Dear Subscriber,

Welcome to the May 03 issue of K-Zine, Kilroys Solicitors e-briefings for business™ from an Irish and European perspective.

We look at some important new legislation, introduced in the past two months with significant implications for businesses in Ireland including the establishment of the new Irish Financial Services Regulatory Authority, the new Data Protection Act, changes to the Transfer of Undertakings Regulations and the new VAT rules on the supply on digitised products and services over the Internet.

We also comment on the Competition Law implications of price fixing, recent legal developments in the Irish telecommunications sector as well as the latest EU Commission Report on EU car prices.

Kind regards,
Kevin O'Brien
Financial Services
The Irish Financial Services Regulatory Authority is established
Data Protection
 New legislation introduced that significantly updates Irish Data Protection law with implications for large and medium sized Irish businesses
Employment Law
 Changes have been introduced to the Transfer of Undertakings Regulations, which have implications for anyone purchasing a business or contemplating a merger in Ireland
E-Business
 New VAT rules to apply from the 1st July 2003 on the supply of digitised products and services over the Internet
Competition Law
 Resale price maintenance/price fixing - the Competition Law implications
Telecommunications
 Some recent legal developments in the telecommunications sector in Ireland
Motor
 EU Commission issues Report on EU car prices

 
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May 2003 - The Irish Financial Services Regulatory Authority is established

On the 1st May 2003 the Irish Financial Services Authority ("IFSRA") was established as the new regulatory authority for the financial services sector in Ireland

The IFSRA is a distinct component of the new Central Bank of Ireland and Financial Services Authority of Ireland ("CBIFSA") with responsibility for the regulation of all aspects of the financial services sector, including banks, building societies, credit unions, insurance companies, investment intermediaries, mortgage brokers, exchanges, stockbrokers and mutual funds.

IFSRA will also monitor the provision of financial services to consumers and has been granted significant consumer protection powers. Integrated within IFSRA will be the former responsibilities of the Central Bank, the Department of Enterprise Trade & Employment, the Office of the Director of Consumer Affairs and the Registrar of Friendly Societies.

The new regulator will consist of a two-part structure, accountable to the Governor of the Central Bank. The first pillar is IFSRA, which will have responsibility for consumer protection and the prudential regulation of the financial services sector. The second pillar will be a monetary committee with responsibility for the monetary policy functions of the Central Bank.

Publication is expected shortly of a bill to establish a Financial Services Ombudsman as well as consultative panels to arbitrate on disputes between customers and financial service providers. The Financial Services Ombudsman will replace the credit institution and insurance industry ombudsmen funded by the banks and insurance companies.

For further information contact:
Jennifer Fox at
Email : jfox@kilroys.ie

© Kilroys Solicitors 2003
April 2003 - New Data Protection legislation enacted

The Data Protection (Amendment) Act 2003 was signed into law on the 10th April 2003. This important amending legislation substantially updates the Data Protection Act 1988 gives full effect to the provisions of the EU Data Protection Directive (95/46/EC).

Among the important changes are the following:
  • The data protection principles contained in the 1988 Act have been modified.
  • The rules governing how data relating to living people (personal data) may be used have been updated.
  • There are new rules governing the use of personal data for direct marketing purposes.
  • The transfer of personal data to countries outside the EEA will be subject to new controls.
  • Rights of access by individuals to their personal data are strengthened.
  • The powers of the Data Protection Commissioner have been extended and include the right to visit businesses to audit the state of their compliance with the law.
  • There are new requirements for annual registration with the Data Protection Commissioner.
  • The requirements regarding keeping personal data secure are strengthened.
  • Any businesses outsourcing the processing of personal data (e.g. payroll) will have to have an appropriate contract in place with the data processor concerned.
  • In time the law will be extended to cover certain types of personal data held in manual files.
The orders to commence the main provisions of the Act with effect from the 1st July 2003 are in the course of being drafted by the Department of Justice, Equality and Law Reform.

The new rules governing the requirement to register annually with the Data Protection Commissioner may by postponed to enable a public consultation to take place.

That said it is likely that within a reasonable time most Irish businesses of medium size and upward will be required to register annually with the Data Protection Commissioner.

The Data Protection Commissioner has announced his intention to begin visits to public and private companies from mid 2004 onwards to audit the state of their data compliance practices in line with his stated intention to conduct what he terms "proactive" investigations.
For further information contact:
Patrick Ryan at
Email : pryan@kilroys.ie

© Kilroys Solicitors 2003
April 2003 - Changes to the Transfer of Undertakings Regulations are introduced

The promised changes to the Transfer of Undertakings Regulations were recently signed into Irish law by the Minister of Enterprise Trade and Employment with effect from 11th April 2003. These have particular significance for any person contemplating any business acquisition or merger.

