Business law-slides

Business Law

Lesson: 1-2

Dr. Gabriella Gimigliano

[email protected]

Some advice…

TFEU = Treaty on the Functioning of the

European Union

TUE = European Union Treaty

Both of them can be freely downloaded by the European Union website.

The Community-based definition of Undertaking

• Breda Hooghovens (13 July 1962, 17 – 20 /1961) – Undertaking = single legal unit

• in the opinion of the High Court, the economic activity performed by a group may be attributed only to the legal persons within the group because only the legal persons are parts of economic transactions.

• Formal approach to the definition of undertaking

The Turning Point

Christiani – Nielsen Case law (18 June 1966)

Court held that article 85 may be applied to any agreements between the parent company and its subsidiaries as far as the subsidiaries were enjoyed economic discretion in the operation of its business.

A step further…

Hydrotherm case law (C. Justice, 12th July 1983, case n. 170).

“the term "undertaking" must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question even if in law that economic unit consists of several persons, natural or legal”

The Court, the definition of undertaking and the 90s

The Functional Approach: the single economic unit principle

- one or more legal persons exercising an economic activity

- taking on the correspondent economic risk

- enjoying some degree of economic independence.

When we analyse case law…

We ask ourselves the following questions:

- Which European institution issued the judgement?

- Who are the parties?

- Which are the main facts?

- What is the controversial legal issue?

- What is the final decision of the EC Court?

- How did the Court reach that conclusion? What was its way of reasoning?

Becu Case Law (Case Number 22/98)

Parties:

The Public Prosecutor Department took criminal action against

- Mr Becu and Mr Verweire

- Smeg and NV Aida Interim companies

Matter of Fact

• SMEG hired recognised dockers for the performance of loading and unloading activities of grain boats in the Ghent port area, while for the other work – the storage of grain in the silos – Smeg employed not recognised dockers, for example temporary workers;

• SMEG paid differently recognised and not reconised dockers.

Matter of Law

A STATE LAW (para 3, 6, 7, 12, 13) (Para 20) whether the State law imposing on SMEG (and any other employers) to hire only recognised dockers and apply different hourly wages in the operation of dock work complies with article 86 (now art. 102 TFEU), 90.1 (now art. 106 TFEU) (Para 22) whether the State law above mentioned complies or not with art. 90.1 (now art. 106 TFEU) according to which Member States may not maintain in force any measure contrary to the rules provided in the competition section of TFEU

Matter of Law (2)

• Art. 90 (now art. 106 TFEU), art. 86 (now art. 102 TFEU)

• What do they have in common? The definition of undertaking. It means that they can be applied as far as dockers are regarded in legal terms as undertakings. Are dockers undertaking?

• What is an undertaking according to the European jurisprudence?

• Do dockers have all the features essential to an undertaking in the EU legal framework?

The way of reasoning of the Court

- (para 26) for and under the direction

- (para 26) Since they (the dockers) are, for the duration of that relationship, incorporated into the undertakings concerned and thus form an economic unit with each of them, dockers do not therefore in themselves constitute «undertakings» within the meaning of Community competition law.

Decision

- The dockers do not constitute in themselves undertaking according to the definition of undertaking in the European jurisprudence;

- art. 90.1 (now art. 106 TFEU) may not be applied to dockers. (para 30)

Eurocontrol (Case n. C-364/92)

Parties

SAT, airline company based in Germany (para:2)

Vs

European Organization for he safety of Air Navigation (EUROCONTROL), an international organization based in Brussels (para: 3, 4)

Matter of Fact…

SAT refused to pay route charges for flights made from September 1981 to December 1985. (para 6)

Matter of Law

SAT claimed that Eurocontrol performed price fixing operations and infringed European competition rules (namely, art. 86, now art. 102 TFEU). Indeed, the charges were from one State to another and they varied from year to year. (para 6)

SAT claimed that when Eurocontrol fixing the flight charges was abusing of its dominant position and did not comply with art. 86 and 90 (now art. 102 and 106 TFEU)(para 6).

The controversial legal issue

Art. 86 (now art. 102 TFEU), Art. 90 (now art. 106 TFEU)

What do art. 86 and art. 90 have in common? Both of them may be applied if there is an undertaking.

- What is an undertaking? And which are its main legal features?

- Is Eurocontrol an undertaking? Does it perform an economic activity?

The way of reasoning of the Court:

• The concept of undertaking covers every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed. (para 18)

• What is the nature of the activities carried out by Eurocontrol?


To ascertain whether Eurocontrol is an undertaking the Court posed indirectly several questions

- What are the tasks of Eurocontrol? (para 22)

- Does the Eurocontrol activity correspond to an economic activity? (para 23, 29)

- What are the flight charges?

- Can Eurocontrol fix freely flight charges?


