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University of Glamorgan

Llantwit Road, Pontypridd

Jonathan Bishop

Scientific, Economic and Legal Issues for


Virtual Communities and Electronic Learning
Masters Dissertation in European Un ion Law

An investigation into how the European


Union affects the development and provision
of e-learning services

Academic Year: 2006/2007

To My Father

Authors Fo rwa rd
As an individual that holds an MSc degree in e-learning and who is also on the Board
of Directors of a co-operative e-learning firm, understanding the legal issues affecting
the industry in which the company I have legal responsibilities towards is important.
Having developed e-learning systems since the 1990s, I brought to this project a lot
of knowledge of the intricacies of e-learning projects, and through undertaking the
certificate and diploma stage of the course I gained a good insight into the main
principles of European Union Law. This dissertation focuses on the main aspects of
EU law affecting the e-learning industry and of particular interest to me were
competition law and intellectual property law. I also drew on my understandings of
the European Union as a voter and member of a political party that gives me access
to MEPs and Members of the Council of Ministers to provide my opinion of how I
believe primary legislation of the EU should be changed to better represent the
interests of the e-learning industry and the three interests of the Community, the
Nations and the People. Proposals are put forward for changes in secondary
legislation also, which would have direct benefits for the e-learning industry. This
dissertation is my own work. All sources used, quoted, summarised and otherwise
referred to within are fully credited and cited in the bibliography.
Signature: _______________

Date: _________________

Ackno wledgements
The author would like to acknowledge all the individuals who provided comment and
feedback on this dissertation. In particular the author would like to thank his mother
and carer for providing the essential personal support he needed to undertake this
project, his father to whom the dissertation is dedicated, who the author has looked
up to since a young age and who has provided a good example of business
leadership for the author to follow, his brother, who is also a company secretary, for
supporting the authors bid to undertake the course, and his friends, who have
listened to him endlessly talk about proportionality, subsidiarity and representativity.
This dissertation is submitted in part completion of study for the award by the
University of Glamorgan of the degree of LL.M. in the academic year 2006/7.
Signature: _______________

Date: _________________

Table o f Content s
AUTHORS FORWARD......................................................................................................................1
ACKNOWLEDGEMENTS...................................................................................................................1
TABLE OF CONTENTS......................................................................................................................2
INTRODUCTION .................................................................................................................................4
THE E-LEARNING INDUSTRY ........................................................................................................5
The Undertakings that form the e-learning industry .......................................................6
HISTORY AND FUNCTIONING OF THE EUROPEAN UNION ......................................................8
THE INSTITUTIONS OF THE EUROPEAN UNION..............................................................................8
The European Commission..............................................................................................9
The Council of the European Union ................................................................................9
The European Parliament ................................................................................................9
The European Court of Justice ......................................................................................10
SOURCES OF EUROPEAN UNION LAW ........................................................................................10
PROVISION OF GOODS AND SERVICES ....................................................................................11
PUBLIC PROCUREMENT .............................................................................................................11
Public Procurement in Practice......................................................................................12
DISTANCE SELLING ....................................................................................................................13
EUROPEAN COMPETITION LAW ..................................................................................................16
ARTICLE 81 ...............................................................................................................................16
Exemptions under Article 81(3)......................................................................................17
Horizontal Agreements ...................................................................................................17
Price-fixing agreements................................................................................................................................. 17
Production Quotas.......................................................................................................................................... 18
Market Sharing............................................................................................................................................... 18

Vertical Agreements .......................................................................................................18


Exclusive distribution agreements ................................................................................................................ 18
Exclusive purchasing agreements and licence agreements ......................................................................... 19
Selective distribution agreements ................................................................................................................. 19

The De Minimis doctrine.................................................................................................20


ARTICLE 82 ...............................................................................................................................20
Dominant Position ...........................................................................................................20
Abuse of a dominant position.........................................................................................21
Predatory Pricing............................................................................................................................................ 21
Discriminatory Pricing and Fidelity Rebates ............................................................................................... 21
Refusal to deal or supply ............................................................................................................................... 22
Unfair trading conditions............................................................................................................................... 23
Market partitioning ........................................................................................................................................ 23
Mergers........................................................................................................................................................... 23

MERGERS ..................................................................................................................................24
The Merger Regulation ...................................................................................................24
Ancillary Agreements......................................................................................................25
EUROPEAN INTELLECTUAL PROPERTY LAW..........................................................................27
COPYRIGHT ...............................................................................................................................27
An overview of the EU Directives relating to copyright ................................................28
DESIGNS ...................................................................................................................................31
PATENTS ...................................................................................................................................32
TRADEMARKS ............................................................................................................................32
ENFORCEMENT OF INTELLECTUAL PROPERTY ...........................................................................32
EUROPEAN EMPLOYMENT LAW .................................................................................................34
EQUALITY OF PAY AND TREATMENT ...........................................................................................34
WORKING TIME LEGISLATION ....................................................................................................34
EUROPEAN SAFETY, HEALTH AND ENVIRONMENTAL LAW ................................................37
THE BUILT ENVIRONMENT .........................................................................................................37
PRODUCT SAFETY .....................................................................................................................38
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 2

DEVELOPMENTS AND PROPOSITIONS FOR CHANGES IN EU LAW .........................................................40


FUNCTIONING OF THE EUROPEAN UNION...................................................................................................................40
The Principles of European Union Law .........................................................................40
The European Commission............................................................................................41
The Council of the European Union and The European Parliament...........................42
The Social Partners ........................................................................................................43
EUROPEAN COMPETITION AND INTELLECTUAL PROPERTY LAW .................................................45
EUROPEAN EMPLOYMENT LAW ..................................................................................................46
EUROPEAN SAFETY, H EALTH AND ENVIRONMENTAL LAW ..........................................................47
DISCUSSION .....................................................................................................................................49
REFERENCES ..................................................................................................................................57

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 3

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Legal Issues for Virtual Communities and Electronic Learning


An investigation into how the European Union affects the development and provision of e-learning services

Introduction
The worldwide e-learning industry is estimated to be worth over 38 billion euros
according to conservative estimates, although in the European Union only about 20%
of e-learning products are produced within the common market. In 2000 the
European educational multimedia industry was undercapitalised as links between
education and training systems and the industry were not strong enough to generate
viable services that cater for education and training requirements (EC, 2000). It has
been argued by the European Commission that another reason for this
undercapitalisation is because much of the development of e-learning systems
comes from a high number of small firms within the industry. Critics would argue that
this is only a problem because of how small businesses have been burdened with
increased legislation originating from the European Union, which now legislates in an
increasing number of areas affecting small to medium-sized undertakings. Indeed,
some now estimate that European Union Law accounts for about half of the
legislation in Member States, with countries wishing to join the European Union
facing around 80,000 pages of EU law to incorporate into their national legislation
(Mulvey, 2003). Despite the legislative burden placed on small e-learning firms, the
attitude of the European Commission towards e-learning is very positive. According
to one estimate, in 2001 around 50 million euros from the budget for education and
training was spent on projects which could be considered as promoting e-learning,
but the largest amounts have been channelled to the Structural Funds and the
framework research programme (Mauro, 2003). Since 2000 the European Union
institutions have collectively promoted an agenda for e-learning, with measures to
increase its uptake by educational service providers and promote research and
development into its design and use. The eEurope 2002 Action Plan made e-learning
a priority, with the aim of connecting all schools to the Internet, which had all but
been achieved, leading the institutions to shift to their attention to wider educational
use of e-learning. The eEurope 2005 Action Plan set out to launch the e-Learning
Programme to support priority areas, which included analysing the European market
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 4

for e-learning, including the private sector to identify obstacles and propose remedies;
establishing virtual campuses for all students by ensuring all universities offer online
access for students and researchers to maximise the quality and efficiency of
learning processes and activities; ensure that all schools and universities as well as
other institutions that play a key role in e-learning (e.g. museums, libraries, archives)
have broadband Internet access for educational and research purposes. Crucially,
the European Union recognised the importance of e-learning for training purposes
and allocated Structural Funds and Commission support for Member States to launch
actions to provide adults with the skills they need for employment.

The E-L earn ing Indu stry


Developments in Internet and multimedia technologies are the basic enabler of elearning, with content, technologies and services being the three key segments of the
e-learning industry (Nagy, 2005). Before the microcomputer revolutionised e-learning,
the television was seen as the technology that would transform learning, and
television products for the classroom formed the basis of the early e-learning
industry. In this industry a time was envisaged where there would be classrooms of
learners without teachers, who would be happily absorbing all manner of knowledge
through a television set (Rosenberg, 2000). Coupled with the view that this form of elearning could lead to greater social justice, the British Labour Party in 1963
proposed a University of the Air through which lower income groups could access
higher education through television and radio and after winning the election in 1964
Harold Wilsons Government established a committee that led to a manifesto
commitment at the 1966 election to create the Open University. Whilst televisionbased content, technologies and services have remained part of the e-learning
industry, the industry evolved dramatically with the advent of the personal computer,
which created a greater interest in interactive content, leading to the advent of
computer-based training. As the personal computer became a greater part of the
workplace and home, the evolving e-learning industry began to see an embedded
base of hardware to run their programs, but the differences in hardware, software,
programming languages, and other technical barriers made universal availability
more a dream than a reality as software had to be developed in different formats,
which was an expensive proposition, particularly as just when a program hit the
marketplace, rapid changes in technology platforms made it obsolete and the
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type computers, coupled with the complete lack of authoring and development
standards, played havoc with the emerging computer-based training (CBT) sector of
the e-learning industry (Rosenberg, 2000). Computer-based training encompassed
any training delivered via a computer and with the advent of the CD-ROM corporate
undertakings began to demand that the e-learning industry deliver by this method
because of its ability to store large, media-rich files, and the term CBT became
synonymous with training delivered by CD-ROM (Stone & Koskinen, 2002).
Proponents of e-learning via CD-ROM talked-up its potential at conferences and
seminars (e.g. Megarry, 1989), emphasising the role of hypertext, but did not
envisage the next stage of the e-learning industry, which was to use hypertext-based
systems over the Internet to deliver learning. Even as people across Europe were
connecting to the Internet in increasing numbers the CD-ROM was still seen as the
mode for delivering learning. Williams (1998) argued that people like to own things,
and would prefer to have a CD-ROM library than download their information. Whilst
delivery of educational material by disc, either CD-ROM or its successor DVD-ROM
is still a core business for the e-learning industry, the biggest growth since the
increase in use of high-speed Internet connections, such as broadband, has been
Web-based learning. While the Web has revolutionised the e-learning industry, in
that content is now delivered by this means more so than on CD-ROM, there is
further change ahead with the drive for better provision of e-learning services. The
services sector of the e-learning industry is set to grow significantly as the demand
for blended learning increases. Blended learning, as the name suggests, involves
blending e-learning with traditional methods of learning and development and it is
argued that it is the most logical and natural evolution of the learning agenda
(Thorne, 2003).
The Undertakings that form the e-learning industry
In terms of the EC Treaty, what constitutes an undertaking has not been defined, but
it has been subject to wide interpretation by the European Court of Justice (Hanlon,
2003). The e-learning industry can be seen to consist of undertakings that provide
content, technology and services as well as undertakings that support the industry
(Henry, 2001). These undertakings include small to medium-sized e-learning firms
that produce the content and software, large software companies that provide the
platform on which to run the software, manufacturing firms and their supply-chain that
provide the hardware and media, telecommunications companies that provide the

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network infrastructure, educational establishments and training firms that provide the
services as well as content, self-employed consultants who contribute to the
consulting sector and technical and administrative enterprises that contribute to the
support sector.
Market segmentation of the Web-based services sector of the e-learning industry
reveals that e-learning products and services serve three primary markets, which are
corporate training, secondary education and post-compulsory education (Whalen &
Wright, 2000), although it is becoming more common for e-learning services to
provided to other areas such as in out-of-school clubs. Increasingly public authorities,
such as central, regional and local government are becoming clients of the e-learning
industry and there are an ever-increasing number of public procurement proposals
relating to e-learning published in the Official Journal of the European Union.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 7

