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What is a service of general economic interest?

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Abstract

The definition of the concept a “service of general economic interest” (SGEI) known from Article 106(2) treaty of the functioning of the European Union is clarified. When a service is determined to be an SGEI, Member States may enact measures and undertakings entrusted with the provision of the SGEI may engage in behaviour which would otherwise be contrary to the rules of the Treaties, notably the competition rules. Member States retain a wide discretion to define, provide and finance SGEIs; i.e. to use the entrustment of an SGEI as a tool to intervene in the market. This discretion is subject only to a test for manifest error of assessment by the Commission. To increase legal certainty, ensure effective intervention in markets and prevent their use in industrial policy, it is highly relevant to clarify what SGEIs are. The various definitions published by the Commission and in the literature are examined, and a new definition of an SGEI based on economic theory (networks and network effects) is formed. This definition is consistent with the case law of the Court of Justice of the European Union and the General Court. On the basis of the definition, implications for efficiency in dealing with SGEIs are made.

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Notes

  1. For readers not familiar with the topic, please refer to one of the comprehensive and detailed academic texts concerning the developments in case law and policy over time, e.g. Buendia Sierra (2000, 2007), Baquero Cruz (2005).

  2. The legal test under Article 106(2) TFEU will not be elaborated here, as focus is on the concept of an SGEI, and not on the legal implications of the service being an SGEI. For further information on the legal test under Article 106(2) TFEU; see references in note 1.

  3. Charter of Fundamental Rights of the European Union, OJ 2010 C 83/389, Article 36. Both Protocol no. 26 and the Charter are part of the Treaties, cf. Article 51 TEU and Article 6(2) TEU.

  4. For an analysis of the soft law regulation of SGEIs, see Neergaard (2011).

  5. Cf. Article 14 TFEU (ex Article 16 TEC): “… the Union and the Member States, each within their respective powers…” “[emphasis added] and Article 1 of Protocol no. 26 on SGIs: The shared values of the Union in respect of services of general economic interest within the meaning of Article 14 of the Treaty on the Functioning of the European Union include in particular: the essential role and the wide discretion of national, regional and local authorities in providing, commissioning and organising services of general economic interest as closely as possible to the needs of the users…” [emphasis added].

  6. The “first Altmark package” was adopted in 2005 and consisted of the Altmark Decision and the Framework for Public Service Compensation.

  7. The documents are available at: http://ec.europa.eu/competition/state_aid/legislation/sgei.html.

  8. The list of case law in long, some recent examples on solidarity include C-218/00 Cisal (2002) ECR I-691; C-350/07 Kattner Stahlbau GmbH (2009) ECR I-1513 and C-437/09 AG2R (2011) ERC I-973 and on public authority, see C-49/07 MOTOE (2008) ECR I-4863 and C-138/11 Compass-Datenbank, judgment of 12 July 2012, nyr. On purchasing activities, see Cf. C-205/03P FENIN (2006) ECR I-6295 and C-113/07P SELEX (2009) ECR I-2207.

  9. The concept of an undertaking is e.g. central in the current reform of the State aid rules, cf. 2011 Communication.

  10. The review of definitions is delineated from definitions based on other norms than economic ones; e.g. Ross (2007, 2009).

  11. This could be influenced by the turn of interest towards Social Services of General Interest and Non-economic Services of General Interest, cf. 2006 Communication and the 2007 Communication, and most recently at Treaty level Protocol No. 26 on Services of General Interest.

  12. I.e. the more economic approach to assessments under Article 102 TFEU in the Communication on Article 82 EC and the more economic approach to State aid in the 2005 State Aid Action Plan. On the more economic approach under the rules on State aid, see also Friederiszick et al. (2008).

  13. This perception is criticised by Neegaard (2009), who mentions several weaknesses in the approach, notably the wording of Article 106(2) TFEU which mentions both imposing of an SGEI and assignment of “particular tasks”.

  14. E.g. joined cases C-34-38/01 Enirisorse (2003) ECR I-14243, para. 33 and C-399/08P Commission v Deutsche Post [2010] ECR I-7831, para. 41.

