09/05/2011 1

The concept of economic activity in

Free movement and Competition law

Vassilis HatzopoulosAssociate Professor at the Democritus University of Thrace, GreeceVisiting Professor at the College of Europe, Bruges, BelgiumSpecial Lecturer at the University of Nottingham, UKAttorney-at-Law, Member of the Athens Bar

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QuestionsWhat is in a market?

Does the “market” change depending on the applicable rules?

How market principles affect non-economic activities?

Introduction

The nature of the activity: basic distinctions

The scope of the Treaty freedoms: analytical criteria

Conclusion

Introduction Basic distinctions Analytical criteria Conclusion

Outline

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1. Introduction1.1. Why is the distinction important?EU based on the conferral of powers: Art 3 TEU : AFSJ – Internal market – (E)MU– CFSP Internal market rules : economic activity is key!Free movement rules

Goods: having some economic value [Walloon Waste]Persons: workers [Antonissen] BUT citizenship [Collins]Services: remuneration [Smits & Peerbooms]

Competition rules: concept of undertaking [Höfner]Harmonisation: Art 115 + 106(3) TFEUProtocol 26 on SGIs + Art 14 TFEU: SGEIs/NESGIs

Economic activity as a competence moderator++ In secondary law: the Services Directive

Introduction Basic distinctions Analytical criteria Conclusion

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1. Introduction1.2. Can the concept vary from one field to the other?

In favour of a dual approachCase law:

CL but not FM: Meca Medina FM but not CL: Viking, Kattner, Com/Germany (old age pensions)

AG Maduro in FeninDoctrine: O.Odudu, H. Schwheitzer

Introduction Basic distinctions Analytical criteria Conclusion

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1. Introduction1.2. Can the concept vary from one field to the other?

Against a dual approachPure logic: an apple is an apple...

The TreatyLogic: all provisions should converge towards the same end result + Art 7

TFEU (principle of coherence)

Wording: 3(3) TEU + 3(1)b TFEU + Protocol 27: “the internal … market includes a system ensuring that competition is not distorted”

Case law: Consten/Grundig, Metro I: link between the policies

Glöckner: an abuse may consist on limiting the provision of services

Freskot: the solidarity logic is transposed from CL (trilogy) to FM

Wouters, MMedina: same body of justifications

Doctrine: L. Idot, U. Neergaard – My own view

Introduction Basic distinctions Analytical criteria Conclusion

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1. IntroductionViking 53:the fact that an agreement or an activity are excluded from the

scope of the provisions of the Treaty on competition does not mean that that agreement or activity also falls outside the scope of the Treaty provisions on the free movement of persons or services since those two sets of provisions are to be applied in different circumstances

Meca Medina 31:even if those [anti doping] rules do not constitute restrictions on

freedom of movement because they concern questions of purely sporting interest and, as such, have nothing to do with economic activity (Walrave & Koch and Donà), that fact means neither that the sporting activity in question necessarily falls outside the scope of Articles 81 EC and 82 EC [101 & 102 TFEU] nor that the rules do not satisfy the specific requirements of those articles

Introduction Basic distinctions Analytical criteria Conclusion

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1. IntroductionConfusion between the nature of the activity

the conditions for the application of the different Treaty rules

Economic activity?

YES

FM rules

Comp rules

Introduction Basic distinctions Analytical criteria Conclusion

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2. Basic distinctions: economic vs non-economicAll Activities

Economic activities SGIs

SGEIs NESGIsSSGIs

Core SGEI

FundraisingSGEI

Full EU impact NO EU impactModerate EU impact

Introduction Basic distinctions Analytical criteria Conclusion

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2. Basic Distinctions – A positivist Presentation2.1. Clear outer limits (nearly!)

