OPINION OF ADVOCATE GENERAL

POIARES MADURO

delivered on 10 November 2005 1( )

Case C-205/03 P

Federación Española de Empresas de Tecnología Sanitaria (FENIN), formerly Federación Nacional de Empresas, Instrumentación Científica, Médica, Técnica y Dental

(Appeal – Organisations managing the Spanish national health system – Concept of undertaking – Terms of payment imposed on suppliers of medical goods and equipment)

1. In order for an entity to be subject to Community competition law, it must be classified as an undertaking. Although the EC Treaty makes frequent reference to the concept, it does not define it and it has instead been clarified in case-law, which gives it a functional content. It has been established that an entity engaged in an economic activity is an undertaking for the purposes of Articles 81 EC to 86 EC, irrespective of its legal status and the way in which it is financed. ( ) While it is accepted that certain tasks in the public interest such as the maintenance and improvement of air navigation safety ( ) and the protection of the environment ( ) are not economic in nature, it is less easy, where activities are linked to the operation of the national social security system, to determine when they may be classified as non‑economic, since the case-law in this field undertakes a case-by-case analysis, and asks whether the principle of solidarity requires that the application of the Community competition rules be excluded. It is difficult to specify the circumstances in which that principle will result in an activity being classified as non-economic in nature.

2. The question at the heart of this case concerns the purchase of medical instruments by a public body responsible for the management of the Spanish national health system (‘the SNS’). Two issues are of particular importance. It is necessary, first, to establish whether the fact that the activity carried on by that body is subject to the principle of solidarity prevents it being classified as an undertaking and, secondly, whether it is possible to separate its purchasing activities from those of providing health services.

3. The Federación Española de Empresas de Tecnología Sanitaria (‘FENIN’) has appealed against the judgment of 4 March 2003 in Case T‑319/99 FENIN v Commission [2003] ECR II-357 (‘the judgment under appeal’) by which the Court of First Instance of the European Communities confirmed the decision of the Commission of the European Communities rejecting a complaint, which held that competition law did not apply to the body in question, on the basis that it was not an undertaking. By this appeal, the Court of Justice is called upon to rule on whether that conclusion accords with the concept of an undertaking, as it is defined in case-law.

I – Background to the appeal

4. The judgment under appeal shows that the dispute originates in a decision of the Commission of 26 August 1999 (‘the contested act’) not to allow a complaint submitted by FENIN seeking a declaration that 26 public bodies, including three ministries of the Spanish Government, which run the SNS, had infringed Article 82 EC by paying sums invoiced to them by FENIN only after a considerable delay, amounting to 300 days on average.

5. FENIN is an association of the majority of undertakings which market medical goods and equipment used in Spanish hospitals. On 12 December 1997, it submitted a complaint to the Commission alleging that the organisations managing the SNS were in a dominant position on the Spanish market for medical goods and equipment and that they had abused that position by delaying payment of their debts. FENIN submitted additional observations to the Commission on 12 May 1998. By letter of 2 December 1998, the Commission informed the appellant of its provisional decision to reject the complaint. FENIN replied to the Commission by observations dated 10 February 1999. The contested act definitively rejected FENIN’s complaint, first, on the ground that ‘the 26 ministries and other organisations in question [were] not acting as undertakings when they [participated] in the management of the public health service’ and, secondly, that ‘the demand of the 26 ministries and other organisations [could not] be dissociated from the subsequent supply which they provide’. The Commission deduced from that that the organisations in question were not acting as undertakings and were accordingly not subject to Article 82 EC.

6. By application lodged at the Registry of the Court of First Instance on 10 November 1999, FENIN brought an action for the annulment of the contested act on the ground inter alia that the Commission had committed a manifest error of assessment in the application of Articles 82 EC and 86 EC. The Commission maintained that, in assessing the position of the SNS, it had applied the functional criterion of the definition of an undertaking, as laid down by the Court of Justice in Poucet and Pistre. ( )

7. In the judgment under appeal, the Court of First Instance dismissed the action brought by FENIN and held that the Commission had correctly applied the concept of an undertaking within the meaning of Articles 82 EC and 86 EC. That Court adopted a three-stage approach in reaching that conclusion. First, in paragraph 36 of the judgment, it distinguished between purchasing and supplying activities, stating that ‘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’. The Court of First Instance went on to hold that ‘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’. It is therefore necessary to consider whether or not the use of the purchased goods amounts to an economic activity. The Court of First Instance based its analysis on Poucet and Pistre and FFSA and Others, ( ) in order to hold, in paragraph 39 of the judgment under appeal, that ‘the SNS, managed by the ministries and other organisations cited in the applicant’s complaint, operates according to the principle of solidarity in that it is funded from social security contributions and other State funding and in that it provides services free of charge to its members on the basis of universal cover’. Accordingly, the purchasing activities linked to an activity which was not of an economic nature were classified in the same way. The organisations covered by FENIN’s complaint were accordingly not undertakings for the purposes of Articles 82 EC and 86 EC.