  15. C-280/00 Altmark (2003) ECR I-7747.

  16. Cf. Altmark Decision and 2011 Communication.

  17. Joined cases C-34-38/01 Enirisorse (2003) ECR I-14243, para. 33.

  18. T-289/03 BUPA (2008) ECR II-81, paras. 161–162.

  19. T-17/02 Fred Olsen (2005) ECR II-2031, para. 216; T-289/03, BUPA (2008) ECR II-81, para. 166; T-442/03 SIC (2008) ECR II-01161, para. 195; T-309/04, T-317/04, T-329/04 and T-336/04 TV2 Danmark (2008) ECR II-2935, para. 101.

  20. T-289/03 BUPA (2008) ECR II-81, para. 168.

  21. T-289/03 BUPA (2008) ECR II-81, para. 172.

  22. T-137/10 CBI v Commission, judgment of 7 November 2012, nyr.

  23. T-137/10 CBI v Commission, judgment of 7 November 2012, nyr., paras. 167 and 215.

  24. T-137/10 CBI v Commission, judgment of 7 November 2012, nyr., paras. 165-167.

  25. However, in several of the judgments of the General Court (T-17/02 Fred Olsen (2005) ECR II-2031; T-289/03, BUPA (2008) ECR II-81; T-442/03 SIC (2008) ECR II-01161; and, T-309/04, T-317/04, T-329/04 and T-336/04 TV2 Danmark (2008) ECR II-2935), reference is made in this connection to opinion of AG Léger on 10 July 2001 concerning C-309/99 Wouters [2002] ECR I-1577, para. 162: “In point of fact, it falls to the Member States to define the content of their services of general economic interest. In this respect they enjoy considerable leeway since the Court will intervene only in order to penalise any abuse, where the Member States damage the Community's interests.”

  26. T-289/03 BUPA [2008] ECR II-81, para. 167.

  27. On the legal basis provided in Article 14 TFEU, see e.g. Krajewski (2008).

  28. “The Communication provides important guidance on what the Commission considers manifest error to be, and thus increases legal certainty.”

  29. Which he terms “manifestly disproportionate”, cf. Sauter (2008), p. 186.

  30. Moreover, see Sauter (2013).

  31. Joined cases C-197 and 203/11, Eric Libert and Others, judgment of 8. May 2013, nyr., para. 97; along the same lines T-137/10 CBI v Commission, judgment of 7 November 2012, nyr., paras. 86–87.

  32. See references in fn. 40.

  33. T-289/03 BUPA (2008) ECR II-81, paras. 191-195.

  34. The Amsterdam Protocol was annexed to the Treaty in 1997, and has now been replaced by Protocol no 29 on the systems of public broadcasting in the Member States, annexed by the Lisbon Treaty to the TEU and TFEU.

  35. C-96/94 Spediporto (1995) ECR I-2883.

  36. What is now Protocol no 27 on the Internal Market and Competition and Article 4(3) TFEU, read in conjunction with Article 101 or 102 TFEU, see also Gerad (2010).

  37. See also C-7/82 GVL v Commission [1983] ECR 483, paras. 30-32; C-18/88 GB-Inno BM (1991) ECR I-5941, para. 22; and, T-266/97 Vlaamse Televisie Maatschappij (1999) ECR II-2329, para. 122.

  38. E.g. Recialt 18, Article 11(1) (a), Article 12 and Article 15 of Directive 96/67/EC on access to the ground handling market at Community airports, O.J. 1996 L 272/36; Article 1 of Directive 97/67/EC on common rules for the development of the internal market of Community postal services and the improvement of quality of service, O.J. 1998 L 15/4 as amended by Directive 2008/6/EC amending Directive 97/67/EC with regard to the full accomplishment of the internal market of Community postal services, O.J. 2008 L 52/3; Article 1 of Directive 2002/22/EC on universal service and users' rights relating to electronic communications networks and services, O.J. 2002 L 108/51 as amended by Directive 2009/136/EC amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws, O.J. 2009 L 337/11; Regulation 1370/2007 on public passenger transport services by rail and by road and repealing Council Regulations Nos 1191/69 and 1107/70, O.J. 2007 L 315/1; Article 1 of Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC, O.J. 2009 L 211/55;.