Histo ry and Functioning o f the Europ ean Union


Visions of a unified Europe with a centralised government have existed since the
Roman era, but while such visions of diluting national identities have failed, the vision
of a common market has prevailed. Such ideas of being able to trade freely with
ones neighbours are not unique to the 20th and 21st centuries. In the 14th century
the people of the Welsh town of Llantrisant petitioned the Lord of Glamorgan, Hugh
Despencer for the right to trade freely within their own town, a freedom that was
granted them in 1346 with the Llantrisant Town Charter. The Charter created a new
borough, which existed until 1889, and gave the Freemen of Llantrisant a measure of
self-government, their own courts of law and control on markets and fairs as well as
grazing rights over the common. The dream of the Freemen of Llantrisant to trade
freely with their neighbours is probably a microcosm of the dream to create the
European Common Market. Rycroft (2002) argues that the European Common
Market is the most important example of a common market in modern times; defining
it as a group of Western European nations that have agreed to strive for economic
integration and according to Burki (2000) the European Common Market is slowly
moving towards a more integrated European Union, with its own currency, the euro.
The European Common Market grew out of the European Coal and Steel Community
(ECSC), which was founded in 1951 by its six founding members, namely Belgium,
Netherlands, Luxembourg, West Germany, France and Italy, with the purpose to pool
the coal and steel resources of its members. While the ECSC was successful,
attempts to create a European Defence Community (EDC) and European Political
Community (EPC) failed. Following the failure to create military and political union,
the six founders of the ECSC sought a perhaps more realistic and mutually beneficial
goal of economic integration and in 1957 established the European Economic
Community (EEC), referred to as the European Common Market in the United
Kingdom, with the signing of the Treaty of Rome. The founding treaty was based on
the four freedoms of free movement of goods, services, capital and people.

The Inst itutions of the Europ ean Un ion


The legislative arm of the European Union is made up of three institutions, which
each represent an interest. The European Commission represents the community
interest, the Council of the European Union represents the national interests of
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Member States, and the European Parliament represents the interests of the people of
the European Union. In addition to these there is the European Court of Justice
(ECJ), which is the body that interprets the EC Treaty and the legislation produced by
the three legislative institutions.
The European Commission
The European Commission consists of 25 members representing each Member
State, one of whom is the President, appointed by common accord of the
governments of Member States as set out in Article 213 (ex 157) of the EC Treaty.
No Qualifications are prescribed for Commissioners other than that they must have
general competence, their independence must be beyond doubt and they must be
nationals of a Member State (Weatherill & Beaumont, 1999). One of the core
responsibilities of the European Commission is to propose legislation, particularly as
even where the EC Treaty confers power on the Council of the European Union to
make decisions, as this cannot be done without a legislative proposal from the
European Commission (Kapteyn & VerLoren van Themaat, 1998).
The Council of the European Union
The Council of the European Union, often referred to as the Council of Ministers, is
the core institution for developing legislation based on a proposal from the
Commission. In accordance with Article 203 (ex 146) is consists of a representative
of each Member State at ministerial level, authorised to commit the Government of
that Member State with Article 202 (ex 145) stating that its main function is to take
decisions. According to Foster & Tillotson (2003) the Presidency of the Council
presently rotates among the Members States at six monthly intervals. This
mechanism ensures that the national interest of the Member States is accounted for,
with the holder of the Presidency being keen to achieve the maximum progress on
areas in their national interests during their term of office (ibid.).
The European Parliament
A parliament has been defined as a public body consisting of elected members
representing the interests of the people of a country (UN, 1992). To this extent the
European Parliament can be considered to be a parliament, but it lacks several
things that characterise national parliaments of the Member States. Unlike national
parliaments, the European Parliament does not have the power to initiate legislation,
as it is the European Commission that initiates legislative proposals in the European

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 9

Union. Also unlike national parliaments, the majority party of the European Parliament
does not form the government, as there is no executive. The functions that resemble
what a government would do, such as proposing legislation, are in most cases
carried out by the European Commission.
The European Court of Justice
The European Court of Justice is made up of 25 Judges and 8 Advocates General,
which may be increased by the Council of the European Union acting unanimously.
The Judges and Advocates General are appointed by common accord of the
governments of the Member State and hold office for a renewable term of six years
according to the EC Treaty and are chosen from legal experts whose independence
is beyond doubt and who possess the necessary qualifications that would be
required for appointment to the highest judicial offices in their Member State of origin
(Anon., 2006).

Sources o f Eu ropean Un ion La w


There are three sources of European Union Law; primary legislation, secondary
legislation and rulings of the European Court of Justice. According to Pasa &
Bennacchio (2005) secondary legislation is based on the EC Treaty and implies a
variety of procedures defined thereof; in the framework of the EC Treaty establishing
the European Union, secondary legislation make take the form of Regulations,
Directives, Decisions, Recommendations, or Opinions. Primary legislation includes
the EC Treaty and is agreed by direct negotiation between Member State
governments, and laid down in the form of treaties, which are then subject to
ratification by the national parliaments, with the same procedure applying for
subsequent amendments to the treaty (ibid.).

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Provision of Good s and Serv ices


The free movement of goods and services is a founding principle of the European
Union. It is unequivocally clear that the Members States are not allowed to adopt
measures restricting trade in goods or services, with the main purpose of the EC
Treaty provisions on the free movement of goods and services being to abolish
restrictions created by Member States, and the great majority of cases and
Community legislation have been aimed at dismantling barriers created by public
authorities (Snell, 2002). Through Article 49, the EC Treaty contains a prohibition on
discrimination regarding the provision of services by a person in one Member State
who is established in another (Woods, 2004). In the e-learning industry, this can be
seen as giving an undertaking that provides e-learning services, the right to provide
their services in another Member State, which is essential to the growth of the
industry throughout the Common Market.

Public P ro curem ent


In some industries, such as the construction industry, public procurement has been
the area of EU law that has had the most impact on their market, significantly
changing practices and procedures of the industry (Dalby, 1998). As the e-learning
industry matures, so this significant area of EU law is more likely to affect the
undertakings providing the content, technology and services to bodies funded by the
public purse. Between 2003 and 2004 the number of public tendering proposals
affecting the e-learning industry almost doubled and in recent years there have been
nearly 10 public procurement proposals every month for the e-learning industry to
tender for across the European Union.
It has been argued that there is little that the EU law can do to improve public
procurement in the information technology (IT) sector as a whole, particularly
because the IT sector is already a global industry, dominated by international
companies that have established themselves across the European Union (Medhurst,
1997). However, there is a place for EU law on public procurement in developing the
e-learning industry, which consists of a high number of small and developing firms,
which can only grow if they have fair access to public procurement projects.

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Public procurement in regard to the two procurement areas affecting the e-learning
industry, namely computer and related services and education and vocational
services are subject to a single directive, which combines three directives and their
amending directives. The Consolidated Procurement Directive (2004/18/EC)
combines the Supplies Directive (93/36/EEC), the Works Directive (93/37/EEC) and
the Services Directive (92/50/EEC), which were amended by Directive 97/52/EEC,
and extends them to include new provisions on central purchasing authorities, new
electronic procurement provisions and dynamic purchasing systems, framework
agreements as well as introducing a new competitive dialogue procedure.
The Consolidated Procurement Directive refers to the public procurement proposals
affecting the e-learning industry as public supply contracts and public service
contracts depending on whether the contract has their object as the purchase, lease,
rental or hire purchase of e-learning products, or has their object as the provision of
e-learning services. There is a third type of contract, which are public works contracts
that refer to products of the construction and civil engineering industries, which do not
apply to the e-learning industry. The Directive defines the public authorities as
contracting authorities, which refer to the State, regional or local authorities, bodies
governed by public law, associations formed by one or several of such authorities or
one or several of such bodies governed by public law, with such bodies being
established for the specific purpose of meeting needs in the general interest, not
having an industrial or commercial character, having legal personality, and being
financed, for the most part, by the State, regional or local authorities, or other bodies
governed by public law; or subject to management supervision by those bodies; or
having an administrative, managerial or supervisory board, more than half of whose
members are appointed by the State, regional or local authorities, or by other bodies
governed by public law. Such an all-encompassing definition of public bodies offers
many opportunities for the growing e-learning industry to tender to provide e-learning
products and services to bodies funded by the public purse. Already new bodies
covered by the Directive, such as the National Assembly for Wales have awarded the
e-learning industry public service contracts for the development of e-learning systems
(2005/S 161-161086).
Public Procurement in Practice
While there may be a principle of best value from competing e-learning firms, elearning firms tendering for public procurement projects need to observe whether

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tenders contain a technology exchange clause. Such clauses are means of public
authorities dealing with their responsibilities under the Consolidated Procurement
Directive that require them to chose the most economically advantageous tender. In
most e-learning projects the lowest price is rarely the most appropriate way of
determining best value, so such a clause gives the public authority the ability to
change the specifications of hardware and software provided by the e-learning firm to
the variants that are technically improved on the initial proposal. Public authorities
may also place clauses subjecting the e-learning firm to use technical specifications
based on national standards of the Member State they are part of. It has been
argued that such clauses limit the ability of e-learning firms to compete for tenders in
all Member States as they create obstacles to public sector procurement integration,
but it could also be argued that as each Member State has different requirements,
such clauses are necessary to ensuring that the end-user of the e-learning system
learns in a way that is culturally acceptable to them. Despite such differing needs of
Member States that has been an increasing emphasis on harmonising technical
standards across the European Union through a number of non-governmental
standardisation organisations and the European Commission has been keen to adopt
directives that eliminate discrimination based on national standards (Bovis, 1997).

Distance S ellin g
Nagy (2005) asks what the dominant business model for selling e-learning will be and
discusses what the role of e-learning might be within the European Union, including
that it could be seen as a facilitator for producing and delivering rich multimedia and
high interaction. E-learning packages meeting these criteria, including Bear &
Penguins Maths Adventure by Dorling Kidersley Ltd, have achieved phenomenal
sales due to effective distribution across the European Union. One way in which elearning packages such as this one have achieved this is through distance selling,
including via Amazon.co.uk, where this particular package received a sales rank of
60 in 2006. E-learning firms wishing to sell their products in the European Union can
enjoy the right of establishment and freedom to provide their goods, including having
the freedom to market them by distance selling. In 1997 after the European
Parliament and the Council of the European Union reached agreement, Directive
97/7/EC, hereafter referred to as the Distance Selling Directive, entered the Official
Journal of the European Union, having a wide impact on how undertakings, including
e-learning firms, sell their goods and services to consumers at a distance.
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The Distance Selling Directive creates in law the existence of distance contracts,
which are defined as contracts concerning goods or services concluded between a
supplier and a consumer under an organised distance sales or service-provision
scheme run by the supplier, who, for the purpose of the contract, makes exclusive
use of one or more means of distance communication up to and including the
moment at which the contract is concluded. The Directive places certain obligations
on suppliers, such as e-learning firms, including that they must provide the consumer
with specific information prior to the conclusion of the contract. This information,
which must be provided by the supplier to the consumer, includes; the identity of the
supplier and, in the case of contracts requiring payment in advance, their address;
the main characteristics of the goods or services; the price of the goods or services
including all taxes; delivery costs, where appropriate; the arrangements for payment,
delivery or performance; the existence of a right of withdrawal, except where the
Directive provides exemptions, the cost of using the means of distance
communication, where it is calculated other than at the basic rate; the period for
which the offer or the price remains valid; where appropriate, the minimum duration
of the contract in the case of contracts for the supply of products or services to be
performed permanently or recurrently, a clause which is particularly relevant to the elearning industry.
A significant right given to consumers by the Distance Selling Directive include the
right to withdraw from the contract, but there are certain exclusions that protect elearning firms providing e-learning goods and services. For any distance contract the
consumer is granted a period of at least seven working days in which to withdraw
from the contract without penalty and without giving any reason within seven days,
with the only charge that may be made to the consumer because of the exercise of
his right of withdrawal being the direct costs of returning the goods. The Directive
makes it clear what that there is a difference between distance contracts for goods
and those for services. With regards to goods, the period in which consumers can
exercise their right to withdrawal are from the day of receipt by the consumer where
the obligations laid down and with regard to services are from the day of conclusion
of the contract or from the day on which the obligations set out above were fulfilled if
they are fulfilled after conclusion of the contract, provided that this period does not
exceed a three-month period, which applies if the supplier does not meet the above
obligations. Where the consumer has exercised the right of withdrawal the supplier is
obliged to reimburse the sums paid by the consumer free of charge. The only charge
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 14

