Introduction
Articles 81 and 82 of the EC Treaty contain the principle prohibitions against anticompetitive conduct in EC Law[1]. These provisions regulate and are applicable solely to “undertakings”[2], a legal concept for which the EC Treaty provides no definition. To facilitate the implementation of the law, it has therefore been incumbent upon the EC courts through their jurisprudence, and the European Commission through its decisions, to develop and as the need arises, reformulate a definition for the meaning of “undertakings”. This paper will examine the general principles derived from case law and identify possible criticisms.
A Functional Approach
The “classic” albeit, inherently circular definition of an undertaking was given in Höfner and Elser v Macrotron:
‘in the context of competition law … the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed’[3]
Which was further clarified in Pavolv:
‘It has also been consistently held that any activity consisting in offering goods and services on a given market is an economic activity’[4]
EC law therefore takes a “functional approach” to the determination of what constitutes an undertaking[5]: the classification of an entity an undertaking is dependent on its activities, not its legal character. As this requires the application of a multifaceted, evolving ‘behavioral’ test, not contained in a single clear statement, a functional approach offers less certainly than an institutional approach, where legal personality would be determinative.
The functional approach nonetheless provides a considerable advantage with regards to uniformity of application as the legal personalities available vary between Member States. Under an institutional definition a Kommanditgesellschaft auf Aktien might for example find itself beyond the reach of Articles 81 and 82, while a Limited Liability Partnership, though broadly similar, might not. Another advantage of the functional approach is that it allows for the possibility that the same legal entity may be an undertaking with respect one of its activities but not its others[6].
Some examples of entities which have been found to be undertakings under the functional approach but which might have been excluded by a commercially focused institutional one include: public work placement authorities[7], opera singers[8], registered charities[9], sporting bodies[10], and professional associations[11].
Procuring v Offering
The case law draws a distinction between offering and procuring goods and services. While the latter may have significant economic consequences, and the entity so engaged may wield considerable market power, the EC courts have held that the mere procurement of goods and services on the market for subsequent non-economic uses will not establish an entity as an undertaking:
‘[36]…it is the activity consisting in offering goods and services on a given market that is the characteristic feature of an economic activity not the business of purchasing, as such… it would be incorrect, when determining the nature of that subsequent activity, to dissociate the activity of purchasing goods from the subsequent use to which they are put. The nature of the purchasing activity must therefore be determined according to whether or not the subsequent use of the purchased goods amounts to an economic activity.
37. Consequently, an organisation which purchases goods even in great quantity not for the purpose of offering goods and services as part of an economic activity, but in order to use them in the context of a different activity, such as one of a purely social nature, does not act as an undertaking simply because it is a purchaser in a given market.’[12]
Exceptions?
A distinction has also been drawn between activities which are prima fasciae economic, but because they are conducted either on the basis of ‘solidarity’ or in connection with the exercise of the powers of a public authority, are not considered to be equivalent to the types activities normally regard as economic for the purposes of Articles 81 and 82[13]. It is arguable that distinction contradicts the Höfner definition: ‘...regardless of the legal status of the entity’[14] for it is precisely the legal status of the entity (a public body or emanation thereof) which has caused the activity to be considered uneconomic. A better approach however, is to consider the parallel with the ‘offering v procuring’ distinction: in both cases it is possible to rationalize the distinction as being based on the inseparability of the ‘end result’ of the activity from the activity in question itself. The following examples illustrate this distinction:
In Diego Calì & Figli Srl v SEPG it was held that a company retained to conduct anti-pollution surveillance was not undertaking when so acting, as the protection of the environment was an essential function of the state and therefore not an economic activity, even though in this case it was being conducted for profit on a competitive market.[15] The end result cannot be separated from the means of achieving it and so the combined effect was to render the otherwise economic activity uneconomic. Although workplace insurance is in many cases is provided in ways which are not ‘in the public interest’ for example by large for-profit multinationals like Allianz SE or AXA, if a body has been entrusted by law with conducting this seemingly economic function as was the case in Cisal di Battistello Venanzio & C. Sas v INAIL, where the defendants managed such an insurance scheme, the principle of solidarity (‘the inherently uncommercial act of involuntary subsidization of one social group by another’[16]), and the constraints on the entity’s economic activities and choices by law (premiums, extent of coverage, ect were set by law), will preclude the offering of said service from being considered an economic activity for the purposes of Articles 81 and 82[17]. As no economic activity was being carried out, INAIL was not an undertaking[18].
