The Frabo Case
The FRABO Case is the story of the action taken by an SME, sustained in order to not let the product be eliminated from the market - a product that at the time ensured the company's future.
On the other hand, it's the story of a group of competitors who choose to use technical regulation to eliminate from the market the new type of product launched by FRABO, rather than compete with the same product.
This story takes place in Brussels, Germany and Europe. It involves the press as well - from Italy and Brussels.
A true test of applying the standards of the single market and free competition, requested by an SME, alone against its competitors, which are larger and more organised, German and European.
A BRIEF HISTORY
In 1999, FRABO obtains a gasket for its press fittings, which passes European tests for water and gas pipes, called "FRABOPRESS". There is nothing like it on the market, but its competitors have every opportunity to use a similar gasket, which is non-patented, and compete with FRABO. This gasket bears the CE marking for systems to carry water as well as those that carry gas.
After receiving certifications from the German body DVGW, necessary for the German market, in 2005 the DVGW certificate for water systems is withdrawn, after a verification that lasted three years instead of three months, as requested by German competitors. The DVGW was withdrawn due to a new test, in addition to the European ones, added during verification - a test that, technically, the type of mixture necessary to pass the water and gas tests cannot pass.
In 2006 and then in 2008, the EU Commission opened two infringement procedures against Germany for violating European Community standards, based on the FRABO complaints. The infringement procedures concern: the additional test, the role of DVGW, and the relative barriers to the free movement of goods.
Among others, such as the consequences deriving from FRABO's initial suit: Germany has modified two decrees that provide for the requirement of the DVGW mark; DVGW split into two distinct bodies, amended its procedural rules multiple times, but never eliminated the test that was the subject of the controversy.
In February 2012, the FRABO case was presented in Copenhagen on occasion of the 20th anniversary of the internal market, before European institutions, as an example of obstacles to the innovation of SMEs.
In July 2012, the Court of Justice of the European Union agreed with FRABO concerning the fact that EU law and the free movement of goods is applied on this "theoretically private" body, the DVGW.
In February 2013, the EU Commission requested that Germany apply the Court of Justice decision of July 2012; this forces the DVGW to change its role in the market and, indeed, requires a radical revision of the regulation of energy products in Germany in this sector.
In May 2015 DVGW and FRA.BO put an end to the ongoing legal conflict lasted more than ten years. DVGW and FRABO have decided to find an extrajudicial agreement to end the pending litigation which has been examined by the Bundesgerichtshof.
A press fitting is a type of pipe junction that was first created in the 90s. The fitting is positioned between the two pipes it needs to join, and is then "pressed", once and with a press that looks like a large pliers.
In this way the metal is deformed and adheres to the pipe. At each end, the fitting has an internal gasket that ensures a tight seal between the fitting and the pipe.
The enormous advantage of the press fitting is in the time it saves the plumber during installation, as the pressing takes as long as it takes to staple two sheets of paper together. Therefore, a line of pipes, even one long several meters, once the fittings are in place, can be completed with quick pressings on the various fittings in just a few minutes. The FRABOPRESS is FRABO's press fitting, and it is at the origin of the FRABO Case. Thanks to a special gasket, FRABOPRESS is ideal for both pipes used for drinking and non-drinking water, and those that carry gas. In this case, the significant advantage is the plumber's savings in purchasing materials. A savings that has been calculated to be approximately 15%.
KEY DATES OF THE FRABO CASE
1999: FRABO obtains from its elastomer manufacturer the HN 707 blend, which passes European gasket tests for use with both water (Harmonised European standard EN 681-1) and gas (Harmonised European standard EN 549);
1999: HN 707 receives the CE marking for use with water and gas. FRABO begins the production and sale of the FRABOPRESS, the first press fitting suitable for use with both water and gas.