Background

The purpose of the legislation is to update the protection afforded to employees when a business is being transferred which results in a change of employer.

The Regulations do not apply if the acquisition of the business is by the purchase of the shares in the company concerned because the company itself is the employer and the underlying employment relationship does not change.

The Regulations provide that on the transfer of the undertaking, all the rights and obligations of an employer in relation to the contracts of employment are automatically transferred to the new owner (the transferee).

Pension entitlements do not have to be continued by a transferee but there is an obligation to ensure that the entitlements accrued up to the date of transfer can and will be honoured.

Dismissal of employees is prohibited unless there are exceptional circumstances involving "economic, technical or organisational" reasons, which require changes in the workforce.

There are also obligations on employers to keep their employees informed and consulted in advance of the proposed transfer. Any provision in an agreement is void if it purports to exclude the application of the Regulations.

Changes introduced from previous regime

Insolvent/Bankrupt businesses

It has been clarified that the Regulations do not apply if the outgoing employer, being an individual is subject to bankruptcy proceedings, or in the case of a company is wound up by reason of insolvency.

Informing and consulting with employees in relation to the transfer

Parties to a transfer have obligations to notify, inform and consult their employees, before the transfer takes effect about the reasons for the transfer and the implications for the employees.

Previously there was no set time-scale applicable to this process but this has now been amended so that employees must be told, where reasonably practicable not later than 30 days before the transfer is carried out. This flexibility is to take account of the fact that it may be commercially unwise to disclose the proposed transfer or indeed prohibited by the Stock Exchange Regulations.

Complaints for breach of the Regulations

Under the previous Regulations dating from 2000, employees or their representatives could refer the matter to a Rights Commissioner if they believed that the consultation process had been inadequate and he could order up to 4 weeks remuneration as compensation.

Under the new Regulations the Rights Commissioner can also award such compensation as is "just and equitable in the circumstances" of up to 2 years' salary for contravention of the Regulations other than failure to inform or consult the employee.

An order may be made requiring the employer to take a specified course of action if required.

Conclusion

Irish businesses contemplating acquisitions or mergers should ascertain what are the implications of the Regulations before proceeding. There are potentially large costs and penalties involved for breach of the Regulations, which may not be fully apparent at the outset.
For further information contact:
Anthony Layng
Email: alayng@kilroys.ie

© Kilroys Solicitors 2003
New VAT rules to apply from 1st July 2003 to the provision of Digitised Products or Services over the Internet
From 1st July 2003 the place of supply of "electronically supplied services" will be deemed to be the member state where the customer belongs. Non-EU suppliers of "electronically supplied services" to customers in Ireland will be subject to VAT at the prevailing Irish rate. Suppliers of "electronically supplied services" from Ireland to non-EU customers will no longer have to charge VAT.

An "electronically supplied service" is in essence a digitised service or product that is delivered over the Internet or an electronic network - which is automated - in other words requiring minimal human intervention for its delivery.

The Finance Act 2003 contains examples of "electronically supplied services" and
include:
  • Website supply and website hosting.
  • Distance maintenance of computer programmes and equipment.
  • Supply of software or updates.
  • Supply of images, text and information
  • Making databases available - i.e. search engines and Internet directories
  • Supply of music, films and games
  • Supply of political, cultural, artistic, sporting, scientific and entertainment broadcasts and events.
  • Supply of distance teaching.
Earlier this year the VAT Committee of the EU Commission issued a set of Guidelines on the applicability of VAT to the provision of electronically supplied services which set out further examples of electronically supplied services including:
  • Subscription to on-line newspapers or journals.
  • Provision of banner ads on a website.
  • Accessing or downloading music to PC's or mobile phones.
  • Downloading games to PC's or mobile phones.
  • On-line auctions.
  • On-line data warehousing (where specific data is stored and retrieved electronically).
E-mail communications over the Internet does not come within the definition of electronically supplied services.

Under the new rules non-EU businesses (not otherwise registered in the EU) selling electronically supplied services to customers in Ireland will be able to electronically register with the Irish tax authorities and account for VAT electronically.

For further information contact:
Patrick Ryan at
Email : pryan@kilroys.ie

© Kilroys Solicitors 2003
Resale Price Maintenance/Price Fixing - the Competition Law implications

Introduction

Ireland now treats price fixing as an indictable offence and under the Competition Act, 2002 ("the Act"). Conviction carries a five-year term of imprisonment as well as the possibility of stiff civil sanctions.

What is Resale Price Maintenance?

Any limitation or restriction imposed by a distributor or manufacturer on a retailer fixing minimum resale prices is resale price maintenance. Such conduct inhibits or prevents price competition. It is always unlawful.

Suppliers may recommend prices but any covert or tacit understanding that the resellers must adhere to this price would amount to resale price maintenance.