8. FENIN’s appeal is against that part of the judgment under appeal. FENIN relies on the single ground of appeal that the Court of First Instance incorrectly interpreted the concept of an undertaking within the meaning of Community competition law. By the first part of the appeal, FENIN submits that the Court of First Instance was wrong in failing to hold that the purchasing business was an economic activity and that it incorrectly linked the nature of the purchasing activity to that of the service subsequently provided. By the second part, FENIN argues in the alternative that the Court of First Instance should have held that the purchasing activity is an economic activity because the subsequent activity, namely the provision of medical care, is economic in nature. In its submissions in reply, the Commission maintains that the analysis undertaken by the Court of First Instance in the judgment under appeal is consistent with the interpretation of the concept of an undertaking for the purposes of Community competition law, as adopted in case-law. The Commission also contends that the second part of the appeal is inadmissible, since it was put forward for the first time at the stage of the appeal. Furthermore, that plea is tantamount to challenging the assessment of the facts by the Court of First Instance, which cannot be the subject of an appeal. The United Kingdom and the Kingdom of Spain have intervened in support of the Commission’s position. They consider that neither purchasing, as such, nor the provision of medical care constitute an economic activity.

9. Before examining in turn the two parts of the single ground of appeal, it is appropriate to give preliminary consideration to the concept of an undertaking within the meaning of Community competition law, as established by the case‑law of the Court. Reference will also be made to the practice of the courts and competition authorities of the Member States.

II – Preliminary issue: the concept of an undertaking

10. As was mentioned above, the classification of an entity as an undertaking for the purposes of Community law depends on the economic nature of the activity carried on by it. As each activity carried on by the entity falls to be analysed separately, it is quite possible for an entity to be treated as an undertaking as regards some of its activities, while others fall outside the sphere of competition law. ( ) In order to differentiate between economic and non-economic activities, the case‑law relies on concurrent criteria, which are used either cumulatively or alternatively. It is necessary to set these out, since the basis of FENIN’s appeal is that the Court of First Instance wrongly applied that case-law.

A – Case-law relating to the concept of an undertaking

11. The use of a comparative criterion, which lies at the root of a functional and wide-ranging approach to the concept of an undertaking, dates from the judgment in Höfner and Elser. The Court held that the activity concerned was economic in nature, since ‘employment procurement has not always been, and is not necessarily, carried out by public entities’. ( ) In his Opinion in Poucet and Pistre, Advocate General Tesauro adopted the same reasoning and considered that the activity in question could be carried on only by a public body and could not be assimilated with the insurance activities carried on by private undertakings. He therefore concluded that the entity in question was not an undertaking. ( ) The judgment in Ambulanz Glöckner offers a further illustration of the use of the comparative criterion by the Court: health organisations providing services on the market for emergency and ambulance services were held to be undertakings, because ‘such activities have not always been, and are not necessarily, carried on by such organisations or by public authorities’. ( )

12. Where there is no competitive market on which a number of undertakings act in competition, the question of the economic nature of an activity and the application of the comparative criterion become more difficult. So that the absence of effective competition on a market does not lead to its automatic exclusion from the scope of competition law, the comparative criterion therefore extends the concept of an economic activity to include any activity capable of being carried on by a profit-making organisation. ( ) While the Court does not undertake that comparison as a matter of course, it refers in nearly all its judgments relating to the concept of an undertaking to Höfner and Elser, which remains the starting point for its analysis. However, that comparative criterion would, literally applied, enable any activity to be included within the scope of competition law. ( ) Almost all activities are capable of being carried on by private operators. Thus, there is nothing in theory to prevent the defence of a State being contracted out, and there have been examples of this in the past. Accordingly, in its subsequent judgments, the Court elaborated on that concept by linking it to participation in a market.