• Can Eurocontrol exercise influence over the amount of route charges? (para 23, 29)

• Why do airline companies pay route charges? (para: 16, 28)

• Does Eurocontrol organize by itself its activities? (para: 21, 28)

Decision

Eurocontrol is not an undertaking because its activities are lacking of economic nature

Eurocontrol must be regarded as a public authority in the performance of collecting route charges and art. 90.1 (now art. 106 TFEU) and art. 86 of EC Treaty (now art. 102 TFEU) may not be applied.(para: 30, 31)

Hofner and Elser Case law (Case n. 41/90)

Hofner and Elser, recruitment consultants (para:2)

Vs

Macroton, a company governed by German law and established in Munich. (para: 2)

Matter of Fact

Hofner and Elser brought action against Macroton claiming to be paid for the assistance in the recruitment process of a sales director. (para: 2, 11)

Matter of Law

• The German employment law conferred on the Federal Office for Employment the exclusive right of employment procurement (para: 3, 5, 6)

• This employment system admitted some exceptions (para: 9, 10, 11, 12.4)

• Does this system comply with art. 86 (now art. 102 TFEU) and art. 90.2 (now art. 106 TFEU) (para: 16, 17, 25, 26)?

Different stanpoints

• Hofner and Elser (para 17)

• EU Commission (para 18)

• The German Government (para 19)


• (para 21) What is an undertaking under the EU competition jurisprudence?

• (para 22, 23) Is the employment procurament activity necessarily carried out by public entities?

• (para: 23) Is a public employment agency engaged in the employment procurament activities subject to article 86 EC Treaty (now, art. 102 TFEU);

• (para: 26, 27, 28, 29, 30) if a Member State confers on an entity an exclusive right of performing an activity, does the Member State infringe art. 90.1 of EC Treaty (now art. 106 TFEU)?

The Decision

The employment procurament is an undertaking and a public employment agency engaged in such an activity must comply with art. 86 (now art. 102 TFUE)

The German Goverment does not comply with art. 90.1 (now art. 106 TFEU) because it created a situation in which that agency cannot avoid infringing art. 86 (now art. 102 TFEU)

Poucet and Pistre (Case C-159, 160/91)

Parties

Poucet Vs Caisse Mutualle Regionale, managing the sickness and maternity insurance scheme for self-employed persons in non-agricultural sectors; (para: 2,3)

Pistre vs Caisse Autonome National de Compensation. (para 2,3)

Matter of Fact

Mr Poucet and Pistre sued the public insurance entities on the grounds the public insurance entities held dominant position contrary to the rules on the freedom of competition of EC Treaty. (para: 3)

Pistre and Poucet claimed to be free of picking out any private insurance companies established in the Community area to enjoy compulsory insurance services. (para:3)

Matter of Law

(para: 4) Is a dominant position conferred by a national legislation compatible with the Common Market? Should one assume that the pursuing of a social objective and the enforcement of solidarity principle exempt an insurance scheme from EU competition rule?


The EC Court of Justice investigated on the way the principle of solidarity was applied to the State-based insurance scheme (para: 9, 10, 11, 12, 13, 15)

This is not the solidarity principle in itself to deny the economic nature of the activities but the way it was applied in Poucet and Pistre case law.

Decision

Article 86 (now art. 102 TFEU) may not be applied to Poucet and Pistre case law because the entities in charge of the management of the public social security system fulfil only a social function and their activity does not have economic nature. Indeed, there is no relation between the statutory benefits and the amount of contributions. It means that there is no market for their services. (para: 18, 19)

Customs Agents Case Law (C-35/96)

Parties

The Commission

Vs

The Italian Republic

Matter of Fact

The National Council of Customs Agents established compulsory tariff to be applied in the provision of customs agents services.

The tariff laid down a minimum and a maximum amount to be paid for customs transactions and services.

An Italian Law granted the national council the relative decision making power. (para:1)

Matter of Law

According to the Commission the Italian Republic maintained in force a law which allowed the national council of customs agents to adopt a decision contrary to article 85 of the EC Treaty (now art. 101 TFEU) (para: 3, 5, 6, 7) (para: 13) The Commission argued that the cnsd decision establishing a compulsory tariff for customs agents services did not comply with art. 85 (now art. 101 TFEU) because this was an association of undertakings restricting competition in the internal market.


Are customs agents undertakings?

The Court drew a comparison between the jurisprudence-based definition of undertaking and the activities carried out by customs agents.

«The concept of undertaking covers any entity in an economic activity, regardless of its legal status and the way it was financed» (para:36)


• Which activities the customs agents perform?

• Do customs agents activities have economic nature? (para: 37)

• Do customs agents take on the related financial risk? (para:37)

• What about the intellectual nature of customs agents services? (para: 38)

• Does CNSD pursue general interests? (para: 41, 42, 43, 44)


- Did CNSD customs agents tariff affect intracommunity market? (para: 48)

- Provided that CNSD decisions on tariff were based on an Italian law: should the statutory provision exempt customs agents from complying with Treaty competition rules? (para: 53, 56)

Decision

The Court held customs agents were undertaking and the Italian Republic, by adopting a law which required the National Council of Customs Agents (CNSD) to adopt a decision by association of undertakings contrary to art. 85 (now art. 101 TFEU) setting compulsory tariff for all customs agents, failed to fulfil its obligations under EC Treaty (now, TFUE) (para: 53)

What we can infer from the case law

The Court does not refer to any legislative definitions of undertaking; The Court establish the definition of undertaking paying attention to the economic character of the activities performed; The Court does not explain what the economic nature of an entity is; The Court points to the activities actually performed by an entity; The Court drives its attention to the existence of a market and who bears the financial risk.

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