Legal issues affecting e-learning firms in the European Union: To merge or not to merge

What do you think the European Union is? Is it an entity that exists solely to pass laws regulating the shape and size of fruit, or burden employers with endless legislation? Or is it a collection of governments, working to find areas they have in common, and improve standards across the trading block?

One area where the last of these has happened is with regards to E-learning. E-learning can be defined as any educational activity that has an electronic dimension to it, encompassing a primary school class delivered using a PowerPoint presentation teaching learners how to use desktop computer applications, like what is done at Broadclyst Primary School, to a programme delivered completely online to update workers’ skills.

According to the International Data Corporation the corporate training segment of the e-learning industry is estimated to have to increased from 234 million euros in 2000 to 11.4 billion euros in 2003, although in the European Union only about 20 percent 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.

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.

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.

Developments in Internet and multimedia technologies are the basic enabler of e-learning, with content, technologies and services being the three key segments of the e-learning industry, although it could be argued that there are two additional sectors, which are the consulting and support sectors.

The e-learning industry can be seen to consist of companies that provide content and technology such as Microsoft, services, such as those offered by the University of Cambridge or Brighton University, as well as undertakings that support the industry, such as marketing firms like Magicomm. 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 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. These companies may offer services such as direct-to-customer marketing communications solutions, personalisation and cross media implementation and document and communications workflow consulting, such web enabled information production automation.

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 e-learning 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 and 82 of the European Union treaties, soon to be Articles 101 and 102 respectively. These firms may consist of technical media specialists, digital artists, content developers and in some cases social networking analysts. The concept of free competition is a fundamental element in the EU treaties, which embraces the premise that any restriction on free competition is intrinsically reprehensible.

It could be argued that the restrictions placed on undertakings in the e-learning industry by Article (101) is forcing small to medium-sized enterprises to enter into more substantial agreements to form what are known as 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 (101).


One comment

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