13. The second criterion developed by case-law for the purposes of classifying an activity as economic in nature is that of participation in a market or the carrying on of an activity in a market context. While in Höfner and Elser the economic nature of the activity stemmed only implicitly from participation in a market, since the State allowed private undertakings to participate in the market, in other cases the Court has established a clear link between participation in a market and the carrying on of an economic activity. In holding that Italian customs agents are undertakings, the Court described their activities as follows: ‘they offer, for payment, services consisting in the carrying out of customs formalities, relating in particular to the importation, exportation and transit of goods, as well as other complementary services such as services in monetary, commercial and fiscal areas’. ( ) In subsequent judgments, the Court directly assimilated participation in a market with the economic nature of the activity carried on. Thus, it stated in Pavlov and Others and Ambulanz Glöckner that ‘any activity consisting in offering goods and services on a given market is an economic activity’. ( ) It is not the mere fact that the activity may, in theory, be carried on by private operators which is decisive, but the fact that the activity is carried on under market conditions. Those conditions are distinguished by conduct which is undertaken with the objective of capitalisation, which is incompatible with the principle of solidarity. That allows it to be determined whether a market exists or not, even if the legislation in force prevents genuine competition emerging on that market. By contrast, where the State allows partial competition to arise, the activity in question necessarily implies participation in a market.

14. That is the context in which the references in case-law to the capacity to commit infringements of competition law can be understood, as the basis for categorising an entity as an undertaking. ( ) Even if no profit-making activity is carried on, there may be participation in the market capable of undermining the objectives of competition law. The Court’s case-law should not be interpreted as meaning that that criterion is sufficient to establish that an entity is to be classified as an undertaking, but it supports a conclusion that competition law should apply.

15. Apart from the criteria set out above, which have led the Court to hold in various cases that an entity was an undertaking, it is also relevant to consider the case-law where the Court has classified certain activities as ‘non‑economic’. Such a classification allows, a contrario, the scope of Community competition law to be defined. The Court will look to the nature, the aim and the rules which govern an activity. ( ) That analysis has led to it excluding from the scope of competition law tasks in the public interest such as the maintenance of air navigation safety ( ) and the protection of the environment, ( ) as those activities are considered to form part of the essential functions of the State. ( ) More generally, all cases which involve the exercise of official authority for the purpose of regulating the market and not with a view to participating in it fall outside the scope of competition law. ( )

16. Although the health sector is more and more open to competition, most commonly as a result of reforms introduced by the national legislature, ( ) entire parts of the sector remain the exclusive preserve of the activity of the State. In any event, competition law can apply to the sector only in so far as solidarity does not predominate in it. In order to determine the degree of solidarity involved, the Court has adopted, in the judgments it has delivered on the subject, a range of tests for determining whether compulsory membership of pension, insurance or retirement schemes complies with competition law. In two cases, it held that the activity in question was not economic in nature, and in three cases it reached a contrary conclusion.

17. In Poucet and Pistre, the question arose as to the compatibility with competition law of compulsory membership of a social security scheme. There being no particular activity at issue in the case, the Court referred to the nature of the organisations concerned. The operative part of the judgment states that ‘the concept of undertaking within the meaning of Articles 85 and 86 of the Treaty does not encompass organisations charged with the management of social security schemes of the kind referred to in the judgments of the national court’. In order to reach that conclusion and without indicating the degree of importance it attached to each element taken in isolation, the Court noted that ‘those schemes pursue a social objective and embody the principle of solidarity’. ( ) Consideration of the manner in which the principle of solidarity is embodied should form the basis of the classification, ( ) while the ‘exclusively social’ function fulfilled by those organisations ‘is based on the principle of national solidarity and is entirely non‑profit-making’. The Court also noted that ‘the benefits paid are statutory benefits bearing no relation to the amount of the contributions’. ( )

18. In Cisal, it was necessary to determine whether compulsory membership of a national insurance scheme against accidents at work and occupational diseases satisfied the requirements of Articles 82 EC and 86 EC. The Court held that the organisation concerned, the Istituto nazionale per l’assicurazione contro gli infortuni sul lavoro (Italian national institute for insurance against accidents at work, ‘the INAIL’), operated in accordance with the principle of solidarity ( ) and that it was subject to the control of the State, which set the level of contributions and determined that membership was to be compulsory. The Court therefore held that the INAIL did not carry on an economic activity, with the result that competition law did not apply.