Social services - Solidarity (strong enough)?Primary pension schemes [Poucet] Statutory insurance against work accidents [Kattner]Mandatory indemnity system for farmers [Freskot]Homes for the elderly [Sodemare]

BUT not 2/3 pillar pension schemes [Albany, Brentjens, Drijvende]

Strategic services - Public authorityCommunal funeral services [Bodson]

Mooring services in ports [Corsica Ferries France]

Air traffic control [Eurocontrol, SELEX]

Anti-pollution surveillance [Diego Cali]BUT Private security services are within the market

Introduction Basic distinctions Analytical criteria Conclusion

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2. Basic Distinctions – A positivist Presentation2.2. Blurred inner distinctions: market/SGEI/SSGI

Textual elements of definitionPrimary law: not helpful

Secondary law: SD unhelpful, network industries Dirs ltd help

Soft law: successive attempts by the Commission: COM (1996) 443, COM (2001) 597, COM (2003) 270, COM (2004) 374, COM (2006) 177, COM (2007) 725

CFI in BUPA (2008):165. in Community law and for the purposes of applying the EC Treaty competition rules, there is no clear and precise regulatory definition of the concept of an SGEI mission and no established legal concept definitively fixing the conditions that must be satisfied before a Member State can properly invoke the existence and protection of an SGEI mission

Introduction Basic distinctions Analytical criteria Conclusion

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2. Basic Distinctions – A positivist Presentation2.2. Blurred inner distinctions: market/SGEI/SSGI

The characteristics of SGEI Universality, equality, continuity, regularity, adaptability

Quality, respect for environment, transparency, participation

Who’s got the competence to draw the line? Sector specific legislation: various solutions

• Telecoms : Dir 2002/22: defined and secured at EU level• Energy : Dir 96/92 : defined and secured by MS + Dir

2003/54 some PSOs defined at the EU, to be attained by MS• Postal : Dir 97/67+2002/39 // energy

In the absence of any legislative text: MS under the control of the CJEU, confined to manifest error [BUPA 169]

Introduction Basic distinctions Analytical criteria Conclusion

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3.Criteria : an analytical approach

3.0.1. Criteria used by the Court The nature of the body concerned

The nature of the activity involved

The object of the measure

Mitigating factors

General exceptions

Art 106(2) TFEU

3.0.2 In the various fields of law FM: free movement proper + public procurement

CL: anti-trust + state aids

Introduction Basic distinctions Analytical criteria Conclusion

QUALIFICATION

DISQUALIFICATION

EXCEPTION

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3.Criteria : an analytical approach3.1. For the qualification of a violation3.1.1. Nature of the BODY adopting the measure/practice

Introduction Basic distinctions Analytical criteria Conclusion

Core concept Qualifications Exclusions

Free movement

Public body State control or regulatory pwr + Laval

See Activity

Public procurement

Contracting authority/entity

State control or finance+Activity

Degree of finance/control [Cambridge]

Anti trustUndertaking

Public/private irrelevant [Höfner]

State aids

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3.Criteria : an analytical approach3.1. For the qualification of a violation3.1.2. Nature of the ACTIVITY involved

Introduction Basic distinctions Analytical criteria Conclusion

Core concept Qualifications Exclusions

Free movement

Economic nature

Value/ work / remuneration

51 TFEU Sodemare/Freskot

Public procurement

Needs of general interest

No competitionseverability

Glöckner BUT Com/Germany

Anti trust FENIN: goods/ services in the market

Severability of non-economic activities [Glöckner]

Eurocontrol, SELEXPoucet

State aids

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3.Criteria : an analytical approach3.2. For the disqualification of a violation3.2.1. OBJECT of the MEASURE examined

Introduction Basic distinctions Analytical criteria Conclusion

Core concept Qualifications Exclusions

Free movement

Inherent to activity: Deliege – MMedina

Effects subject to proportionality

Public procurement

In house attribution Teckal - Coditel

Participation of CA in Contractor

Anti trust Existence of OK of the essence: Trilogy/Laval

State aids Performance of a SGEI: Altmark

4 conditions + package+BUPA

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3.Criteria : an analytical approach3.2. For the disqualification of a violation3.2.2. De minimis – other MITIGATING FACTORS

Introduction Basic distinctions Analytical criteria Conclusion

Core concept Qualifications Exclusions

Free movement

Remoteness: Viacom/ MobitelDe minimis: Mickelsson

Uncertain application

Public procurement

Thresholds – Annex IIA/IIBConcessions, PPP not covered

Transparency case law

Anti trust De minimis CommunicationsRule of reason (?)

