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Applicable Legislation

•Primary Law: Art.101 and 102 TFEU.
•Secondary Law: Council Regulation 1/2003 applies to all air transport services, including on routes between the EU and third countries. The latter was achieved through the adoption of Council Regulation 411/2004 on 26 February 2004, (Official Journal L 68, 6.3.2004, p. 1-2).

Council Regulation (EC) No 487/2009 of 25 May 2009 on the application of Article 81(3) of the Treaty to certain categories of agreements and concerted practices in the air transport sector (Codified version) (Official Journal L 148, 11.6.2009).

•Commissions’ antitrust regulations specific to air transport have been gradually repealed and no such regulation is in force today. General antitrust regulations are however applicable.
•General notices and communications on antitrust are applicable., but not  to antitrust in the air transport sector.
Article 101 TFEU
•According to Article 1(1) of Regulation 1/2003 agreements which are caught by Article 101(1) and which do not satisfy the conditions of Article 101(3) are prohibited, no prior decision to that effect being required. According to Article 1(2) of the same Regulation agreements which are caught by Article 101(1) but which satisfy the conditions of Article 101(3) are not prohibited, no prior decision to that effect being required. Such agreements are valid and enforceable from the moment that the conditions of Article 81(3) are satisfied and for as long as that remains the case.
Article 101 (3)
•The application of the exception rule of Article 101(3) is subject to four cumulative conditions, two positive and two negative:
•(a) The agreement must contribute to improving the production or distribution of goods or contribute to promoting technical or economic progress,
•(b) Consumers must receive a fair share of the resulting benefits,
•(c) The restrictions must be indispensable to the attainment of these objectives, and finally
•(d) The agreement must not afford the parties the possibility of eliminating competition in respect of a substantial part of the products in question.
Article 102 TFUE
•Article 102 TFUE prohibits abuses of a dominant position. In accordance with the case-law, it is not in itself illegal for an undertaking to be in a dominant position and such a dominant undertaking is entitled to compete on the merits. However, the undertaking concerned has a special responsibility not to allow its conduct to impair genuine undistorted competition on the common market. Article 102 is the legal basis for a crucial component of competition policy and applies to undertakings which hold a dominant position on one or more relevant markets. Such a position may be held by one undertaking (single dominance) or by two or more undertakings (collective dominance).
SSNIP Test
•Before deciding whether companies have significant market power which would justify government intervention, the test of Small but Significant and Non-transitory Increase in Price (SSNIP) is used to define the relevant market in a consistent way. It is an alternative to ad hoc determination of the relevant market by arguments about product similarity.
•The SSNIP test is crucial in competition law cases accusing abuse of dominance and in approving or blocking mergers. Competition regulating authorities and other actuators of anti-trust law intend to prevent market failure caused by cartel, oligopoly, monopoly, or other forms of market dominance.
Means of Compliance
•fines and periodic penalty payments;
•effective supervision;
•simplify administration.
Competent Authorities
•Article 101 (previously Article 81) of the new EU Treaty prohibits agreements and concerted practices between firms that distort competition within the Single Market. Fines of up to 10% of their worldwide turnover may be imposed on the guilty parties. The prohibition of cartels was already in the 1957 Treaty of Rome and the 10% cap has been introduced in 1962 by the first implementing Regulation for competition enforcement (Regulation No 17).
•All cartel decisions by the Commission may be appealed against before the General Court of the European Union and then before the European Court of Justice. They can, therefore, be closely scrutinised by these two courts, which are empowered to annul decisions in whole or in part and to reduce or increase fines, where this is deemed appropriate.
Leniency
•The Commission’s leniency policy encourages firms to provide the Commission with insider information on cartels. The first firm to do so is granted total immunity from fines. Other firms that follow suit may be granted a reduction in the amount of the fine. This policy is very effective in uncovering cartels but does not prevent the Commission from conducting investigations on its own initiative. The first leniency notice was adopted in 1996 and has since been revised and further refined in 2002 and 2006.
Settlement
•Settlement decisions are only foreseen in cartel cases. They are adopted pursuant to Articles 7 and 23 of Regulation (EC) Nº 1/2003, which are the standard legal basis for Commission Decisions acting against violations of Articles 81 and 82 EC. Therefore, settlement decisions establish the existence of an infringement, describing and proving all the relevant parameters thereof, require the termination of the infringement and impose a fine. They constitute a precedent valid to establish recidivism for subsequent similar infringements and preclude the adoption of another decision for the same facts and pursuant to the same legal basis by the Commission or any EU National Competition Authority.
•By introducing a settlement submission, the parties commit to follow the settlement procedure subject to the condition that the Commission Decision ultimately reflects the contents of the settlement submission and it does not impose a fine higher that the maximum fine indicated in it.
Commitment
•Commitment decisions are adopted on the basis of Article 9 of Regulation (EC) Nº 1/2003. They do not establish an infringement or impose a fine, but bring a suspect behaviour to an end by imposing on companies the commitments offered to meet the Commission concerns. Commitment decisions render the commitments legally binding and conclude that there are no longer grounds for action by the Commission. Therefore, they do not constitute precedents to establish recidivism for subsequent infringements. Commitment decisions are not appropriate in cartel cases.
Fines- Basic Amount
•The maximum fine for each firm is 10 % of its total turnover in the preceding business year (Regulation EC No 1/2003).
•The basic amount is calculated as a percentage of the value of the sales connected with the infringement, multiplied by the number of years the infringement has been taking place.
•The percentage of the value of sales is determined according to the gravity of the infringement (nature, combined market share of all the parties concerned, geographic scope, etc.) and may be as much as 30 %.
•The Commission then adds to this initial calculation a further amount that is applied to all cartel cases and, at the Commission’s discretion, to certain other types of infringement. This will be between 15 and 25 % of the value of annual sales, irrespective of the duration of the infringement.
Adjustments to the basic amount
•The basic amount may be adjusted by the Commission, downwards if it finds that there are mitigating circumstances, or upwards in the event of aggravating circumstances.
•Firms that commit similar infringements again will now be fined more heavily. The Commission will penalise re-offending, taking into account not only its own earlier decisions but also rulings by national authorities. Firms that re-offend could now face a 100 % increase in their fine for each subsequent infringement.
Inability to pay claims by cartel members
•The 2006 Fines Guidelines provide that in, exceptional cases, the Commission may, upon request, take account of an undertaking’s inability to pay. In assessing whether a company would risk going bankrupt as a result of the fine, among other things the Commission assesses a company’s financial situation on the basis of its financial statements from recent years but also including projections for the current and the two following years. The Commission looks at the company’s liquidity, solvency and other financial ratios that are commonly used to assess a company’s solidity or the lack thereof. It also assesses the company’s relations with banks and shareholders. In the recent bathroom fittings case, 10 companies claimed inability to pay. The claims of five companies were found to be justified and fine reductions were granted.