that may be made to the consumer because of the exercise of his right of withdrawal
is the direct cost of returning the goods and such reimbursement must be carried out
as soon as possible and in any case within 30 days. Of particular relevance to the
services sector of e-learning industry, the consumer may not exercise the right of
withdrawal for the provision of services if performance has begun, with the
consumer's agreement, before the end of the seven working day period and in the
content sector of the e-learning industry the consumer may not exercise the right to
withdrawal where the goods were made to the consumer's specifications or clearly
personalised or which, by reason of their nature, cannot be returned or are liable to
deteriorate or expire rapidly. E-learning firms distributing their software may wish to
seal their software packages as audio or video recordings or computer software,
which if unsealed by the consumer, also restrict the consumer from withdrawing from
the contract.
As well as obligations to provide specific information to consumers and confirm their
right to withdrawal where it applies, the Distance Selling Directive also places some
performance obligations on undertakings that enter into distance contracts with
consumers. These include that unless the parties have agreed otherwise, the
supplier must execute the order within a maximum of 30 days from the day following
that on which the consumer forwarded his order to the supplier; where a supplier fails
to perform his side of the contract on the grounds that the goods or services ordered
are unavailable, the consumer must be informed of this situation and must be able to
obtain a refund of any sums he has paid as soon as possible and in any case within
30 days. If the supplier wishes to withdraw from the distance contract in such
circumstances, the cost of returning the goods following exercise of the right of
withdrawal shall be borne by the supplier, and the consumer must be informed of
this.

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European Compet ition La w


It has been argued that the present e-learning industry of a high number of small to
medium-sized undertakings is slowing the growth of the industry and that as few elearning companies can truly do it all they will form strategic alliances to diversify and
strengthen offerings (Hartley, 2001). The form such alliances will take are limited by
competition law, in particular Articles 81 (ex 85) and 82 (ex 86) of the EC Treaty. The
concept of free competition is a fundamental element in the EC Treaty, which
embraces the premise that any restriction on free competition is intrinsically
reprehensible (Hanlon, 2003).
In order for an alliance between two e-learning firms to fall within Article 81 there
needs to be some affect on trade between Member States and to fall within Article 82
an e-learning firm needs to have a dominant position within the European Union and
not just their domestic market. In some sectors of the e-learning industry, particularly
content, the market for e-learning products is often limited by linguistic and cultural
barriers, in a similar way to the paid-for television market, which the European
Commission found to be an area confined to national markets (Larouche, 1998). With
some broadcasting undertakings being part of the e-learning industry, most notably
the British Broadcasting Corporation (BBC), it could be argued that the market for elearning content and services is limited by national boundaries as a result of linguistic
barriers in the same way broadcasting products are. However, the BBCs educational
content is not restricted to the UK market as English speakers access their online
learning materials from across the continent.

Article 81
Article 81(1) (ex 85(1)) makes illegal all agreements between undertakings,
concerted practices and decisions by associations of undertakings that may affect
trade between Member States and which have as their object or effect the
prevention, distortion or restriction of competition within the common market. The
major point of European competition law is to prevent an altering or distortion of the
competitive balance between undertakings. This distortion of competition is most
clearly seen in horizontal agreements, although Article 81 (ex 85) also applies to
vertical agreements as well (Hanlon, 2003). The nature of horizontal and vertical
agreements has been widely interpreted by the ECJ and can include arrangements
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 16

that are not written down such as gentleman agreements as well as binding
agreements. What is considered to be a concerted practice has been more widely
interpreted by the ECJ than an agreement as it involves the substitution of
substantial cooperation between firms for competition without the conclusion of an
actual agreement. What constitutes a decision by associations of undertakings has
also been widely interpreted by the ECJ and includes non-binding recommendations.
Exemptions under Article 81(3)
In some circumstances an agreement that is found to be within Article 81(1) may gain
exemption under Article 81(3) where it improves the production or distribution of
goods or promote technical or economic progress, where consumers receive a fair
share of the resulting benefit, where it contains only restrictions which are
indispensable to the attainment of the agreements objectives and where it may not
lead to the elimination of competition in respect of a substantial part of the products
in question. The European Commission has simplified this with the interests of small
to medium sized undertakings in mind by granting block exemptions in a number of
different areas. These cover specific types of vertical agreement, while all horizontal
agreements remain prohibited.
Horizontal Agreements
A horizontal agreement or practice is an agreement or practice between or amongst
two or more undertakings at the same level of supply (Lane, 2000). Horizontal
agreements can take many forms, most obviously as price-fixing agreements,
production quotas and market sharing arrangements. In the e-learning industry
horizontal agreements would be those that are made between two or more e-learning
firms that are at the same stage of providing an e-learning product or service, for
example two e-learning firms that provide managed learning environments for the
purpose of post-compulsory education or corporate training that made an agreement
that falls within Article 81(1).
Price-fixing agreements
Article 81(1)(a) strictly prohibits all agreements that directly or indirectly fix purchase
of selling prices. It is generally regarded that such a prohibition of price-fixing
agreements in the interests of consumers as it often results in lower prices (Nitsche,
2001). Since Pronuptia de Paris v Schillgalis [1986] ECR 353 however, it has not
been considered a breach of Article 81 to offer recommendations for resale prices
that do not bind those undertakings purchasing the goods or services.
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 17

Production Quotas
A quota agreement is a type of market sharing whereby competitors fix or limit the
quantity of goods or services they each produce and/or market in order to artificially
adjust supply to demand (Lane, 2000). An example of such an arrangement would be
where a group of e-learning firms agreed to only tender competitively for certain elearning public procurement projects, allowing each to share the market.
Market Sharing
Like production quotas and price fixing, market sharing has the outcome of restricting
competition between undertakings. Often market sharing agreements take the form
of agreements to restrict trading to certain territories (Lane, 2000). In the Soda-Ash
case, two firms, namely Solvay and ICI, were found to be operating a market sharing
agreement, which was referred to as the Page 1000 agreement, which had been in
operation since the 1870s and renewed in the 1940s. Motta (2004) points out that
what is noticeable about this case is that each firm admitted that it had no intention of
invading the others home market, but simply because it feared retaliation if it had
done so, which they argued justified a collusive outcome as the result of independent
decisions that made sense from a business viewpoint.
Vertical Agreements
A vertical agreement is an arrangement or concerted practice between two or more
undertakings operating at different levels of the production, distribution or supply
chain. Vertical agreements can take many forms, but most commonly as exclusive
distribution agreements, exclusive purchasing agreements and selective distribution
agreements.
Exclusive distribution agreements
Under exclusive distribution agreements a manufacturer supplies only one distributor
in each territory (Young & Wallace, 2000). Such an agreement is often the most
effective for an undertaking wishing to trade in a Member State other than their own,
as it means they do not have to establish a subsidiary under the freedom of
establishment legislation. For example, a British e-learning firm wanting to distribute
its CD-ROMs to the Republic of Ireland may enter into an agreement with an Irish
distributor to market its products in that territory. The leading case on this type of
agreement was Joined cases 56/64 and 58/64 Consten and Grundig v Commission
[1966] ECR 299, hereafter referred to as Consten and Grundig. In Consten and
Grundig the German manufacturer, Grundig entered into an exclusive distribution

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 18

agreement with French distributor Consten, which included that Grundig would not
supply its products to other outlets likely to export to France. The ECJ ruled that this
exclusive distribution agreement was designed to restrict competition impermissibly
so breached Article 81(1). Since Consten and Grundig, a block exemption has been
passed by the European Commission to allow certain exclusive distribution
agreements between two undertakings for the exclusive supply of certain goods for
resale.
Exclusive purchasing agreements and licence agreements
Exclusive purchasing agreements enable the supplier to plan sales with greater
precision, ensure that their customers requirements are met upon a regular basis
and allow both to limit risk owing to disruption to market conditions (Lane, 2000).
However, while the European Commission has indicated that whereas non-exclusive
contracts for the supply of fixed quantities of industrial raw material which do not last
longer than two years are permissible under Article 81(1) (ex 85(1), an exclusive
supply agreement of such products for five years amounts to a restraint of trade
within the meaning of the Article (EC, 1981). The European Commission has also
granted group exemptions for agreements for technology transfer, comprising both
know-how transfer and license agreements, which means that undertakings such as
e-learning firms do not risk legal action by conducting a regular licensing agreement
(Bekkers, 2001).
Selective distribution agreements
Selective distribution agreements are characterised by supplier selectivity in granting
distributorships whereby the potential for reduced competition arises because the
criteria used to choose distributors may, either intentionally or unintentionally, have
the effect of limiting the number of outlets for the product in question meaning that
those distributors who are selected by the producer would to some degree be
insulated from rivals carrying the same goods (Anon., 2005). An example of a
selective distribution agreement would be where an e-learning firm only supplies its
educational CD-ROMs to distributors to a selective distribution network who provide
after-sales support to their customers and another would be where an e-learning firm
only supplied its managed learning environment to customers with specialist
knowledge of e-learning. Where a manufacturer maintains a selective distribution
network, of which membership is subject to certain qualitative conditions relating to
technical ability, then the network will be lawful so long as the criteria of purely
qualitative tests are objective and objectively applies, such as the condition that
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 19

undertakings have specialist knowledge, adequacy or premises or customer service


(Dalby, 1998).
The De Minimis doctrine
Since the case of Vlk v. Vervaecke [1969] ECR 295; [1969] CMLR 273 the De
Minimis doctrine has applied to agreements falling within Article 81(1). A European
Commission notice issued in 1997 clarified the De Minimis doctrine by stating that
agreements involving less than 5 per cent market share for horizontal agreements
and 10 per cent market share for vertical agreements should be regarded as of minor
impact, and outside the ambit of Article 81(1). However, the De Minimis doctrine
does not apply to vertical agreements that have their object as fixing resale prices or
containing territorial protection clauses or horizontal agreements that have their
object price fixing, production or sales quotas, market sharing or sharing sources of
supply.
With regard to Scenario 1 (Annex I), the agreement between the producers of nail
guns can been seen to come within Article 81(1) and outside the provision of the De
Minimis doctrine as despite the parties to the agreement having only 6 percent
market share, the agreements have their objectives as price fixing and contain
territorial protection clauses.

