Anger grows over advertising barriers

Date: 12/11/1998

By Peter Chapman

LESS than two months from now, the EU will pull off its most impressive trick to date when the euro replaces the national currencies in 11 member states.

For its supporters, the euro is a powerful symbol of what Europe can do when it works together to build the single market. But many question why, if the EU can manage this enormous feat of cooperation, it appears to find it so difficult to make progress in other seemingly less tricky areas.

Perhaps the most glaring example of the extent to which the Union's single market is, in some cases, more myth than reality is the advertising sector.

In theory, it should allow businesses to advertise their goods across the EU with the minimum of fuss and red tape. If an advertising campaign or marketing tools of the trade such as discounting are legal in one member state, say critics, then surely the internal market should mean that a company can use them elsewhere too.

But that is not always the case. Instead, a myriad of national 'commercial communications' rules across the Union are thwarting businesses when they try to market their wares in other member states.

Three high-profile cases have grabbed the headlines in the national media in recent months, although Commission officials admit they are looking at many similar complaints.

One of the cases at the centre of controversy is the German government's decision to outlaw Dutch record company PolyGram's special offers such as 'three for the price of two'.

The second is the French Loi Evin, which has been used to block the advertising of alcohol drinks on billboards at sports matches outside France to prevent them being seen on television at home.

The third centres on the Greek government's ban on advertising toys on television, which has sparked fury among foreign toy firms claiming that the measure discriminates against them.

The problem with all these national restrictions is that although they may breach EU single market laws, the European Commission is not doing a very good job in getting them overturned.

Although it finally announced plans to take legal action over the PolyGram case early this year, the other two cases have dragged on for years since industry groups and companies first lodged complaints with officials in Mario Monti's Directorate-General for the single market (DGXV).

Even though it sent a warning letter to France nearly two years ago over Loi Evin, the Commission is still a long way from launching court action against Paris.

A perplexed executive from drinks group Bacardi-Martini complained at a recent Brussels conference that the legal fees involved in keeping up the fight against rules such as the Loi Evin could be too much for even the deep pockets of the multinationals. What hope of victory, he asked, did a small company have?

Similar delays have dogged attempts to get the Greek toy advertising ban overturned, with the Commission repeatedly failing to take action against Athens despite complaints from toy exporters in other EU member states that the legislation has cut their sales to Greece by 40%. The Commission, in what some see as a fudge, announced that it would carry out a study of the effect of TV advertising on children.

Under current rules, it can take action if laws or regulations are deemed to fail a 'proportionality' test. This means they should be proportionate to their stated aim - for example, of protecting consumers - and should not discriminate against foreign firms.

Industry lawyers who have toiled in vain to get the Commission to accept their complaints are quick to defend Mario Monti and his single market officials.

But they point to problems elsewhere in the institution, claiming that the biggest stumbling block to legal action is the lack of political will at the top of the institution to stop errant member states from legislating in areas that affect consumer and health policy in the wake of the BSE affair.

At the same time, they claim, the Commission's legal service, which is proud of its track record in winning cases it takes to the European Courts, is reluctant to take action where it doesn't believe it has a cast iron case. The institution's lawyers apparently fear that complaints brought under the relatively untried or tested articles of the EU treaty on the free movement of services will be rejected.

In the face of such caution, Dutch Liberal MEP Jessica Larive is set to launch the most strident campaign to date for the Commission to ring the changes on commercial communications before she leaves the European Parliament next year.

Larive plans to throw the spotlight on the Commission's foot dragging when she produces a report on the Parliament's response to recent attempts by Monti's officials to update the system.

The linchpin of those reforms was the establishment of a committee of member state experts to examine legislation governing commercial communications across the EU.

The experts are currently focusing their attention on problem areas, rather than on specific complaints from angry firms, and examining possible cases where 'mutual recognition' of national laws might be a better way to tackle the problem than harmonisation.

They are also tasked with considering the difficult question of the extent to which national rules can be deemed 'proportionate' or not, although the Commission has the final say.

But Larive argues that these reforms are not enough, on their own, to overcome the flaws in the system. She says the process by which the Commission decides whether or not to take legal action against member states over alleged breaches of Union single market rules is still riddled with bureaucracy - and is totally untransparent.

Referring to the section of the EU treaty which governs breaches of single market legislation, she insists: "The whole Article 169 issue is, to my mind, the biggest democratic deficit we have got.

I am pushing for us to tackle it.

"It is not just with commercial communications, though that is a scandalous example of how complaints should not be treated."

Top of the Dutch MEP's agenda when she unveils her report to colleagues on the Parliament's economic and monetary affairs committee later this month will be a call for the EU to remove a get-out clause in the Commission's latest commercial communications policy which, she argues, allows member states to erect barriers for reasons of "social and cultural" differences.

"If there is a good reason for a rule, then it should be tested objectively. But this is so vague that it is not a very good criterion. It is an open door," she argues. "Where would the single market be if we were unable to take legal action against member states in the case of social or cultural differences?"

Larive will also insist on the need for concrete timetables for the Commission to handle complaints, arguing that it is no longer acceptable for cases to drag on seemingly forever. In addition, she will call on industry to set up a register of complaints, which would probably be published on the Internet, in an attempt to prevent the Commission from hiding the extent of the problem from the outside world.

The Dutch MEP also wants the head of the Commission's legal service to be held publicly accountable for decisions by the institution not to launch court action against a member state in a particular case.

If Larive's proposals are accepted, the institution's top lawyer would be hauled before the European Parliament's legal affairs committee for a public grilling.

"As far as I am concerned, the legal advice the service gives is not transparent," she complains, insisting that the expert committee set up by the Commission earlier this year should also be opened up to allow an industry representative to take part. "The proportionality test is going to be done by this committee. That is why it should be transparent and democratic."

However, Larive admits it may be difficult for rival firms to agree on one suitable spokesperson to attend these key meetings, adding: "The ball is in their court."

Major feature on commercial communications.