1999: FRABOPRESS obtains the DVGW certificate for use with gas;
2000: FRABOPRESS obtains the DVGW certificate for use with water;
2002: FRABO asks DVGW to unify the two certificates in order to have a single certificate for the gas/water fitting;
2002: DVGW, which had initially responded more positively, refuses to unite the two certificates for administrative reasons;
2002: two German competitors of FRABO file a complaint at DVGW challenging that FRABO does not have a gasket that complies with the water and gas standards; the two FRABOPRESS certificates are suspended; a verification begins - with the suspension of the certificates - that will last three years instead of the three months provided for in DVGW's procedure rules;
2002: work begins at DVGW to modify the requirements for the certificate for water use; this work group consists of experts from German companies who are FRABO's competitors; including the two companies that requested the verification of the FRABO certificate;
2004: the verification with tests continues at the various DVGW laboratories;
2004: the "work sheet" draft is published, containing the requirements (tests) for fittings used in water systems: a new test is added by the experts of the German companies that compete with FRABO, a test that rubber experts call a "killer" test for the FRABO gasket; the HN 707 gasket cannot pass the test; the test is in addition to the European standard EN 681-1 and eliminates a gasket that bears the CE marking from the German market;
2005, January: verification is complete and the final report, which was positive for FRABO, confirms that FRABO used a single gasket for water and gas; the report is on the table of DVGW management; FRABO will never see this report;
2005, January: DVGW management decides not to announce the result of the verification, meanwhile time is running out to take the new test in order to keep the certificate suspended; FRABO would have to pass the new additional test by June 2005;
2005, June: in the same letter in which DVGW announces that the verification was passed positively, they also communicate that the certificate for water is being withdrawn; the wait for the announcement of the verification means that, for three months, there is no "single" water and gas fitting; the "single" fitting is eliminated from the market (for now);
2005, end of June: FRABO begins the suit; Article 11 of the DVGW procedure rules, which governs complaints, is challenged at the DVGW's accrediting body; the DVGW is required to change Article 11 but its accreditation certificate will not be withdrawn;
2005, September: FRABO passes the ozone test at an Italian laboratory, in spite of the fact that German laboratories did not make them pass the test;
2005, November: FRABO files a complaint at the DVGW's accrediting body, in reference to the withdrawal of the certificate and the verification; the accrediting body finds some "non-compliances" but does not withdraw DVGW's certificate and does not return the certificate to FRABO;
2006, February: FRABO challenges the DVGW's lack of independence at the accrediting body; following this, the DVGW splits into the DVGW association (which will only issue standards) and DVGW Cert (which will only issue certifications);
2006, July: at FRABO's request, an infringement procedure is opened against Germany by the European Commission (Case 2006/4610); this concerns the additional test that provides for national requirements in addition to the European ones and constitutes a barrier to the free movement of goods;
2006, 12 October: the European Commission decides not to send any letter to Germany in spite of the fact that it had already been prepared by legal services; the violation procedure will in fact remain inactive for several months with no activity from the EU Commission;
2007, July: the European Ombudsman (a supervisory body at the European Parliament) accepts the FRABO complaint against the European Commission for its management of Case 2006/4610 that remained inactive;
2007, September: the EU Commission convenes with FRABO and a new head of unit is nominated at the competent authorities, while the German head of unit is removed;
2007, December: the EU Commission submits a 300 page report on the management of Case 2006/4610 and the European Ombudsman accepts the EU Commission's responses;
2008, January: FRABO also challenges at the EU Commission the fact that there is a German law that calls for the DVGW's mark and that it was not notified in accordance with the provisions of Directive EC 98/34; in addition, this law does not contain adequate indications of the applicable European technical standards, as determined by European law;
2008, 25 July: the EU Commission writes Germany a letter concerning the complaints of EU law breaches, referred to in Case 2006/4610 and concerning the disallowed additional test;
2008, November: Germany modifies the AVBWasser decree containing the clauses challenged by FRABO and a clause is added providing for the recognition of the technical standards of another Member State;
2008, December: FRABO also challenges the failure to notify of the German decree that calls for the DVGW mark for products in the gas sector;
2009, January: the EU Commission opens a new violation procedure against Germany, Case 2008/4063 concerning Germany's failure to notify the decree that provides for the DVGW mark for products used in gas systems;
2009: in accordance with Directive EC 98/34, Germany also modifies and notifies the decree that provides for the DVGW mark for products in the gas sector;
2010: FRABO appeals in Germany the first instance judgement in the case against DVGW for restoring the certificate withdrawn in June 2005; this appeal is mainly based on the application of EU law and the request to sue in the Court of Justice of the European Union;
2011, March: the German appeals judge accepts FRABO's requests and adjourns to the Court of Justice;
2012, 12 July: the Court of Justice of the European Union accepts FRABO's argument and requires the application of EU law to the DVGW; this is in contrast with what DVGW always claimed; this is Case C 171/11;
2012, September: The European Commission asks Germany information concerning the actions that will be taken to apply the decision of the Court of Justice;
2013, February: the EU Commission opens a procedure, called "EU Pilot", indicating a series of points Germany should follow in restructuring the sector's regulations in applying the decision of the Court of Justice;
2013, February: the publication by CEN, the European Committee for Standardization, of a standard for fittings in steel that contains the additional test is suspended;
2013, 17 April: the German appeals judge adjourns to 15 May 2013 the decision of the civil case that had been scheduled for 17 April 2013;
2013, 15 May: the German appeals judge adjourns the decision and announces the decision it wants to reopen the proceedings that had been closed on 19 December and schedules a hearing for 19 June 2013;
2013, 17 June: the German appeals judge adjourns the hearing to 7 July 2013;
2013, 7 July: at the hearing, the German appeals judge schedules the final decision for 7 August 2013;
2013, 7 August: the appeals judge adjourns the final decision to 14 August
2013, 14 August: the Court of Düsseldorf has declared that the decision made in 2005 by the DVGW to withdraw the certificate from Frabopress illegitimate; has ruled the DVGW to issue the water certificate and the water and gas certificate for the Frabopress product; has considered the request for compensation by Frabo from DVGW legitimate, whose amount will be decided in another civil proceeding.