  39. Opinion of Advocate General La Pergola on 4 March 1999 concerning C-124/97 Läärä (1999) ECR I-6067, para. 30.

  40. T-289/03 BUPA (2008) ECR II-81.

  41. C-203/96 Dusseldorph (1998) ECR I-4075 and C-209/98 Sydhavnens Sten og Grus (2000) ECR I-3743.

  42. A good or a service—here the term “good” will be used to encompass both as this is the standard terminology of welfare economics.

  43. However, public control with certain undertakings entrusted with an SGEI could be seen as dealing with information asymmetries. Such control could be achieved by golden shares but the Courts seem to deal with golden shares not through 106(2) TFEU but rather through free capital mobility. See the discussion in section IV on cases.

  44. The two cases mentioned in Section II.C on collection of hazardous and building waste have to do with remedying the environmental externality (collection and treatment of waste) rather than with limiting the size of the external effect at its root. However, the cases illustrate that environmental concerns may occasionally explain the existence of an SGEI.

  45. These circumstances are that a) there are increasing returns to scale in software production; b) there is free entry into software production; and c) consumers have a preference for software variety.

  46. For an example of this view, see Jordan (1972).

  47. For early contributions, see Stigler (1971) and Peltzman (1976).

  48. C-157/94 Commission v Netherlands (19970 ECR I-5699, para. 58).

  49. E.g. C-439/08, VEBIC, judgment of 7 December 2010, nyr, para. 38 or C-116/08, Christel Meerts (2010) ECR I-10063, para. 3.

  50. E.g. C-367/10P, EMC Development AB, judgment of 31 March 2011, nyr.

  51. E.g. C-205/99 Analir (2001) ECR I-1271 or joined cases C-282-283/04 Commission v Netherlands (2006) ECR I-9141.

  52. Hopefully, only one judgment was left out on this basis, namely T-137/10 Coordination bruxelloise d’institutions sociales et de santé (CBI) v European Commission, judgment of 7 November 2012, nyr.

  53. C-437/09, AG2R (2011) ECR I-973.

  54. AG Mengozzi made do with finding that a task of general economic interest had ostensibly been assigned to AG2R, cf. opinion of AG Mengozzi on 11 November 2010 concerning C-437/09 AG2R, para. 102.

  55. On proportionality of measures or conduct in the context of SGEIs, cf. Sauter (2008).

  56. C-67/96 Albany (1999) ECR I-5751; C-115-117/97 Stichting Bedrijfspensioenfonds (1999) ECR I-6025; C-219/97 Maatschappij Drijvende Bokken (1999) ECR I-6121; and, T-289/03 BUPA (2008) ECR I-81.

  57. See also 2011 Communication, paras 51–53.

  58. For a recent not very formalistic approach, see C-242/10 Enel Produzione, judgment of 21 December 2011, nyr., where the CJEU found that, even though the notification requirement in Article 3(9) of Directive 2003/54/EC concerning common rules for the internal market in electricity and repealing Directive 96/92/EC—Statements made with regard to decommissioning and waste management activities, OJ 2003 L 176/37, was not fulfilled, this was not decisive for defining the national measures as a PSO, cf. para. 39 of the judgment.

  59. This case was appealed by RTE but the appeal was dismissed by CJEU in joined cases C-241/91 P and C-242/91 P. These joined cases do not appear in Table 1 since the search criterion “general economic interest” was not met. In other words the appeals do not throw additional light on SGEI compared with the original case T-69/89.

  60. Purchase of shares is categorized as direct investments, and hence, capital, cf. Directive 88/361/EEC for the implementation of Article 67 of the Treaty, OJ 1988 L 178/5.

  61. Cf. C-543/08 Commission v Portugal ECR 2010 I-11241, paras. 93–95.

  62. C-463/00 Commission v Spain, para. 70.

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  1. Department of Law, Copenhagen Business School, Solbjerg Plads 3 C5, 2000, Frederiksberg, Denmark

    Grith Skovgaard Ølykke

  2. Department of Economics, Copenhagen Business School, Frederiksberg, Denmark

    Peter Møllgaard

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Ølykke, G.S., Møllgaard, P. What is a service of general economic interest?. Eur J Law Econ 41, 205–241 (2016). https://doi.org/10.1007/s10657-013-9426-8

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