Conclusion
By adopting a functional approach to the definition of undertakings, the Commission and the EC courts have allowed for a uniform application of EC law across the EU and ensured a wide effect for Articles 81 and 82. As the definition of an undertaking has been developed gradually by case law, there is and will remain an element of uncertainty regarding situations not already examined by the Courts which contrasts with the certainty afforded by the alternative institutional approach. The exceptions afforded to entities carrying out activities in the ‘public interest’ while on one view sitting somewhat uneasily with the broad, almost all-encompassing sweep of the economic activity test, can be explained by reference to the end result of the activity which clearly falls outside the scope of competition law, as opposed to the activity itself which might otherwise be within the law’s ambit. When applying the test of economic activity to an entity’s behavior, the result of an activity is ultimately determinative of the activity’s classification: the end justifies the means. In this way, the net of completion law cast is as wide as possible, but special shears are provided to extricate those unintentionally ensnared. By way of conclusion the following definition is offered as a synthesis of the above discussion:
“The concept of an undertaking encompasses all entities offering goods and services on a given market, regardless of legal status and financing, even in respect to only one of its activities or functions, provided it does not offer said goods and services in the furtherance of public solidarity, in the exercise of public powers, or when its freedom of economic and commercial action is entirely limited/defined by statute, or when acting as a public authority in the pursuance of regulatory or purely social ends”
Treaties Cited
EC Treaty (Treaty of Rome) 1957
Cases and Decisions Cited
Case C-218/00 Cisal di Battistello Venanzio & C. Sas v INAIL [2002] ECR I-691
Case C-309/99 Wouters, J. W. Savelbergh and Price Waterhouse Belastingadviseurs BV v
Algemene Raad van de Nederlandse Orde van Advocaten [2002] ECR I-1577
Case C-343/95 Diego Calì & Figli Srl v Servizi ecologici porto di Genova SpA [1997] ECR I-1547
Case C-41/90 Höfner and Elser v Macrotron [1991] ECR I-1979
Case C-41/90 Höfner and Elser v Macrotron [1991] ECR I-1979
Case C-41/90 Höfner and Elser v Macrotron [1991] ECR I-1979 para 21
Case C-475/99 Ambulanz Glöckner v Landkreis Südwestpfalz [2001] ECR I-8089
Case C-70/95 Sodemare SA, Anni Azzurri Holding SpA and Anni Azzurri Rezzato Srl v Regione Lombardia [1997] ECR I-3395
Case T-319/99 FENIN v Commission [2003] ECR II-357 para 35-37
Cases C 180/98 ect Pavlov and Others [2000] ECR I-6451, para 74
Distribution of package tours during the 1990 World Cup OJ 1992 L326/31
RAI/Unitel OJ 1978 L157/39
Works Cited
Whish, Richard. Competition Law. (6th edn Oxford University Press, Oxford 2009).
[1] Whish, R. Competition Law (6th Ed. Oxford University Press, Oxford, 2009) 49
[2] EC Treaty (Treaty of Rome) 1957
[3] Case C-41/90 Höfner and Elser v Macrotron [1991] ECR I-1979 para 21
[4] Cases C 180/98 ect Pavlov and Others [2000] ECR I-6451, para 74
[5] Whish, R. Competition Law (6th Ed. Oxford University Press, Oxford, 2009) 83
[6] Whish, R. Competition Law (6th Ed. Oxford University Press, Oxford, 2009) 83
[7] Case C-41/90 Höfner and Elser v Macrotron [1991] ECR I-1979
[8] RAI/Unitel OJ 1978 L157/39
[9] Case C-475/99 Ambulanz Glöckner v Landkreis Südwestpfalz [2001] ECR I-8089
[10] Distribution of package tours during the 1990 World Cup OJ 1992 L326/31
[11] Case C-309/99 Wouters v Algemene Raad van de Nederlandse Orde van Advocaten [2002] ECR I-1577
[12] Case T-319/99 FENIN v Commission [2003] ECR II-357 para 35-37
[13] Whish, R. Competition Law (6th Ed. Oxford University Press, Oxford, 2009) 86-87
[14] Case C-41/90 Höfner and Elser v Macrotron [1991] ECR I-1979 para 21
[15] Case C-343/95 Diego Calì & Figli Srl v Servizi ecologici porto di Genova SpA [1997] ECR I-1547 para 23
[16] Case C-70/95 Sodemare SA, Anni Azzurri Holding SpA and Anni Azzurri Rezzato Srl v Regione Lombardia [1997] ECR I-3395 para 29
[17] Case C-218/00 Cisal di Battistello Venanzio & C. Sas v INAIL [2002] ECR I-691
[18] ibid
No comments:
Post a Comment