2015, 22 May: DVGW and FRA.BO put an end to the ongoing legal conflict lasted more than ten years. DVGW and FRABO have decided to find an extrajudicial agreement to end the pending litigation which has been examined by the Bundesgerichtshof. The litigation refers to FRABOPRESS, a set of copper and bronze press fittings for thermo-hydraulic installations suitable both for gas and water installations.
The agreement validates the important growth and internationalization processof the Italian company, which has characterized the history of FRABO in recent times. Furthermore, it lays the foundations for a more and more significant presence of FRABO on the German market.
"The agreement ends a ten-year litigation, during which FRABO has strenuously defended the right to the free movement of goods - not just for itself, but for all Italian SMEs. FRABO's goal was to see its products recognized as legitimate, and to be able to export to any market. Our perseverance led to the Court of Justice of the European Union accepting FRABO's arguments in 2012, and is today allowing us to lay the foundations to conquer a strategic market like Germany" - declared Manuela Bonetti, CEO of FRABO.
THE EU SINGLE MARKET AND THE STANDARDS CHALLENGED BY FRABO
The single market for goods represents one of the major and continuing priorities of the European Union; it has as its purpose the creation of an environment favourable to businesses and consumers. The main objective of the European Commission is to contribute to development and implementation and perfecting of regulatory policy, to improve the functioning of the single market by removing existing business barriers and preventing the emergence of new ones.
The rules pertaining to the regulation of the EU Single Market, the application of which has been requested by FRABO, and their non-application contested are:
Article 34 of The Treaty on the Functioning of the European Union (TFEU) and the relative ban on Member States to introduce obstacles, including technical ones, to the free movement of goods (this in reference to the inclusion and requirement of the DVGW national mark under German decrees, as a barrier to free movement; and to the direct application of the Treaty provision to the institution in question, see the decision of the Court of Justice of the European Union C 171/11 that accepted the FRABO request);
the prevention of technical barriers and the provision of the obligation of notification of technical regulations (standards) and of the technical regulations (national laws, decrees, ministerial circulars and other national regulatory instruments) for Member States (this in regard to the failure to notify the German Decrees that require the DVGW mark, then carried out by Germany based on complaints by FRABO and of the relative violation procedures activated by the EU Commission); the subject matter of Case 2008/4063; and also in relation to the as yet failure to notify by Germany of all the standards that the DVGW creates and publishes);
the Directive (now a Regulation) for construction products and the specific prohibition against Member States to include requirements additional to those required by the European harmonized standards (this is in regard to the German test in addition to the one required by the applicable European harmonized standards: the EN 681.1; the subject matter of violation procedure 2006/4610 initiated by the EU Commission against Germany);
the provisions concerning the CE mark and its efficacy (this is in regard to the fact that the FRABO gasket, which is not allowed in Germany for one of the uses provided for in the applicable standard, bears the CE mark);
the rules and the regulations on the subject of mutual recognition, which envision the obligation for a Member State to recognize the validity of the technical standards of another Member State, with the exception in the case where it can be proved there are public health reasons for including additional requisites (this is related to the fact that the FRABOPRESS is produced in conformity with a national standard, the UNI 11065, duly notified according to Directive EC 98/34, referred to above, and Germany should recognise the validity of this standard; moreover, FRABO succeeded in obtaining from Germany that there would be inserted in the new German decree provision for the DVGW mark for products used in supplying water, a clause that properly provides for mutual recognition);
the principles of standardisation, the prohibition against excluding products regularly sold on the market, the prohibition against the creation of "regulatory cartels" based on agreements between companies with the objective of limiting or excluding free competition (this in regard to the attempts still in progress and that have continued for more than 7 years by competitors of FRABO to include the test in addition to the European standards in the context of the works at CEN, European Committee for Standardization);
accreditation activities and the relevant EU regulation, which provides for the control and discipline of certification bodies by a sole national accreditation institution (this is in relation to violations of the DVGW, as challenged by FRABO, of the regulations applicable to certification bodies, and the subject of specific complaints to DAKKS, the sole German accreditation institution.