19. The question before the Court in FFSA and Others related to the monopoly of management of an old-age insurance scheme conferred on a mutual fund. Upon analysis, the Court held that the bodies managing the supplementary and optional retirement scheme were undertakings. It emphasised the fact that membership of the retirement scheme was optional, that the scheme was managed in accordance with the principle of capitalisation and that benefits were calculated on the basis of contributions made. Competition with life-assurance undertakings was thus impliedly acknowledged to exist. Lastly, although elements of solidarity were present, they could not alter the conclusion that the bodies were undertakings.

20. A Netherlands sectoral pension fund which was considered by the Court in Albany( ) was also held to be an undertaking for the purposes of competition law. Three factors were referred to, namely the fact that membership of the fund was optional, the fact that the fund was managed in accordance with the principle of capitalisation and the fact that benefits were proportionate to contributions, from which it was deduced that an element of competition was involved between the fund and life-assurance companies in the private sector. The pursuit of a social objective, the fact that the fund was non-profit-making, the requirement of solidarity and the statutory restrictions applying were not sufficient to ‘deprive’ the activity carried on of its economic nature. The solidarity established by the fund was limited, because its benefits extended only to its members.

21. Similar reasoning was adopted in Pavlov and Others. The Court described the similarities between the supplementary pension scheme for doctors in the Netherlands and a private undertaking managing life assurance, and went on to hold that the requirements of solidarity imposed on the organisation could not affect the fact that it was an undertaking.

22. Finally, reference should be made to AOK-Bundesverband and Others, where the issue before the Court was not one of membership of a retirement scheme or a fund, but the setting by sickness funds in Germany of maximum amounts to be paid for medicinal products. Although it was open to it to do so, the Court did not exclude the possibility of the funds being classified as undertakings on the ground that their duties involved the regulation of the market. It reached its conclusion on the basis of the manner in which the State had implemented the concept of solidarity, since the nature of the competition which existed in the health insurance sector meant that market conditions could not be created. Nevertheless, it should be noted that, in paragraph 58 of the judgment, the Court expressly left open the possibility of the organisations in question acting as undertakings when ‘they engage[d] in operations which have a purpose that is not social’.

B – The criterion applied at national level

23. A study of comparative law shows that the national law of the Member States adopts criteria similar to those developed by the Court. It will be useful to give some examples, since they show how the national authorities and national courts have interpreted the concept of an undertaking. The criteria used by the Community Courts are to be found in German ( ) and Spanish ( ) decisions. It appears that a State body will be considered to be an undertaking subject to competition law where it carries on an activity on a market and that activity is capable of having anti‑competitive effects.

24. The judgment of the Competition Commission Appeal Tribunal in England in BetterCare v The Director General of Fair Trading ( ) is particularly noteworthy. North & West Belfast Health & Social Services Trust (‘N&W’) was required under statute to provide nursing home and residential care services for elderly persons. N&W was the owner of residential and nursing homes, some of which were managed by private undertakings. One of those undertakings, BetterCare, complained that N&W was abusing its dominant position since, as the sole purchaser of BetterCare’s services, it was forcing it to agree to unduly low prices. The Tribunal held that the decisive factor was the fact that N&W engaged in commercial transactions in services with private undertakings which managed the homes, with the result that its activities were of a commercial nature. The Tribunal also held that the management of homes and the provision of nursing care were a matter for the private sector and that, in that context, N&W was in competition with private operators. Lastly, the Tribunal noted that N&W was in a position to infringe competition law.

25. The fact that an activity is carried on by a State entity in satisfaction of a statutory requirement may go towards it being held not to be of an economic nature under Finnish law. The competition authority nevertheless held that a public hospital accused of charging predatory prices for laboratory and radiology services on the private market could be considered to be subject to competition law. ( ) Similarly, in Swedish case-law, the exercise of a power by a public authority is not subject to competition law provided it is undertaken on the basis of a statutory requirement. ( ) By contrast, the Irish authorities merely distinguish between economic activities and the exercise of regulatory functions or those involving the organisation of the workforce. The Irish competition authority accordingly held that a health authority responsible for administering health services and the provision of hospital services in a particular area which held fixed assets under lease was carrying on an economic activity. ( )