Parking Brixen GmbH- Case -C-458/03

August 4th, 2011 | Posted by DUCA LL.M in EU Law - (0 Comments)

Ruling of 13 October 2005 of the Court the First Chamber in Case [C-458/03], Parking Brixen GmbH v Gemeinde Brixen and Stadtwerke Brixen AG [2005] ECR I-08585

 

Referred by [Verwaltungsgericht, Autonome Sektion für die Provinz Boz (Italy)]

 

FACTS:

 

 In 2001, the Municipality of Brixen (Italy) converted Stadtwerke Brixen, a municipal undertaking, into a company limited by shares, Stadtwerke Brixen AG. The company’s nominal capital was 100% owned by the municipality which, however, was allowed under national legislation to remain the sole shareholder for only the following two years.

 

In 2002, the Municipality of Brixen concluded an agreement with Stadtwerke Brixen AG for the management, for a nine-year term, of a car park with about 200 spaces.

 

In consideration of the management of the car park, Stadtwerke Brixen AG collects the parking charges. In addition, it provides a free bicycle hiring service and accepts that theweekly market continues to be held on the area in question. Finally, the routine and non routine maintenance of the area is the task of that company which takes full responsibility in

that regard.

 

Parking Brixen GmbH, the company which managed another car park in the Municipality of Brixen, challenged before the Verwaltungsgericht, Autonome Sektion für die Provinz Bozen, the award of the management of the car park to Stadtwerke Brixen AG. In its submission, the Municipality of Brixen should have issued a public call for tenders.

 

The Municipality of Brixen maintained that it completely controls Stadtwerke Brixen AG and that there was therefore no award of a contract or concession to a third party. There was no obligation to proceed by way of a public call for tenders.

 

In that context, the Verwaltungsgericht, Autonome Sektion für die Provinz Bozen, referred two questions to the Court of Justice of the European Communities for a preliminary ruling.

 

 

ISSUES/QUESTIONS:

 

 Interpretation of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1) Articles 43 EC, 49 EC and 86 EC, and the principles of non-discrimination, transparency and equal treatment/ whether the award of the management of the public pay car parks in question in the main proceedings involves a public service contract within the meaning of Directive 92/50, or a public service concession and; whether the award of a public service concession without it being put out to competition is compatible with Community law, if the concessionaire is a company limited by shares resulting from the conversion of a special undertaking of a public authority, a company whose share capital is at the time of the award 100% owned by the concession-granting public authority, but whose administrative board enjoys all extensive powers of routine administration and can effect independently, without the agreement of the shareholders’ meeting, certain transactions up to a value of EUR 5 million.

 

 

ANSWER of the COURT:

 

 The award, by a public authority to a service provider, of the management of a public pay car park, in consideration for which that provider is remunerated by sums paid by third parties for the use of that car park, is a public service concession to which Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts does not apply.

 

Articles 43 EC and 49 EC, and the principles of equal treatment, non-discrimination and transparency, are to be interpreted as precluding a public authority from awarding, without putting it out to competition, a public service concession to a company limited by shares resulting from the conversion of a special undertaking of that public authority, a company whose objects have been extended to significant new areas, whose capital must obligatorily be opened in the short term to other capital, the geographical area of whose activities has been extended to the entire country and abroad, and whose Administrative Board possesses very broad management powers which it can exercise independently.