State aids De minimis Regulation

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3.Criteria : an analytical approach3.3. Justifications to a violation3.3.1. EXCEPTIONS - General

Introduction Basic distinctions Analytical criteria Conclusion

Core concept Qualifications

Exclusions

Free movement

Public policy, order, health ORPI: financial balance

%tyDiscrimina°

Public procurement

Express exceptions from DirConcessions, PPP not covered

Transparency case law

Anti trust 101(3)ORPI (Wouters, MMedina) ???

State aids 107(2) and 107(3) TFEU

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3.Criteria : an analytical approach3.3. Justifications to a violation3.3.2. EXCEPTIONS – Specific for SGEIs: Art 106(2)

Introduction Basic distinctions Analytical criteria Conclusion

Core concept Qualifications Exclusions

Free movement

Corsica ferries France

Public procurement

Glöckner but Com/Germany

SGEI inherent in “contracting authority”

Anti trust Corbeau – Glöckner - Deutsche post

State aids La poste, FFSA

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4. Conclusion From an EU viewpoint: Economic activity triggers the application of FM, Anti-trust

and State aids rules, but it is its absence/graduation that conditions the application of Public Procurement rules

Activities are rarely held to be non-economic, only where the element of public authority or solidarity is overarching

The applicability of the Treaty rules depends on 6 criteria of which the nature of the activity is only one: the remaining five allow the Court to completely exclude or moderate the EU’s impact on SGIs

Indeed, it is by reference to the other 5 criteria that the CJEU (more often than not) avoids the delicate (ideological) question of the nature of the activity

Introduction Basic distinctions Analytical criteria Conclusion

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4. Conclusion From a MS viewpoint: SGEI is a safe harbour for MS: They master the scope subject to control for manifest error

Activities which qualify as SGEIs may: Benefit from 106(2) TFEU

Benefit from Altmark + the Altmark package

Substantiate the presence of solidarity/public authority

It is in MS interest to define and organise SGEIs

Introduction Basic distinctions Analytical criteria Conclusion

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Cases citedCase 249/81 Commission v Ireland (Buy Irish) [1982] ECR 4005 Case 102/86 Apple and Pear Development Council [1988] ECR 1443. Case C-266/96 Corsica Ferries v La Spezia [1998] ECR I-3949.Case C-292/89 R v Immigration Appeal Tribunal, ex parte Antonissen [1991] ECR I-745.Case C-41/90 Klaus Höfner and Fritz Elser v. Macrotron GmbH [1991] ECR I-1979. Case C-320/91 Corbeau [1993] ECR I-2562Case C-70/95 Sodemare SA [1997] ECR I-3395 Case T-106/95 FFSA e.a. v Commission [1997] ECR II-229Joined cases C-51/96 and C-191/97 Deliège [2000] ECR I-2549Joined cases C-147 & 148/97 Deutsche Post AG [2000] ECR I-825Case C-67/96 Albany [1999] ECR I-5751 Case C-155-157/97 Brentjens [1999] ECR I-6025 Case C-219/97 Drijvende [1999] ECR I I-6121 Case C-205/03P FENIN [2006] ECR I-6295Case C-107/98 Teckal [1999] ECR I-8121 Case C-380/98 The Queen v H.M. Treasury, ex parte The University of Cambridge [2000] ECR I-8035Case C-309/99 Wouters and Price Waterhouse [2002] ECR I-1577Case C-475/99 Firma Ambulanz Glöckner v Landkreis Südwestpfalz [2001] ECR I-8089. Case C-355/00 Freskot AE [2003] ECR I-5263 Case C-138/02 Collins [2004] ECR I-2703.Case C-313/02P David Meca-Medina [2004] ECR I-3291Case C-134/03 Viacom II [2005] ECR I-1167Joined cases C-544 and 545/03 Mobistar SA [2006] ECR I-7723 Case C-341/06P 342/06P Chronopost SA et La Poste contre Union française de l’express (UFEX) et autres [2008] ECR I-4777Case C-324/07 Coditel Brabant [2008] ECR I-@@@Case C-481/07P Selex Sistemi Integrati SpA. v Commission [2009] ECR I-2207

Trilogy cases