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EU to Challenge Germany's "VW Law" in Court Again

The European Union says it will bring new action against Germany over a law protecting Volkswagen against takeover bids. Is this a case of a state guarding a company against free competition?

VW factory in Wolfsburg

It doesn't matter how many times you say it, the VW law just doesn't fly with the EU

The EU is set to try to end a long-running dispute over whether a German law giving the state of Lower Saxony veto powers in VW's affairs is in violation of the block competition rules.

The EU has been trying to get Germany's federal government to scrap or revise the so-called "VW Law" -- which privileges Lower Saxony despite that state possessing less than the 25 percent of shares normally required for a veto -- since 2004.

The European Court of Justice ruled the 48-year-old law invalid last October. It was subsequently revised, but not enough to satisfy the bloc.

"The facts are clear -- they're not changing their positions," said a spokesman for EU Internal Market and Services Commissioner Charlie McCreevy in a statement.

EU legal action would begin "as soon as possible," added the spokesman.

Porsche to benefit?

VW logos atop TV tower

VW is one of Germany's most recognizable brands

Officials for Lower Saxony in the city of Hanover had no comment on the proposed legal action, other than to say that McCreedy's position was known.

The VW law was enacted in 1960 to allow the state government to protect Germany's largest carmaker from foreign takeover.

But it has come under increasing criticism in recent years, especially from Porsche. Despite being smaller than the VW, the profitable, luxury-oriented company would like to take over the giant carmaker.

"This is completely in line with our thinking," said a spokesman for Porsche, which holds over 30 percent of voting rights in VW. "We are firmly convinced there's no need for a VW law."

Germany's Economic Minister Michael Glos has also said he believes that the VW law is unnecessary and that the blocking clause favoring Lower Saxony could be removed.

Unions representing VW workers, however, have been vocal in their support for the law, saying it protected the interests of employees.

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