 

REASONING of the Court

 

 The Court points out, first, that the Directive relating to the coordination of procedures for the

award of public service contracts[1] applies to contracts which involve consideration which is paid directly by the contracting authority to the service provider, but does not apply to service concessions.

 

In this case, the service provider’s remuneration comes from the sums paid by third party users of the car park concerned. That method of remuneration means that the provider takes the risk of operating the services in question and is thus characteristic of a public service concession.

 

Therefore, since it is a public service concession, the directive does not apply.

Nevertheless, the Court makes clear that a concession-granting public authority is, as a rule, bound to comply with the general rules of the EC Treaty such as freedom of establishment and freedom to provide services, as well as the principles of equal treatment, nondiscrimination and transparency.

 

The application of those rules is excluded only if the concession-granting public authority exercises over the concessionaire a control similar to that which it exercises over its own departments and if that concessionaire carries out the essential part of its activities with the controlling authority. Such control must enable the concession-granting authority to have a decisive influence over both the concessionaire’s strategic objectives and its significant decisions.

 

In this case, Stadtwerke Brixen AG enjoys a high degree of independence which precludes the municipality from exercising over it control similar to that which it exercises over its own departments. Indeed, the company’s objects were broadened to other fields such as the carriage of persons and goods, its activities expanded to the whole of Italy and abroad, and its capital had to be opened to other shareholders. In addition, broad powers were conferred on its Administrative Board with, in practice, no management control by the municipality. Consequently, the award cannot be regarded as an ‘in-house’ transaction to which the rules and principles of Community law do not apply.

 

The Court concludes therefore that the complete failure to put out to tender the award of a public service concession such as that in question is not compatible with Community law.

 

Comments:

 

After the Court found that Directive 92/50 is not applicable, carried on with assessing the case in the light of the freedom of establishment and services, as governed by the principles of equal treatment and non-discrimination, on the basis of the obligation of transparency, that is incumbent to the public authority when granting a concession. Moreover, the Court made reference to the competition provisions as enshrined by the Treaty, namely Article 106 (1) TFEU, which states that, “in the case of public undertakings and undertakings to which Member States grant special or exclusive rights, Member States shall neither enact nor maintain in force any measure contrary to the rules contained in the Treaty, in particular to those laid down in Articles 18 TFEU and 101 EC to 109 TFEU”.

In this respect, even if the secondary legislation was not found to be applicable to the situation brought before the Court, the Case was analysed under primary legislation, in relation to the fundamental rules that govern EU law. In this regard, the discrimination matter was not assessed as in the light of Article 8 TFEU, which provides for a general expression, but as derived from the freedoms of establishment and services and, consequently in relation to the competition rules.

The Case is retains a high degree of complexity in respect of anti-discrimination law. In this respect, the court emphasized that a member State legislation must always comply with the fundamental freedoms, in particular with the principle of non-discrimination on grounds of nationality[2].

Next, the court found that more specifically applicable provisions, other than the Directive aforementioned, include, so they are not limited to, in particular Articled 49 and 56 TFEU, freedom of establishment and freedom to provide services. In addition, the Court noted that Articles 49 and 56 TFEU are expressions of the principle of equal treatment and not of the principle of non-discrimination, as stated in other Cases that were brought before it.

In order to reach its conclusions in this Case, the Court considered that this was not a matter of internal affairs, but one of the Internal Market, and consequently assessed together the principles of equal treatment and non-discrimination, which sets up a duty of transparency which enables the concession public authority to ensure that these principles are complied with. Moreover, the obligation of transparency consist in ensuring , for the benefit of any potential tenderer a degree of advertising sufficient to enable the service concession to be opened up to competition and the impartiality of procurement procedures to be reviewed[3].

The parties’ arguments sought to maintain that EU law is not applicable, namely the defendants in the main proceedings and the Italian Government, referred to the fact that the situation is an internal one, given that all the parties’ premises are located in Italy and that the plaintiff in the main proceedings is not an entity independent of that municipality.

None of them ware accepted, as the Court assessed the Case in the hypothesis that if a Member State would be interested to provide the same services. When the case maybe, if there is no advertising, then other member States are discriminated and that will hinder the free movement of establishment and services. Moreover, it will distort competition within the Internal Market.

No issues of direct or indirect discrimination were dealt with here, as the principle of discrimination was used to decide whether EU law was applicable or not to the Case brought before the Court. But when the Treaty contains fundamental freedoms based on fundamental rights, that are generally valid, it would be difficult for one not to find them applicable, even if there was a hypothetical situation that the Court ruled on.



[1] Council Directive 92/50/EEC of 18 June 1992

[2] Case [C-458/03], Parking Brixen GmbH v Gemeinde Brixen and Stadtwerke Brixen AG [2005] ECR I-08585, paragraph 46

[3] Idem Paragraoh 49.