Article 82
Whereas Article 81 (ex 85) is concerned with agreements, decisions and concerted
practices that are harmful to competition, Article 82 (ex 86) is directed toward the
unilateral conduct of dominant undertaking that act in an abusive manner with many
of the more controversial decisions of the Commission being taken under Article 82
(Whish, 2003).
There are three factors that determine whether there has been a breach of Article 82,
which are that there must be a dominant position, an abuse of that dominant position
and a resultant effect on trade between Member States (Stothers, 2001).
Dominant Position
In determining whether an undertaking has a dominant position the market first
needs to be defined and the undertakings share of the market identified. The
definition of the relevant market in both its product and geographic dimension allows
the identification of the suppliers and the customers active on that market and on that
basis a total market size and market shares for each supplier can be calculated on
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 20

the basis of their sales of the relevant products on the relevant area (Korah, 2001).
Since Case 27/76 United Brands v Commission [1978] ECR 207, hereafter referred
to as the United Brands case, a market share of 20 per cent has been considered to
be a dominant position, particularly where that share remains in tact despite efforts
by other competing undertakings.
Abuse of a dominant position
Once it has been identified that an undertaking has a dominant position there needs
to be an abuse of that position for the undertaking to be found in breech of Article 82.
Abuse may be exclusionary, such as predatory pricing, loyalty rebates and refusal to
deal, or exploitative, such as charging unfairly high prices, tying, or imposing unfairly
low prices on suppliers (Medhurst, 2001).
Predatory Pricing
In Hoffman-La Roche v Commission [1979] ECR 461 it was established that the
practice of using money or resources to sustain losses from charging prices below
cost by a dominant undertaking is an abuse of a dominant position with regard to
Article 82, a practice referred to as predatory pricing. The most notable case on
predatory pricing was case C62/86 AKZO Chemie BV v Commission of the European
Communities [1991] E.C.R. I-3359; [1993] 5 C.M.L.R. 215; [1994] F.S.R. 25,
hereafter referred to as AKZO. In this case the ECJ defined predatory pricing as the
practice of setting prices lower than average variable cost and ruled that a dominant
undertaking has no interest in applying such prices except that of eliminating
competitors so as to enable it subsequently to raise its prices by taking advantage of
its monopolistic position. Another case of predatory pricing was C333/94 Tetra Pak
International SA v Commission of the European Communities [1997] All E.R. (EC) 4
[1996] E.C.R. I-5951 [1997] 4 C.M.L.R. 662, hereafter referred to as TetraPak II. In
this case the ECJ ruled that for the purposes of Article 82 (ex 86), prices set below
average variable costs must always be considered abusive as in such a case there is
no conceivable economic purpose other than the elimination of a competitor, since
each item produced and sold entails a loss for the undertaking and that prices below
average total costs but above average variable costs are only to be considered
abusive if an intention to eliminate can be shown.
Discriminatory Pricing and Fidelity Rebates
Undertakings that produce products or provide services often charge different prices
for those products or services as a result of different market and commercial
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 21

considerations. For undertakings with a dominant position in a particular market it is


possible that their actions may come within Article 82(c), which rules out dominant
undertakings applying dissimilar conditions to equivalent transactions with other
trading parties, thereby placing them at a competitive disadvantage as was found in
the United Brands case. A similar abuse is offering fidelity rebates, whereby a
dominant undertaking offers price rebates, bonuses or other form of payment in
return for an agreement from a buyer, groups of buyers or agents not to purchase
from their competitors (Lane, 2000).
Refusal to deal or supply
The refusal to deal with a supplier or a customer can amount to an abuse of
dominant position even where it does not lead to a deterioration of the competitive
structure, so much so that where a dominant firm stops, without valid reason,
supplying a well-established customer abiding by commercial custom and whose
orders do not have any abnormal character, this constitutes an abuse (Stuyck &
Vogelaar, 2000).
The first European case to consider refusal to deal was Joined Cases 6/73 & 7/73
Commercial Solvents v. Commission of the European Communities [1974] E.C.R.
223; [1974] 1 C.M.L.R. 309, hereafter referred to as Commercial Solvents. In this
case, there was a refusal to supply nitropropane or its derivative, aminobutanol, a
raw material for the manufacture of ethambutol. The European Commission found
that the supplier had a dominant position in the common market for the raw material
necessary for the manufacture of ethambutol by virtue of its world monopoly in the
production and sale of nitropropane and aminobutanol, and that the refusal to supply
constituted an abuse under Article 82. The ECJ confirmed the European
Commissions finding of a dominant position and their finding of abuse (Stothers,
2001). A refusal to deal may also occur where an undertaking with a dominant
position at one stage of production establishes a subsidiary to supply their product to
and then refuses to supply undertakings competing with that subsidiary that are
dependent on them for a particular product (Lane, 2000). Indeed, the ECJ said in the
United Brands case that an undertaking in a dominant position for the purpose of
marketing a product cannot stop supplying a long standing customer who abides by a
regular commercial practice, if orders placed by that customer are in no way out of
the ordinary.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 22

Unfair trading conditions


The imposition of unfair trading conditions is also prohibited by Article 82. In the Tetra
Pak II case, the Court of First Instance considered that, where a supplier of
packaging machines requires its lessee to pay to it, at the time of delivery of the
machine or shortly thereafter, an initial rental amounting to the entire value of the
rented machine, this constitutes the imposition of unfair conditions since the lessee
does not benefit from the legal advantages deriving from the right of ownership
although his position is economically comparable to that of an owner (Stuyck &
Vogelaar, 2000). Also in the Tetra Pak II case it was upheld that the practice of tying
the sale of packaging to the sale of the machines also breeched Article 82 (ex 86).
Tying the products of one particular undertaking as was done in the Tetra Pak II case
can be seen in trading conditions where the customer is required to purchase a less
critical product from the same undertaking in order to purchase the critical product or
where the customer is required to purchase an unrelated product in order to receive
the product they want. An example of this sort of tying is in Case T-201/04 Microsoft
Corporation v. Commission of the European Communities [2005] 4 C.M.L.R. 5,
[2005] Info. T.L.R. 179, [2005] E.C.D.R. 19, where the undertaking concerned, which
offers e-learning technology, was found to be tying the sale of their operating system
to the sale of their software for playing multimedia files, something which has been
referred to as compulsory licensing.
Market partitioning
Where a dominant undertaking imposes upon its customers obligations that bring
about a partitioning of the markets, this constitutes an abuse within the meaning of
Article 82, so much so that a clause prohibiting distributors from reselling bananas
when they are still green was condemned as abusive (Stuyck & Vogelaar, 2000).
Mergers
Since Case 6/72 Europemballage Corp and Continental Can Co Inc v Commission,
hearafter referred to as the Continental Can Case, some mergers have been
regarded as abuses of a dominant position within the meaning of Article 86.
According to this case, mergers are an abuse, if they strengthen a pre-existing
dominant position to the exclusion of all effective competition in a substantial part of
the Common Market (Cheng & Liu, 1995).

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 23

Mergers
It could be argued that the restrictions placed on undertakings in the e-learning
industry by Article 81 is forcing small to medium-sized enterprises to enter into more
substantial agreements to form concentrations, through either taking over or merging
with other undertakings. Some might argue that this is a good thing, as in a time of
increased globalisation undertakings within the European Union need not just
compete with enterprises within the union, but also compete on a global scale with
undertakings in the USA, and the emerging markets in India and China for example.
It could also be argued that small to medium-sized undertakings allow for a flexible
and dynamic market, and that mergers impede innovation and creativity. Whichever
position is right, it is certain that the e-learning industry will have to deal with mergers
more often as the market develops if undertakings are to overcome the restrictions
placed on them by Article 81.
The Merger Regulation
Mergers within the European Union must be carried out in accordance with Council
Regulation 139/2004 of 20 January 2004 on the control of concentrations between
undertakings, hereafter referred to as the Merger Regulation. In the context of this
regulation, a concentration is defined as what arises where a change of control on a
lasting basis results from either the merger of two or more previously independent
undertakings or parts of undertakings, or the acquisition, by one or more entities
already controlling at least one undertaking or by one or more undertakings whether
by purchase of securities or assets, by contract, or by any other means of direct or
indirect control, whole or parts of one or more other undertakings. The Merger
Regulation sets out that the Commission must make an appraisal of concentrations
with a view to establishing whether or not they are compatible with the common
market. According to the regulation a concentration which would not significantly
impede effective competition in the common market or in a substantial part of it, in
particular as a result of the creation or strengthening of a dominant position, should
be declared compatible with the common market, whereas a concentration that would
significantly impede effective competition, in the common market or in a substantial
part of it, such as through the creation or strengthening of a dominant position,
should be declared incompatible with the common market.
The Merger Regulation states that a concentration that has a Community dimension
must notify the Commission prior to their implementation and following the conclusion
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 24

of the agreement, the announcement of the public bid, or the acquisition of a


controlling interest. According to the regulation, a concentration has a Community
dimension where either the combined aggregate worldwide turnover of all the
undertakings concerned is more than 5 billion and the aggregate Community-wide
turnover of each of at least two of the undertakings concerned is more than 250
million, unless each of the undertakings concerned achieves more than two-thirds of
its aggregate Community-wide turnover within one and the same Member State or
the combined aggregate worldwide turnover of all the undertakings concerned is
more than 2.5 billion, in each of at least three Member States, the combined
aggregate turnover of all the undertakings concerned is more than 100 million, in
each of at least three Member States included for the purpose of the calculating the
combined aggregate turnover, the aggregate turnover of each of at least two of the
undertakings concerned is more than 25 million, and the aggregate Communitywide turnover of each of at least two of the undertakings concerned is more than
100 million, unless each of the undertakings concerned achieves more than twothirds of its aggregate Community-wide turnover within one and the same Member
State. The Merger Regulation states that if a concentration does not have a
Community dimension and is capable of being reviewed under the national
competition laws of at least three Member States, the undertakings party to the
merger may, before any notification to the competent authorities inform the
Commission by means of a reasoned submission that the concentration should be
examined by the Commission, but any Member State competent to examine the
concentration under its national competition law may, within 15 working days of
receiving the reasoned submission, express its disagreement as regards the request
to refer the case.
Ancillary Agreements
Essential to restricting competition when undertakings chose to merge and form a
concentration are ancillary agreements. According to Commission Notice 90/C
203/05 the restrictions in such agreements must be necessary to the implementation
of the concentration, which means that in their absence the concentration could not
be implemented or could only be implemented under more uncertain conditions, at
substantially higher cost, over an appreciably longer period or with considerably less
probability of success and this must be judged on an objective basis. The notice
further states that the question of whether a restriction meets these conditions cannot

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 25

be answered in general terms. In particular as concerns the necessity of the


restriction, it is proper not only to take account of its nature, but equally to ensure, in
applying the rule of proportionality, that its duration and subject matter, and
geographic field of application, do not exceed what the implementation of the
concentration reasonably requires and that if alternatives are available for the
attainment of the legitimate aim pursued, the undertakings must choose the one
which is objectively the least restrictive of competition.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 26

European Intellectual Prop erty Law


An area of EU law that has had a huge and extensive effect on how the e-learning
industry conducts itself is intellectual property law. Referred to in Article 30 (ex 36) of
the EC Treaty as industrial and commercial property, intellectual property rights are
usually granted to a legal or natural person to give them exclusive enjoyment of
valuable property rights throughout the world (Kent, 2001). Intellectual property rights
are very much apparent in the content and technology sectors of the e-learning
industry, with content such as learning materials requiring necessary permissions
before they are used (Worley, 2006).

