has continued to develop its IPR protection in response to the changing economic and technical environment, particularly in the areas of copyright, patent, trademarks, geographical indications (GIs), and enforcement. During the period under review, major reforms on patents were under way, and the EU lowered the registration cost for Community trademarks, strengthened IPR enforcement by setting up an EU Observatory on Counterfeiting and Piracy, and initiated a review of its Customs Regulations on IPR enforcement. Creative industries in the EU contribute 3.3% of its GDP (2006) and 3% of total employment (2008). In 2008, 6.7 million people worked in the creative industries in the EU-27, and creative goods accounted for 4.3% of extra-EU exports.[252]

228. The adoption of the Lisbon Treaty marked an important step forward for the further development of a truly EU-wide IPR regime. It inserts an IP-specific provision. Article 118 of the Treaty on the Functioning of the European Union (TFEU) stipulates that measures shall be established "for the creation of European intellectual property rights to provide uniform protection of intellectual property rights throughout the Union and for the setting up of centralised Union-wide authorisation, coordination and supervision arrangements".

229. The IPR regime in the EU is governed both by EU legislation and legislation in member States. The EU has an extensive body of intellectual property legislation (Table AIII.2). Member States' legislation implements and complements, where appropriate, EU legislation and commitments under international agreements. The EU is an observer to the World Intellectual Property Organization (WIPO), while its member States are WIPO members. In December 2009, the EU ratified the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.

230. The EU has a regime of regional exhaustion, under which parallel imports from third countries are not allowed, while parallel imports within the EU are permitted.

(a) Copyright and related rights

231. Copyright-dependent industries play an important role in the EU economy. A WIPO study on the contribution of copyright industries to GDP and employment in a number of countries, including some EU member States, found that these industries represent a dynamic sector that, on average, grows faster than the rest of the economy (Table III.12).[253] Some other studies found that in the EU and some EU member States, the contribution of copyright industries to GDP varies from 2.6% to 6.9%, and the contribution to employment varies from 3% to 6.5%.[254] However, as the methodologies of the studies vary, their results are not comparable.

232. Following an impact assessment study, in July 2008, the Commission adopted a proposal to amend Directive 2006/116/EC, i.e. to extend the term of protection for performers and producers of sound recordings, from 50 years to 95 years. According to the EU, this extension would bring performers’ protection closer to that given to authors (life plus 70 years), and this would not have a negative impact on prices.[255] The EU provided that the proposal is still pending before the Council, but may be adopted in 2011.

Table III.12