Price fixing can come under many guises and includes a refusal to supply or the sale of product to a retailer at a higher price than to other resellers in order to maintain price levels.

Arrangements between competitors to exchange information on prices or attempts by a trade association to influence the decisions of its members would also fall foul of the legislation.

In general, parties should not agree to exchange business details, which they would not be prepared to exchange in the absence of agreement.

What should a supplier do?

In summary, a supplier may recommend a resale price but in doing so, should inform the reseller/retailer that he is free to set the resale price. The supplier should not require the display of the recommended price and should not take any steps to secure adherence to such a price.

Enforcement

The Competition Authority has the power to investigate suspected breaches under the Act.

The procedure for registering a complaint is easy and can be done anonymously using an on-line form.

The Authority may decide to pursue the complaint based on whether it is in the interest of protecting the competitive process and the consumer.

Enforcement action usually starts with a "dawn raid" and the Authority is now better resourced to carry this out.

The complainant can also pursue a private action through the Courts. Exemplary or punitive damages may be awarded in appropriate cases.

Onus of Proof
It is presumed that price fixing restricts or distorts competition unless the supplier/defendant proves otherwise. This means that the onus is on the supplier to show that the practice that is being questioned is neither, directly or indirectly targeting price.

Maintaining the brand image

Suppliers obviously wish to retain the image of their brand as a quality product and feel that if it is sold at a discounted price that this brand value will be undermined.

However it is always open to suppliers to have a system of selective distribution to enhance the prestige of the brand by imposing minimum standards of premises, staff presentation and training before an entity is qualified for appointment.

Maintaining minimum price levels cannot ever be a valid consideration.

Conclusion

Eradicating price fixing is a key objective of the Competition Authority. The new sanctions, increased resources and investigative techniques will enhance their success in pursuing this objective.

All organisations would be well advised to review the terms and conditions under which they operate to ensure that they comply with the law.
For further information contact:
Anthony Layng at
Email: alayng@kilroys.ie

© Kilroys Solicitors 2003
Telecommunications - Some recent developments

1. New Regulations to facilitate Electronic Communications Market Definition and Analysis - Implications for operators with significant market power.

On the 27th February 2003 the Minister for Communications, Marine and Natural Resources, Dermot Aherne signed into law the European Communities (Electronic Communications Networks and Services)(Market Definition and Analysis) Regulations 2003 (S.I. No. 80/2003).

These Regulations are the first step in the transposition into Irish law of the new EU Electronic Communications Regulatory Package designed to bring all transmission networks and the provision associated services under a single regulatory framework comprising four Directives; the Framework, Authorisation, Universal Service and Access Directives

These Regulations will enable ComReg to gather data to include financial data from providers of electronic communications networks to enable it to carry out the necessary market definition and analysis in co-operation with the Competition Authority, pursuant to the EU Framework Directive, which must be transposed into Irish law by 25th July 2003.

With this information ComReg should then be in a position to determine what adjustments to the regulatory obligations imposed on operators with significant market power are required.

2. ComReg makes new Regulations governing the licensing of Local Area Fixed Wireless Access (FWA).

On the 24th March 2003, ComReg with the consent of the Minister of Communications, Marine and Natural Resources made the Wireless Telegraphy (Fixed Wireless Local Area Licence) Regulations, 2003 (S.I. No. 79/2003) to regulate the issuing of local area fixed wireless access (FWA) licences.

ComReg has published Guidelines for applicants for FWA licences which can be downloaded from its website; www.comreg.ie

FWA licences will be allocated on a first come first served basis and will also be subject to annual renewal. Licence terms will be subject to amendment as required by law.

Separate applications will be necessary for individual local FWA networks and licensee intending to offer FWA services will be required to hold the appropriate Telecommunications Service Licence.
For further information please contact:
Kevin O'Brien at
Email: kobrien@kilroys.ie

© Kilroys Solicitors 2003

EU Commission issues Report on car prices

The EU Commission issued its report on car prices in the EU in February 2003.

The report is based on car prices as they stood on 1st November 2002 and shows that price differentials for new cars are still substantial.

However, the average deviation of prices fell from 10.6% to 10.1% when compared with the last report of 1st May 2002 and overall there is a drop of 0.2% in car prices.

Car prices before tax are the lowest in Denmark, Greece and the Netherlands and the UK is the most expensive market in the European Union.

This report was compiled just after the introduction of the new Block Exemption 1400/2002 and it will be interesting to see if prices converge throughout the euro zone as competition between dealers from different Member States and cross border purchases increase.

The report on car prices is now available on the web-site www./europa.eu.int/comm/competition/car_sector/.
For further information contact:
Anthony Layng at
Email: alayng@kilroys.ie

© Kilroys Solicitors 2003
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