Copyright
Copyright is one of the artistic and literary properties covered by EU law and is the
one that offers the most protection to the small firms that produce the content and
software in the e-learning industry. Copyright covers many of the original literary
works produced by the e-learning industry, such as instructional materials, instruction
manuals and the databases and computer software that store and display materials,
original artistic works, such as photographs, diagrams, maps and logos, as well as
original sound and video recordings. According to Kennedy (2002) the materials
produced by those in the content and services sectors of the e-learning industry
attract copyright protection. Kennedy indicates that historically materials produced by
universities resulted in scholarly lectures, articles and books and the ownership of
course content had not been a contested issue, but with the expansion in e-learning
conducted at a distance academics have started to produce a number of other
copyrighted materials such as multimedia works and videotaped lectures, distributed
either through CD-ROMs or online. The ownership of learning materials has often
been disputed and some undertakings in the e-learning industry are keen to ensure
that the copyright to the content developed by their works belong to them (Kennedy,
2002). In the case of Stephenson, Jordan and Harrison Ltd v Macdonald and Evans
[1952] 69 RPC10 in the United Kingdom there was a dispute between a management
consultant who published his course materials in a book and the management
consultancy that employed him as to who owned the copyright to the materials. It
was held by the court that the copyright belonged to the originator of the works and
not the firm that employed them. Whilst this would suggest that undertakings would
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 27

have to ensure that their contract of employment stated that the copyright belongs to
them and not their workers, subsequent legislation makes it clear that work carried
out during the course of a workers employment belongs to the undertaking
employing the worker unless the contract states otherwise.
An overview of the EU Directives relating to copyright
The European Union has legislated with regarding to copyright extensively since the
1990s. Directive 91/250/EEC of the Council, May 14, 1991, concerning the legal
protection of the computer programs has offered the most protection to undertakings
in the e-learning industry, specifically by giving computer programs, such as elearning systems, the same legal protection as literary works, including preparatory
work on the software, as well as by clarifying the law with regard to who holds the
copyright, by stating that the author of a computer program shall be the natural
person or group of natural persons who has created the program or, where the
legislation of the Member State permits, the legal person designated as the rightholder by that legislation, where collective works are recognized by the legislation of
a Member State, the person considered by the legislation of the Member State to
have created the work shall be deemed to be its author; in respect of a computer
program created by a group of natural persons jointly, the exclusive rights shall be
owned jointly and where a computer program is created by an employee in the
execution of his duties or following the instructions given by his employer, the
employer exclusively shall be entitled to exercise all economic rights in the program
so created, unless otherwise provided by contract.
Directive 92/100/EEC of 19 November 1992 concerned rental rights and lending
rights and on certain rights related to copyright in the field of intellectual property
relating to cinematographic or audiovisual work or moving images, whether or not
accompanied by sound, such as an educational video. It set out that the exclusive
right to authorize or prohibit rental and lending shall belong to the author in respect of
the original and copies of his work, the performer in respect of fixations of his
performance, the phonogram producer in respect of his phonograms and the
producer of the first fixation of a film in respect of the original and copies of their film
with the principal director of the work being considered as its author or one of its
authors and allowed Member States to provide for others to be considered as its coauthors.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 28

Council Directive 93/83/EEC of 27 September 1993 complemented Directive


82/100/EEC by setting out the coordination of certain rules concerning copyright and
rights related to copyright applicable to satellite broadcasting and cable
retransmission. Directive 82/100/EEC set out that broadcasting right Member States
should provide an exclusive right for the author of a work, such as an educational
programme, to authorize the communication to the public by satellite of that
copyrighted work.

This protection is of particular relevance to the expanding e-

learning industry as according to Bates & Bates (2005) low income groups who can
benefit from e-learning have been early adopters of entertainment technology such
as satellite and cable TV.
Council Directive 93/98/EEC of 29 October 1993 concerned the harmonizing the term
of protection of copyright and certain related rights within the European Union,
covering areas including the duration of authors rights, cinematographic or
audiovisual works, the duration of related rights, protection of previously unpublished
works, critical and scientific publications, and photographs.
Regarding the duration of authors rights the Directive 93/98/EEC as amended by
Directive 2001/29/EC set out that the rights of an author of a literary or artistic work,
such as a e-learning program, shall run for the life of the author and for 70 years after
their death, irrespective of the date when the work is lawfully made available to the
public, in the case of a work of joint authorship that term shall be calculated from the
death of the last surviving author and in the case of anonymous or pseudonymous
works, the term of protection shall run for seventy years after the work is lawfully
made available to the public. However, when the pseudonym adopted by the author
leaves no doubt as to his identity, or if the author discloses his identity during the
period referred to in the first sentence, the term of protection applicable is 70 years
after the authors death. The directive further states that where a work is published in
volumes, parts, instalments, issues or episodes and the term of protection runs from
the time when the work was lawfully made available to the public, the term of
protection shall run for each such item separately and in the case of works for which
the term of protection is not calculated from the death of the author or authors and
which have not been lawfully made available to the public within seventy years from
their creation, the protection shall terminate. With regard to cinematographic or
audiovisual works the directive states that the principal director of a cinematographic
or audiovisual work shall be considered as its author or one of its authors, while
giving Member States the freedom to designate other co-authors, the term of
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 29

protection of cinematographic or audiovisual works shall expire 70 years after the


death of the last of the following persons to survive, whether or not these persons are
designated as co-authors: the principal director, the author of the screenplay, the
author of the dialogue and the composer of music specifically created for use in the
cinematographic or audiovisual work.
With regard to the duration of related rights, the amended directive states that the
rights of producers of phonograms shall expire 50 years after the fixation is made,
but if the phonogram has been lawfully published within this period, the said rights
shall expire 50 years from the date of the first lawful publication and if no lawful
publication has taken place within the period mentioned in the first sentence, and if
the phonogram has been lawfully communicated to the public within this period, the
said rights shall expire 50 years from the date of the first lawful communication to the
public. This area of legislation is becoming particularly relevant to the e-learning
industry as the dividing line between the content and services sectors becomes less
obvious. The adopting of podcasting as an educational delivery method brings
educational providers into the legal definition of phonogram producers. Podcasting by
definition is a means to publish audio content to the world via the Internet, meaning
audiences are able to subscribe to their favourite channels and automatically receive
the latest content in iTunes or a similar client (Stolarz & Felix, 2006). Richardson
(2006) suggests that podcasting as an educational technique can be utilised by world
language teachers, who could record and publish daily practice lesson that students
could listen to at home, or download to their own MP3 players. As a phonogram, a
podcasted audio recording by such a teacher would be protected by copyright for 50
years after it is recorded.
With regard to the protection of previously unpublished works any person who, after
the expiry of copyright protection, for the first time lawfully publishes or lawfully
communicates to the public a previously unpublished work, shall benefit from a
protection equivalent to the economic rights of the author. The term of protection of
such rights shall be 25 years from the time when the work was first lawfully published
or lawfully communicated to the public. With regard to critical and scientific
publications

the directive states that member States may protect critical and

scientific publications of works which have come into the public domain and that the
maximum term of protection of such rights shall be 30 years from the time when the
publication was first lawfully published. With regard to the protection of photographs,
the directive states that photographs which are original in the sense that they are the
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 30

author's own intellectual creation shall be protected in the same way as artistic or
literary works and that no other criteria shall be applied to determine their eligibility for
protection and that Member States may provide for the protection of other
photographs.

Designs
Designs like copyright are an artistic property covered by EU law, which cover the
appearance of the whole or a part of a product resulting from the features of, in
particular, the lines, contours, colours, shape, texture and/or materials of the product
itself and/or its ornamentation. In this context product means any industrial or
handicraft item, including inter alia parts intended to be assembled into a complex
product, packaging, get-up, graphic symbols and typographic typefaces, but
excluding computer programs, such as educational software, with complex product
meaning a product which is composed of multiple components which can be
replaced permitting disassembly and reassembly of the product, which can include
educational technology, such as robotics. Covered by Directive 98/71 that
harmonised design rights in the European Union, designs are protected by European
Union Law. The directive, which was published on 13 October 1998, requires
Member States to protect designs by registration, and confers exclusive rights upon
their holders, stating a design shall be protected by a design right to the extent that it
is new and has individual character and a design applied to or incorporated in a
product that constitutes a component part of a complex product should only be
considered to be new and to have individual character if the component part, once it
has been incorporated into the complex product, remains visible during normal use
(i.e. use by the end user, excluding maintenance, servicing or repair work) of the
latter, and to the extent that those visible features of the component part fulfil in
themselves the requirements as to novelty and individual character. According to the
directive, a design should be considered new if no identical design has been made
available to the public before the date of filing of the application for registration or, if
priority is claimed, the date of priority. Designs are deemed to be identical if their
features differ only in immaterial details and the directive states that a design should
be considered to have individual character if the overall impression it produces on the
informed user differs from the overall impression produced on such a user by any
design which has been made available to the public before the date of filing of the
application for registration or, if priority is claimed, the date of priority. The directive
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 31

further states that in assessing individual character, the degree of freedom of the
designer in developing the design shall be taken into consideration.

Patents
Patents are a form of industrial property and covers valuable rights connected with
the production and distribution of goods and services. Whilst the EC Treaty provides
a legal base for harmonising patent laws within the European Union, a separate
treaty, the Convention on the Grant of European Patents, commonly referred to as
the European Patent Convention, governs patents in the EU. The Convention states
that European parents can be granted for any inventions that are susceptible of
industrial application, which and new and involve an inventive step. While patents are
not part of European Union Law, directives covering enforcement of intellectual
property, such as Directive 2004/48/EC, have been considered to include patents
issued by the European Patent Office.

Tradema rks
Trademarks are another form of industrial property, covering valuable rights that are
connected with the production and distribution of goods and services. A trademark
can be a word, phrase, symbol or a combination of these that identifies and
distinguishes the source of the goods or services of one legal or natural person from
those of others. In the European Union there are two types of trademark, a national
one governed by Member States, which has been harmonised by Directive
89/104/EEC and a Community Trademark, which is regulated by Regulation
40/94/EEC.

Enfo rcement o f Intellectual P roperty


Directive 2004/48/EC, hereafter referred to as the IP Enforcement Directive, makes
provision on the enforcement of intellectual property rights, which the European
Commission has made clear in a statement (2005/295/EC) applies to copyright,
rights related to copyright, sui generis rights of a database maker, rights of the
creator of the topographies of a semiconductor product, trademark rights, design
rights, patent rights, including rights derived from supplementary protection
certificates, geographical indications, utility model rights, plant variety rights, trade
names, in so far as these are protected as exclusive property rights in the national
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 32

law concerned. The IP Enforcement Directive makes it clear that Member States
should provide for the measures, procedures and remedies necessary to ensure the
enforcement of the intellectual property rights covered by the Directive and that those
measures, procedures and remedies should be fair and equitable and shall not be
unnecessarily complicated or costly, or entail unreasonable time-limits or
unwarranted delays and those measures, procedures and remedies should also be
effective, proportionate and dissuasive and should be applied in such a manner as to
avoid the creation of barriers to legitimate trade and to provide for safeguards against
their abuse.

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European Emp loym ent Law


A founding freedom of free movement of labour underpins European employment
law. During the early years of the European Union, employment law at the European
level was low key, with the main emphasis on the achievement of free movement of
labour, which in the context of mixed economies depended on a much wider set of
conditions that needed to be fulfilled, including the transferability of social security
payments, the mutual recognition of degrees and professional qualifications, and the
dissemination of information about jobs through a properly functioning labour
exchange (Tsoukalis, 1997).

Equality o f Pay and T reatment


Equality of pay for men and women without discrimination based on sex is enshrined
in the EC Treaty in Article 141, which states that each Member State must ensure
that the principle of equal pay for male and female workers for equal work or work of
equal value is applied with pay being the ordinary basic or minimum wage or salary
and any other consideration, whether in cash or in kind, which the worker receives
directly or indirectly, in respect of his employment, from his employer. Article 141
indicates that equal pay without discrimination based on sex means that pay for the
same work at piece rates shall be calculated on the basis of the same unit of
measurement and that that pay for work at time rates shall be the same for the same
job.

