Marketing dispute escalates as Germans defend national rules

Date: 28/01/1999

By Peter Chapman

GERMANY moved a step closer to a legal battle with the European Commission this week by rejecting claims that its tough national marketing laws breach EU rules governing the free movement of goods.

Bonn has told Internal Market Commissioner Mario Monti that it will not amend the legislation at the centre of the dispute, insisting that his officials have got their facts wrong.

Its defiant stand looks set to spark legal action in the European Court of Justice, following Commission warnings that the rules are illegal under the EU's single market rules.

Commission officials argue German legislation, which bans the use of special offers such as 'two for the price of one' deals, discriminate against foreign firms.

They say this has driven companies such as the Netherlands-based PolyGram, which fell foul of the law when it launched a record club in Germany, out of the market because they need to use banned 'innovative' techniques to break the stranglehold of established German rivals such as Bertelsmann. They also argue the options open to companies selling products such as CDs are limited because they cannot compete on quality.

But Bonn has categorically rejected this. “Our laws have a prohibition for all participants - from abroad or not. There is no discrimination. There is no law against competing on price - that is our strongest point,” said one diplomat.

Germany has some of the toughest rules in the EU on marketing. But it points to previous ECJ judgements upholding the right of member states to set tougher rules than elsewhere.

Bonn is pushing for harmonisation of rules in order to avoid the problems caused by the current wide differences in rules across the Union.

But this is being resisted by most other EU governments and industry groups which claim harmonisation would add millions of euro to companies' costs.