Working T ime Legislat ion


Whilst the working time legislation has its legal base in Article 137 (ex 118a), which is
health and safety, it could also be considered to be law relating to employment so will
be discussed in this section. The Working Time Directive was first introduced in 1993
and there have been a number of amendments since, including Directive 2003/88/EC
[OJ 2003, L299/9] (hereafter referred to as the Directive of 2003), which consolidated
the previous directives. The first part of the Directive of 2003 defines a number of
terms, in some cases not being clear enough in the light of recent judgements of the
European Court of Justice (ECJ). It defines working time as any period during which
the worker is working, at the employer's disposal and carrying out his activity or
duties, in accordance with national laws and/or practice. This does not make it clear
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 34

whether time spent on call is working time. When a worker is on call they are
available for work, but not actually carrying out any duties and in some cases these
workers are even sleeping while being on call. Despite these workers not carrying out
any duties, in the recent cases of Sindicato de Mdicos de Asistencia Pblica
(Simap) v. Conselleria de Sanidad y Consumo de la Generalidad Valenciana (C303/98) and Landeshauptstadt Kiel v. Norbert Jaeger (C-151/02), the ECJ ruled that
time spent on call is working time. Further revisions of the Directive of 2003 could
clarify this by either amending the definition of working time to include time on call or
including a specific definition of time on call and include provisions for treating time
on call as working time. There would need to be clarifications to on call time as it
might be the case that only the on call time spent in the workplace is classed as
working time and on call time spent away from the workplace is classed as a rest
period during which the worker is being given adequate rest. The Directive of 2003
defines rest period as any period which is not working time and it defines adequate
rest as meaning that workers have regular rest periods, the duration of which is
expressed in units of time and which are sufficiently long and continuous to ensure
that, as a result of fatigue or other irregular working patterns, they do not cause injury
to themselves, to fellow workers or to others and that they do not damage their
health, either in the short term or in the longer term.
The Directive of 2003 defines night time as any period of not less than seven hours,
as defined by national law, and which must include, in any case, the period between
midnight and 5.00, shift work as any method of organising work in shifts whereby
workers succeed each other at the same work stations according to a certain pattern,
including a rotating pattern, and which may be continuous or discontinuous, entailing
the need for workers to work at different times over a given period of days or weeks
and it has detailed definitions for different types of workers, including night workers,
shift workers and mobile workers.
The main provisions of the Directive of 2003 are that workers should be granted; a
minimum daily rest period of 11 consecutive hours a day (Article 3); a rest break
where the working day is longer than six hours (Article 4); a minimum rest period of
one day a week (Article 5); a maximum 48 hour working week averaged over a
reference period (Article 6); a statutory right to annual paid holiday of 4 weeks (Article
7); and night working must not exceed eight hours a night on average (Article 8).
All of the provisions of the Directive of 2003 from Article 3 to Article 8 seem adequate
to protect most workers in the e-learning industry. However, there are a number of
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 35

exclusions and derogations from these provisions that can significantly affect the
effectiveness of the legislation. The exclusions and derogations provided in the
Directive of 2003 include allowing managing executives or other persons with
autonomous decision-taking powers, such as those who are self-employed or
managers are excluded from Articles 3 to 6, 8 and 16. There are a significant
proportion of workers who are either self-employed or managers with autonomous
decision-taking powers who are excluded from these very important provisions. Many
parts of the e-learning industry rely on self-employed consultants, and there are
significant risks to workers if they suffer from fatigue caused by the WTD 2003 not
being applied to them. The Directive of 2003 also allows for Member States to extend
the reference period over which working time is calculated to one year instead of it
being over the period of four months. This potentially allows workers to work in
excess of the 48-hour limit over an extended period. However, it could be argued that
this could provide the worker with an element of flexible working, whereby they can
work considerably more than 48-hours over one period and take an extended break
at some point during the reference period.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 36

European Sa fety , H ealth and Environmenta l Law


While some pieces of European Union law affect some industries more than others,
such as intellectual property and public procurement affecting the e-learning industry
more than some other sectors, the less discussed Safety, Health and Environmental
Law affects all industries. With an increase in the services sector of the e-learning
industry through the expansion of blended learning, considerations of health and
safety and the working environment are becoming more relevant.

The Built Env ironm ent


Whilst many may associate e-learning with learners taking part in online courses, the
reality of the e-learning industry is that the content, technology and services are
developed and provided in the built environment. The safety, health and environment
law will become even more apparent as the blending of learning through computers
and learning in the classroom occurs.
Council Directive 90/270/EEC set out to provide minimum safety and health
requirements for work with display screen equipment. The Directive applies to
workers using workstations, such as those in offices, though excludes those for
public use. In the directive, a workstation is defined as an assembly comprising
display screen equipment, which may be provided with a keyboard or input device
and/or software determining the operator/machine interface, optional accessories,
peripherals including the diskette drive, telephone, modem, printer, document holder,
work chair and work desk or work surface, and the immediate work environment, and
a worker is defined as any person employed by an employer, including trainees and
apprentices but excluding domestic servants. According to Banks (2005) there
several things that an employer has to do to comply with the directive, which
including analysing workstations to assess and reduce risk, including looking at the
equipment, furniture and working environment as well as the job being done and any
special requirements of the individuals member of staff; ensuring workstation meet
minimum requirements, including the provision of adjustable chairs and suitable
lighting as well as tilt and swivel monitors, and sufficient workspace; plan the
employees work so that there are breaks and changes in activity; on request
arranging eye tests and providing spectacles if special ones are needed; providing
safety and health training and information, and ensuring that employees can use their
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 37

workstation safely, such as through providing training in the best use of the equipment
to avoid health problems and by giving information to employees about safety and
health using the workstation.

Product Sa fety
While product safety in relation to the e-learning industry may conjure up images of
educational toys, European Union Law covers all aspects of products produced by
the e-learning industry intended for consumer use. Directive 2001/99/EC of the
European Parliament and the Council on general product safety, hereafter referred to
as the Product Safety Directive, sets out what undertakings producing products in the
EU, including those in the e-learning industry must do, to ensure that they are safe.
The Product Safety Directive defines a product as any product, including in the
context of providing a service, which is intended for consumers or likely, under
reasonably foreseeable conditions, to be used by consumers even if not intended for
them, and is supplied or made available, whether for consideration or not, in the
course of a commercial activity, and whether new, used or reconditioned. This
provision means that even where the consumer does not purchase a product, if that
product is likely to be used by them then it must conform to the directive. In the
services sector of the e-learning industry, this might include the computers that
consumers use when they are in a blended learning environment. The Directive
makes it quite clear that for all products intended for consumer use, only safe
products should place on the market by undertakings. The Product Safety Directive
defines a safe product as any product which, under normal or reasonably
foreseeable conditions of use including duration and, where applicable, putting into
service, installation and maintenance requirements, does not present any risk or only
the minimum risks compatible with the product's use, considered to be acceptable
and consistent with a high level of protection for the safety and health of persons,
taking into account the characteristics of the product, including its composition,
packaging, instructions for assembly and, where applicable, for installation and
maintenance; the effect on other products, where it is reasonably foreseeable that it
will be used with other products; the presentation of the product, the labelling,
warnings and instructions for its use and disposal and any other indication or
information regarding the product; and the categories of consumers at risk when
using the product, in particular children and the elderly. The Directive seems
particularly relevant to durable items produced by the e-learning industry such as
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 38

educational toys, where they are used by children, but is also seems apparent that it
applies to software products that vulnerable people such as the young and elderly
use.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 39

Developm ents and Propo sit ion s for chan ges in EU La w


There have been significant developments in European Union Law in the last 5
years, most notably with the agreement of the Treaty Establishing a Constitution for
Europe. French (2005) reported on the British Prime Ministers reaction to the
outcome of France rejecting the Constitutional Treaty, indicating that he thinks there
should be time for reflection. The Constitutional Treaty would have revoked the EC
Treaty and provided a new rule book for the European Union, something which the
author believes is not in keeping with the principle of proportionality and a project that
should be abandoned in favour of retaining the EC Treaty, albeit with modifications.
This section outlines what changes the author thinks should be made to the EC
Treaty and other aspects of EU Law for the benefit of democracy and those in the elearning industry.

Function ing o f the Eu ropean Union


While many may talk of a European Superstate, which would end the existing set-up
of Member States being independent unlike say the states that make up the United
States of America the author believes that little change is needed to how the
legislative institutions of the European Union operate.
The three legislative institutions of the European Union represent three separate
interests. The Commission represents the Community interests, the Council
represents the national interest and the Parliament represents the interests of the
people of the European Union. Scmitz (2005) argues that there is a need to address
what has become commonly known as the democratic deficit. This democratic
deficit exists it is argued because the Commission, representing the Community
interest is unelected. However, in recommending changes to the functioning of the
institutions of the European Union, it should be ensured that the interests they
represent are maintained. The rest of this section will deal with how the democratic
deficit in the three legislative arms of the European Union can be addressed for the
benefit of the whole of the Community, including the e-learning industry.
The Principles of European Union Law
The EC Treaty has written into in the principles of proportionality and subsidiarity.
These are important, as with proportionality the legislature has to ensure it only
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 40

passes laws that are necessary and does not create laws that go beyond the aims of
the legislation. Subsidarity is important as it insures that laws and decisions are made
at the lowest level practical.
Two principles of representativity and sustainability should be enshrined into the EC
Treaty

Although part of social dialogue, the principle of represenativity that states that those
affected by a decision should have a say in how it is made is not a principle of EU
Law in the same way that proportionality is. If it was it would ensure that decisions
are only made if those affected by them are consulted. In the e-learning industry this
could mean that laws on safety requirements for visual display units or software
would have to be made only after consulting the industry and its customers. Another
principle that should be added to the EC Treaty is the principle of sustainability. This
would ensure that laws are only passed if their affects on the sustainability of the
Community are not substantially negative, so for example a piece of legislation
banning smoking in establishments providing e-learning services would only be
passed if it could be proven the social, cultural and economic benefits out way the
social, cultural and economic costs.
The European Commission
The European Commission resembles the executive of a government, in that it can
propose laws, but unlike most governments, those that make up it are unelected and
accountable only to the European Parliament, creating a democratic deficit.
The President of the European Commission should be directly elected by all Citizens
subject to European Union Law using the first-past-the-post mechanism

As the European Commission is the only body in the European Union that can
propose laws it is a fundamental flaw that Commissioners are appointed rather than
elected. It would be beneficial to the functioning of the Union if there was a
Community-wide election to elect a President of the Commission who would ensure
that legislation proposed is in the interests of the whole of the EU as supported by an
electoral mandate. In discussions with members of the Council of Ministers the
author found that these members were concerned about giving too much power to
one individual and democratically legitimising the Commission, but as the author is
not proposing any change to the powers of the Commission, any laws proposed by
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 41

the Commission would need the support of the Council of Ministers and in some cases
the European Parliament. The author feels it is important that the President have
legitimacy which is why it is recommended that the first-past-the-post mechanism be
used so that voters have the option of voting out candidates they do not want and
vote for candidates they do want, which would give them the option of voting for an
individual rather than simply a political party.
The remaining Commissions should be elected using the list method of proportional
representation, with the lists being made up of candidates affiliated with a political
party represented in the European Parliament.

While first part the post is important for electing individuals such as presidents and
mayors it can sometimes not take account of the differences and similarities between
groups of people such as political parties. The author proposes that the remaining
Commissions who take on portfolios be elected using the list system of proportional
representation so that no one party dominates the Commission, making it more likely
the Commission will represent the community interest.
The Council of the European Union and The European Parliament
While the European Commission quite clearly suffers from a democratic deficit, it is
also apparent that the Council of the European Union and the European Parliament
also have some issues relating their democratic structure.
The members of the Council should remain appointed by the governments elected in
the Member States they represent, in order to maintain representing the national
interest

While it is not perfect, the system whereby the Councils membership is made up of
ministers from the elected governments of Member States is probably making the
Council more able to represent the National interest.
The president of the Council should not be a full-time position, but should continue to
be on a rotational basis so that individual member states can set their national
priorities for their term of office, allowing the national interest of all Member States to
be represented.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 42

The aim of the Council is to represent the National interest, and it would be more
difficult for this to happen if each Member State did not have the opportunity to set
the direction and priorities of the Council.
The Members of the European Parliament should continue to be elected from multimember regional constituencies, though they should be elected using the first-pastthe-post mechanism of elimination rather than proportional representation.

It is at present with the proportional representation system as the method of electing


members to the European Parliament very difficult for a voter to get rid of a candidate
that is not performing to the standard they require. The advantage of the proportional
representation system is that Members of the European Parliament (MEP) are
elected to multi-member constituencies covering a region and in some cases a
nation, which means that the electorate will be able to go to another MEP if they do
not get satisfaction with their first choice. While the large constituency gives them this
choice, and is something that should be maintained, the proportional representation
system means that the election cannot vote out a candidate they do not want, like
they could if they were using the first-past-the-post method. While first-past-the-post
mechanisms are usually used for single-member constituencies, which are usually
much smaller than the regional ones used in European Parliament elections, in the
United Kingdom, first-past-the-post is used to elect local government politicians to
multi-member constituencies, known as wards. Proportional representation systems
usually make it difficult for the voter to get the candidate they want, as they may be
either at the bottom of their partys list, or they may be one of two candidates a
section of the electorate wants, but because they did not get enough first preference
votes they would not be elected. With the first-past-the-post mechanism, the voter
would be able to give an equally weighted vote to candidates they want, increasing
the chances of electing the politician they want and voting out the politician they do
not want.
The Social Partners
The Social Partners make agreements through the process of social dialogue, which
is the term used to describe the negotiations and discussions between the social
partners, employers and trade-unions organisations in the European Union (EU),
which it is argued plays a pivotal role in the European society. Social dialogue is at
the heart of the EUs economic and social model, enabling parallel progress on the
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 43

economic and social fronts (EC, 2004). Its main use is to allow for the development of
agreements on matters within the European Commissions competencies as an
alternative to the legislative route involving the Council of Ministers and the European
Parliament. Social dialogue has seen several positive developments, such as the
move towards greater autonomy and the introduction of so-called new generation
texts, in which the European social partners make recommendations to their
members and follow them up at the national level. To date, the social partners have
adopted over 300 joint texts on a large variety of subjects (ibid.). The achievements
of social dialogue have formed the basis for a more substantial process of
negotiation between management and labour at the EU level in the post-Maastricht
period and were critical in creating the environment in which two of the social
partners, namely UNICE and ETUC, who represent management and labour
respectively, could agree on a joint proposal for a new form of bargaining over the
content of social action programme directives (Rhodes, 1995).
Negotiation training is an expanding area, with established providers such as Henley
Management College providing two-day residential courses to individuals for as
much as 2583. Training current and future social dialogue negotiators is a costly
undertaking and ensuring that the training is appropriate and relevant is dependent
on the training providers being familiar with the intricacies of social dialogue and
other collective bargaining negotiations. Many negotiation training schemes will use
problem-based scenarios and role-play to teach negotiation skills, and those trying to
teach social dialogue in particular will ask participants to take on the positions of a
particular social partner, as is done at the University of Glamorgan. An opportunity for
the e-learning industry exists in this area, although electronic means of teaching
negotiation skills are not new. Indeed, until recently the Open University offered a
course in international negotiation skills through an electronic negotiation system.
Weiss (2005) argues that teaching negotiation skills though an electronic
environment provides a number of opportunities that the traditional face-to-face
classroom setting lacks. One affordable method of teaching negotiation electronically
is through e-mail. However studies investigating the role of e-mail for negotiation
have drawn negative conclusions. Indeed, Moore et al. (1999) argue that although email is becoming more important as a medium for negotiation, its advantages must
be weighed against some distinct shortcomings. Another approach to teaching
negotiation electronically is through simulation. Such e-learning systems can provide
an environment though which negotiation skills that are used in real-world
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 44

negotiations can be learned. Much research into simulating negotiation electronically


has focussed on e-mail (e.g. Croson, 1999) with few investigating systems
specifically designed for teaching negotiation through simulation. As e-learning is
becoming more mainstream, learning practitioners are more and more positioning
themselves for using simulations, which it argued will be the next significant use of
technology in learning (Nagy, 2005).

European Compet ition and Intellectua l Prop erty Law


There are clear conflicts between competition law and intellectual property law,
perhaps first evident in Constan and Grudig. While EU law provides protection for
patents granted under the European Patent Convention or international treaties, the
potential of software patents in the EU could be a threat to innovation in the elearning industry if a legal or natural person is allowed a guaranteed dominant
position with a particular technology.
The European Patent Convention should be scrapped and replaced with a
Community Patent compatible with Competition Law

A European Commission report (EC, 2006) found that although there is widespread
preference for the Community Patent as a way forward, stakeholders do not wish to
have one at any price and in particular not on the basis of the key elements of the
2003 CPA. A Community Patent, based on EU Law would have to be compatible with
the primary legislation included in the EC Treaty, including Article 82. A patent
granted exclusive rights to a particular technology would not be compatible with
Article 82 if the patent hold inhibited product development. The Commission v
Microsoft cases have established a need for compulsory licensing of technologies to
allow for product development, something that would benefit the e-learning industry
immensely.
While compulsory licensing of a technology may be important, there still needs to be
protection of a producers original material by copyright. This is done through the
copyright and related rights legislation as discussed, but there exists some specific
inequalities in the law, as at presents educators in the e-learning industry that
produce podcasts are not granted the same amount of protection as those that
produce course notes.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 45

The copyright term for a phonogram, such as a podcast, should be on the same
terms as a literary work, which is 70 years after the performers death.

This inequality should be addressed by the introduction of a Directive providing for


the copyright term for a phonogram such as a podcast the same terms as a literary
work.

European Emp loym ent Law


The Working Time Directive of 2003 allows workers to make an agreement with their
employer to opt-out of the provision of working only 48 hours. Employers are
currently able to agree with workers to opt-out of the Directive at the time they sign
the contract of employment, but they have to ensure there are no negative
consequences for the worker not opting-out and they have to keep records of the
hours worked by the workers that have opted-out. Allowing opt-outs to be agreed at
the stage of signing a contract of employment appears to put a significant degree of
pressure on the worker to agree to opt-out, even if they do not want to.
A future Directive should stipulate that employers are not allowed to request the
worker to opt-out at the same time they sign the contract of employment, but instead
shifting the initiative to the worker, who would have to indicate in writing to the
employer that they wish to opt-out.

In order for this move to be effective, worker would have to be given a period of time,
such as their probationary period in which they can make up their mind whether they
want to opt-out, without being pressurised by the employer to do so at the time they
sign the contract of employment. It could be argued that the requirement for the
employer to keep records of the amount of hours worked by the worker is putting an
unnecessary administrative burden on small to medium sized enterprises, something
which the EC Treaty indicates must not happen.
This burden should be remedied in a future Directive, which should put the
responsibility of keeping records of hours worked in the hands of the worker. It should
also be made the case that the worker is responsible for ensuring that they dont work
more than 48 hours a week over the reference period.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 46

It is possible that a worker that is a self-employed consultant in the e-learning industry


could be working in excess of 48 hours per week.
A future Directive should ensure that all workers, regardless of their profession or
employment status be required to make sure that they do not work more than 66
hours a week, and there would not be any derogations from this requirement.

It is possible for a self-employed consultant to work for more than one client and for a
worker to work for more than one employer taking them over the 48-hour mark, which
could affect their abilities at work. This is something that needs to be dealt with in a
future amendment of the Directive of 2003.

European Sa fety , H ealth and Environmenta l Law


A number of developments have been made in e-learning to encourage individuals
with social impairments to develop positive social behaviours in their environment
(e.g. Bishop, 2003; Golan & Baron-Cohen, 2006). However there are potential health
risks to the individual who make use of their mental intelligences rather than improve
their social intelligence, which could put cognitive stresses on the individual and at
worse result in them experiencing psychiatric injury. While the Product Safety
Directive requires that only safe products be allowed onto the market, products such
as those developed by Bishop (2003) and Golan & Baron-Cohen (2006) may require
a blended learning approach as opposed to a distance learning approach for them to
be fully safe and the law should reflect this.
A directive should be passed to make provisions so that any e-learning system that
attempts to change the social behaviour of an actor has to be supported by a trained
professional.

While the e-learning industry may need to be subject to laws relating to health, as
proposed above, it is possible that the product development and delivery side of the
industry could have impacts on the environment. The most obvious of these would be
where buildings need to be built to support the development and provision of elearning services, and if an e-learning firm proposes establishing in an area of
outstanding natural beauty for example, there needs to be the appropriate legislation
in place to ensure the natural environment is protected for purely commercial
concerns.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 47

A directive should be passed that requires all planning applications that will have an
impact on the socio-cultural, socio-economic and natural or built environment should
require an environmental impact assessment to determine the impact of the
development on these areas.

Legislation should be passed in line with the proposed principle of sustainability to


require that planning applications that would have an impact on the socio-cultural,
socio-economic and natural or built environment should require an environmental
impact assessment before the planning authorities are able to pass it. This could
ensure for example that an e-learning firm with a dominant position does not destroy
the socio-economic environment of a community buy building a large training suite
next to a community centre that provides courses for the benefit of the community on
a not-for-profit basis.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 48

Discussion
The worldwide e-learning industry is estimated to be worth over 38 billion euros
according to conservative estimates, although in the European Union only about 20%
of e-learning products are produced within the common market. In 2000 the
European educational multimedia industry with it being argued that this was because
much of the development of e-learning systems comes from a high number of small
firms within the industry with critics counter-arguing that

this is only a problem

because of how small businesses have been burdened with increased legislation
originating from the European Union. Despite the legislative burden placed on small
e-learning firms, the attitude of the European Commission towards e-learning has
been very positive.
Developments in Internet and multimedia technologies are the basic enabler of elearning, with content, technologies and services being the three key segments of the
e-learning industry. Whilst delivery of educational material by disc, either CD-ROM or
its successor DVD-ROM is still a core business for the e-learning industry, the
biggest growth since the increase in use of high-speed Internet connections, such as
broadband, has been Web-based learning. While the Web has revolutionised the elearning industry, in that content is now delivered by this means more so than on CDROM, there is further change ahead with the drive for better provision of e-learning
services. The services sector of the e-learning industry is set to grow significantly as
the demand for blended learning increases. Blended learning, as the name suggests,
involves blending e-learning with traditional methods of learning and development
and it is argued that it is the most logical and natural evolution of the learning
agenda. Market segmentation of the Web-based sector of the e-learning industry
reveals that e-learning products and services serve three primary markets, which are
corporate training, secondary education and post-compulsory education, although it
is becoming more common for e-learning services to provided to other areas such as
in out-of-school clubs and increasingly public authorities are becoming clients of the
e-learning industry and there are an ever-increasing number of public procurement
proposals relating to e-learning.
Visions of a unified Europe with a centralised government have existed since the
Roman era, but while such visions of diluting national identities have failed, the vision
of a common market has prevailed. The six founders of the ECSC in 1957
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 49

established the European Economic Community (EEC), referred to as the European


Common Market in the United Kingdom, with the signing of the Treaty of Rome. The
founding treaty was based on the four freedoms of free movement of goods,
services, capital and people. The EC Treaty has written into in the principles of
proportionality and subsidiarity. These are important, as with proportionality the
legislature has to ensure it only passes laws that are necessary and does not create
laws that go beyond the aims of the legislation. Subsidarity is important as it insures
that laws and decisions are made at the lowest level practical. Although part of social
dialogue, the principle of represenativity that states that those affected by a decision
should have a say in how it is made is not a principle of EU Law in the same way that
proportionality is. If it was it would ensure that decisions are only made if those
affected by them are consulted. In the e-learning industry this could mean that laws
on safety requirements for visual display units or software would have to be made
only after consulting the industry and its customers. Another principle that should be
added to the EC Treaty is the principle of sustainability. This would ensure that laws
are only passed if their affects on the sustainability of the Community are not
substantially negative, so for example a piece of legislation banning smoking in
establishments providing e-learning services would only be passed if it could be
proven the social, cultural and economic benefits out way the social, cultural and
economic costs. The legislative arm of the European Union is made up of three
institutions, which each represent an interest. The European Commission represents
the community interest, the Council of the European Union represents the national
interests of Member States, and the European Parliament represents the interests of
the people of the European Union. In addition to these there is the European Court of
Justice (ECJ), which is the body that interprets the EC Treaty and the legislation
produced by the three legislative institutions. The European Commission consists of
25 members representing each Member State, one of whom is the President,
appointed by common accord of the governments of Member States as set out in
Article 213 (ex 157) of the EC Treaty. No Qualifications are prescribed for
Commissioners other than that they must have general competence, their
independence must be beyond doubt and they must be nationals of a Member State.
One of the core responsibilities of the European Commission is to propose
legislation, particularly as even where the EC Treaty confers power on the Council of
the European Union to make decisions, this cannot be done without a legislative
proposal from the European Commission. The European Commission resembles the
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 50

executive of a government, in that it can propose laws, but unlike most governments,
those that make up it are unelected and accountable only to the European
Parliament, creating a democratic deficit. The President of the European Commission
should be directly elected by all Citizens subject to European Union Law using the
first-past-the-post mechanism. As the European Commission is the only body in the
European Union that can propose laws it is a fundamental flaw that Commissioners
are appointed rather than elected. It would be beneficial to the functioning of the
Union if there was a Community-wide election to elect a President of the Commission
who would ensure that legislation proposed is in the interests of the whole of the EU
as supported by an electoral mandate. While first part the post is important for
electing individuals such as presidents and mayors it can sometimes not take
account of the differences and similarities between groups of people such as political
parties. The remaining Commissions should be elected using the list method of
proportional representation, with the lists being made up of candidates affiliated with
a political party represented in the European Parliament.
The Council of the European Union, often referred to as the Council of Ministers, is
the core institution for developing legislation based on a proposal from the
Commission. In accordance with Article 203 (ex 146) it consists of a representative of
each Member State at ministerial level, authorised to commit the Government of that
Member State with Article 202 (ex 145) stating that its main function is to take
decisions. While it is not perfect, the system whereby the Councils membership is
made up of ministers from the elected governments of Member States is probably
making the Council more able to represent the National interest. The aim of the
Council is to represent the National interest, and it would be more difficult for this to
happen if each Member State did not have the opportunity to set the direction and
priorities of the Council.
A parliament has been defined as a public body consisting of elected members
representing the interests of the people of a country and to this extent the European
Parliament can be considered to be a parliament, but it lacks several things that
characterise national parliaments of the Member States. Unlike national parliaments,
the European Parliament does not have the power to initiate legislation, as it is the
European Commission that initiates legislative proposals in the European Union. Also
unlike national parliaments, the majority party of the European Parliament does not
form the government, as there is no executive. The functions that resemble what a
government would do, such as proposing legislation, are in most cases carried out by
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 51

the European Commission. It is at present with the proportional representation system


as the method of electing members to the European Parliament very difficult for a
voter to get rid of a candidate that is no performing to the standard the require. The
advantage of the proportional representation system is that Members of the
European Parliament (MEP) are elected to multi-member constituencies covering a
region and in some cases a nation, which means that the electorate will be able to go
to another MEP if they do not get satisfaction with their first choice. Proportional
representation systems usually make it difficult for the voter to get the candidate they
want, as they may be either at the bottom of their partys list, or they may be one of
two candidates a section of the electorate wants, but because they did not get
enough first preference votes they would not be elected. With the first-past-the-post
mechanism, the voter would be able to give an equally weighted vote to candidates
they want, increasing the chances of electing the politician they want and voting out
the politician they do not want. The Members of the European Parliament should
continue to be elected from multi-member regional constituencies, though they
should be elected using the first-past-the-post mechanism of elimination rather than
proportional representation.
The European Court of Justice is made up of 25 Judges and 8 Advocates General,
which may be increased by the Council of the European Union acting unanimously.
The Judges and Advocates General are appointed by common accord of the
governments of the Member State and hold office for a renewable term of six years
according to the EC Treaty and are chosen from legal experts whose independence
is beyond doubt and who possess the necessary qualifications that would be
required for appointment to the highest judicial offices in their Member State of origin.
There are three sources of European Union Law; primary legislation, secondary
legislation and rulings of the European Court of Justice. Secondary legislation is
based on the EC Treaty and implies a variety of procedures defined thereof; in the
framework of the EC Treaty establishing the European Union, secondary legislation
may take the form of Regulations, Directives, Decisions, Recommendations, or
Opinions. Primary legislation includes the EC Treaty and is agreed by direct
negotiation between Member State governments, and laid down in the form of
treaties, which are then subject to ratification by the national parliaments, with the
same procedure applying for subsequent amendments to the treaty.
There are a number of areas of law affecting the e-learning industry that legislation
from the EU is influenced by, including in the provision of goods and services,
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 52

competition law, intellectual property law, employment law, and health, safety and
environmental law.
The free movement of goods and services is a founding principle of the European
Union and it is unequivocally clear that the Members States are not allowed to adopt
measures restricting trade in goods or services, with the main purpose of the EC
Treaty provisions on the free movement of goods and services being to abolish
restrictions created by Member States, and the great majority of cases and
Community legislation have been aimed at dismantling barriers created by public
authorities. Through Article 49, the EC Treaty contains a prohibition on discrimination
regarding the provision of services by a person in one Member State who is
established in another and in the e-learning industry, this can be seen as giving an
undertaking that provides e-learning services, the right to provide their services in
another Member State, which is essential to the growth of the industry throughout the
Common Market.
It has been argued that the present e-learning industry of a high number of small to
medium-sized undertakings is slowing the growth of the industry and that as few elearning companies can truly do it all they will form strategic alliances to diversify and
strengthen offerings, with form such alliances will take are limited by competition law,
in particular Articles 81 (ex 85) and 82 (ex 86) of the EC Treaty. The concept of free
competition is a fundamental element in the EC Treaty, which embraces the premise
that any restriction on free competition is intrinsically reprehensible (Hanlon, 2003). It
could be argued that the restrictions placed on undertakings in the e-learning industry
by Article 81 is forcing small to medium-sized enterprises to enter into more
substantial agreements to form concentrations, through either taking over or merging
with other undertakings. Some might argue that this is a good thing, as in a time of
increased globalisation undertakings within the European Union need not just
compete with enterprises within the union, but also compete on a global scale with
undertakings in the USA, and the emerging markets in India and China for example.
It could also be argued that small to medium-sized undertakings allow for a flexible
and dynamic market, and that mergers impede innovation and creativity. Whichever
position is right, it is certain that the e-learning industry will have to deal with mergers
more often as the market develops if undertakings are to overcome the restrictions
placed on them by Article 81.
An area of EU law that has had a huge and extensive effect on how the e-learning
industry conducts itself is intellectual property law. Referred to in Article 30 (ex 36) of
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 53

the EC Treaty as industrial and commercial property, intellectual property rights are
usually granted to a legal or natural person to give them exclusive enjoyment of
valuable property rights throughout the world and intellectual property rights are very
much apparent in the content and technology sectors of the e-learning industry, with
content such as learning materials requiring necessary permissions before they are
used.
There are clear conflicts between competition law and intellectual property law,
perhaps first evident in Constan and Grudig. While EU law provides protection for
patents granted under the European Patent Convention or international treaties, the
potential of software patents in the EU could be a threat to innovation in the elearning industry if a legal or natural person is allowed a guaranteed dominant
position with a particular technology. Altjough there is widespread preference for the
Community Patent as a way forward, stakeholders do not wish to have one at any
price and in particular not on the basis of the key elements of the 2003 CPA and a
Community Patent, based on EU Law would have to be compatible with the primary
legislation included in the EC Treaty, including Article 82. A patent granted exclusive
rights to a particular technology would not be compatible with Article 82 if the patent
hold inhibited product developed. The Commission v Microsoft cases have
established a need for compulsory licensing of technologies to allow for product
development, something that would benefit the e-learning industry immensely. While
compulsory licensing of a technology may be important, there still needs to be
protection of a producers original material by copyright. This is done through the
copyright and related rights legislation as discussed, but there exists some specific
inequalities in the law, as at presents educators in the e-learning industry that
produce podcasts are not granted the same amount of protection as those that
produce course notes. This inequality should be addressed by the introduction of a
Directive providing for the copyright term for a phonogram such as a podcast the
same terms as a literary work.
A founding freedom of free movement of labour underpins European employment
law. During the early years of the European Union, employment law at the European
level was low key, with the main emphasis on the achievement of free movement of
labour, which in the context of mixed economies depended on a much wider set of
conditions that needed to be fulfilled, including the transferability of social security
payments, the mutual recognition of degrees and professional qualifications, and the
dissemination of information about jobs through a properly functioning labour
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 54

exchange. The Working Time Directive of 2003 allows workers to make an agreement
with their employer to opt-out of the provision of working only 48 hours. Employers
are currently able to agree with workers to opt-out of the Directive at the time they
sign the contract of employment, but they have to ensure there are no negative
consequences for the worker not opting-out and they have to keep records of the
hours worked by the workers that have opted-out. Allowing opt-outs to be agreed at
the stage of signing a contract of employment appears to put a significant degree of
pressure on the worker to agree to opt-out, even if they do not want to. A future
Directive should stipulate that employers are not allowed to request the worker to optout at the same time they sign the contract of employment, but instead shifting the
initiative to the worker, who would have to indicate in writing to the employer that they
wish to opt-out. It could be argued that the requirement for the employer to keep
records of the amount of hours worked by the worker is putting an unnecessary
administrative burden on small to medium sized enterprises, something which the EC
Treaty indicates must not happen. This burden should be remedied in a future
Directive, which should put the responsibility of keeping records of hours worked in
the hands of the worker. It should also be made the case that the worker is
responsible for ensuring that they dont work more than 48 hours a week over the
reference period.
It is possible that a worker that is a self-employed consultant in the e-learning
industry could be working in excess of 48 hours per week. A future Directive should
ensure that all workers, regardless of their profession or employment status be
required to make sure that they do not work more than 66 hours a week, and there
would not be any derogations from this requirement.
While some pieces of European Union law affect some industries more than others,
such as intellectual property and public procurement affecting the e-learning industry
more than some other sectors, the less discussed Safety, Health and Environmental
Law affects all industries. With an increase in the services sector of the e-learning
industry through the expansion of blended learning, considerations of health and
safety and the working environment are becoming more relevant.
Whilst many may associate e-learning with learners taking part in online courses, the
reality of the e-learning industry is that the content, technology and services are
developed and provided in the built environment. The safety, health and environment
law will become even more apparent as the blending of learning through computers
and learning in the classroom occurs.
Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 55

A number of developments have been made in e-learning to encourage individuals


with social impairments to develop positive social behaviours in their environment
(e.g. Bishop, 2003; Golan & Baron-Cohen, 2006). However there are potential health
risks to the individual who make use their mental intelligences rather that improve
their social intelligence, which could put cognitive stresses on the individual and at
worse result in them experiencing psychiatric injury. While the Product Safety
Directive requires that only safe products be allowed onto the market, products such
as those developed by Bishop (2003) and Golan & Baron-Cohen (2006) may require
a blended learning approach as opposed to a distance learning approach for them to
be fully safe and the law should reflect this. A directive should be passed to make
provisions so that any e-learning system that attempts to change the social behaviour
of an actor has to be supported by a trained professional. While the e-learning
industry may need to be subject to laws relating to health, as proposed above, it is
possible that the product development and delivery side of the industry could have
impacts on the environment. The most obvious of these would be where buildings
need to be built to support the development and provision of e-learning services, and
if an e-learning firm proposes establishing in an area of outstanding natural beauty
for example, there needs to be the appropriate legislation in place to ensure the
natural environment is protected for purely commercial concerns. A directive should
be passed that requires all planning applications that will have an impact on the
socio-cultural, socio-economic and natural or built environment should require an
environmental impact assessment to determine the impact of the development on
these areas. Legislation should be passed in line with the proposed principle of
sustainability to require that planning applications that would have an impact on the
socio-cultural, socio-economic and natural or built environment should require an
environmental impact assessment before the planning authorities are able to pass it.
This could ensure for example that an e-learning firm with a dominant position does
not destroy the socio-economic environment of a community buy building a large
training suite next to a community centre that provides courses for the benefit of the
community on a not-for-profit basis.

Jonathan Bishop The LIVCEL Project Masters Dissertation in EU Law 56

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