C – The applicable criterion

26. In seeking to determine whether an activity carried on by the State or a State entity is of an economic nature, the Court is entering dangerous territory, since it must find a balance between the need to protect undistorted competition on the common market and respect for the powers of the Member States. ( ) The power of the State which is exercised in the political sphere is subject to democratic control. A different type of control is imposed on economic operators acting on a market: their conduct is governed by competition law. But there is no justification, when the State is acting as an economic operator, for relieving its actions of all control. On the contrary, it must observe the same rules in such cases. It is therefore essential to establish a clear criterion for determining the point at which competition law becomes applicable. In principle, the rules of competition law apply only to economic operators who participate on a market and not to States, save where they pay aid to undertakings (Articles 88 EC to 92 EC). However, the need for consistency means that if a State ratifies decisions taken by undertakings ( ) or if it conducts itself in practice as an economic operator, Articles 81 EC to 86 EC may apply to it. It should be added that Article 86(2) EC would be rendered redundant if competition law were no longer to apply as soon as the State is present on a market. ( )

27. It is true that to introduce a requirement of competition in sectors which have no market characteristics would be meaningless. That would risk imposing a requirement on Member States to justify their position under Article 86(2) EC as a matter of course and would represent an unlimited extension of the scope of competition law. Above all, the State does not primarily act as an operator on the market, since one of its main roles is to put in place systems for redistribution. In that context, since action by the State is governed only by an objective of solidarity, it bears no relation to the market. Competition law applies to it only in so far as the bodies responsible for achieving the objectives of solidarity are to be treated as undertakings. By contrast, that law will not apply if the exercise of the activity does not involve the pursuit of an objective of capitalisation in any way, with the result that there can be no market. The State is none the less under a duty to act consistently: it is free to withdraw certain activities from the market only on the condition that it effectively implements the principle of solidarity and gives effect to redistribution policies. In effect, the State assumes two distinct roles, depending on whether it is acting as an operator on a market or whether it is acting for political purposes, inspired by considerations of solidarity. But it cannot shelter behind the pretext of solidarity in order to avoid economic operators being subject to competition law.

28. Two cases fall to be distinguished. First, if private organisations and public bodies carry on the same activity, competition, even of a limited and circumscribed nature, may have a role to play between them. The fact that the two kinds of entity carry on the same activity means that the services provided are similar and that they respond to the same demand on the market. The Court does not use the comparative criterion to mean that any activity where the State plays a role must be liberalised, but none the less seeks to avoid a situation where public bodies may act in competition with undertakings while at the same time claiming immunity from competition law. Höfner and Elser may be interpreted in the light of that approach. It appears that a decisive factor in the Court’s reasoning was the State’s inability to satisfy the demand presented by the market, since, in practice, it allowed its exclusive rights in the recruitment field to be encroached on by private companies. ( ) It remains open to the State to combine market conditions in this sector with restrictions, such as the obligation to provide a universal service. ( ) Organisations placed under the control of the State will then be treated as undertakings entrusted with the operation of services of general economic interest, as defined in Article 86(2) EC. It will be necessary to determine whether the conditions specified in that article are satisfied, that is to say whether the application of the competition rules does not prevent them achieving their task. It is at this point that social requirements will be taken into account in the light of the objective of maintaining undistorted competition. ( )

29. Secondly, where the State has reserved to itself a statutory monopoly for carrying on an activity, which means that no effective competition can arise, the possibility none the less remains that it is acting as an operator on the market, as the existence of such a monopoly will not change the nature of the activity in question. ( ) Within that framework, on the basis of relevant factors, it will be necessary to establish whether the activity is organised in such a way that the requirements of solidarity are satisfied in all material respects or whether, on the contrary, it operates on the basis of the market and pursues an objective of capitalisation. The inability of the organisation in question to break even without a contribution from the State will be evidence that it is the first of these situations which applies.

30. Whatever the field in question, the degree of solidarity put in place by the State may be more, or less, strong. In the insurance sector, as the Court has held in its case-law regarding membership of retirement or sickness funds, there are three factors which allow the degree of solidarity to be measured: whether membership is compulsory, the link between the contributions payable and the risk to which the insured is exposed, or, on the other hand, where solidarity is relevant, with his income, and, lastly, the relationship between the benefits dispensed and the contributions paid. ( )

31. Where it is a question of measuring the degree of solidarity involved in the provision of a service, the relevant parameters are different. A guarantee of universal access to users, whether in the field of health, telecommunications or energy, implies solidarity in so far as any differences in actual costs are eliminated in favour of a uniform price. Nevertheless, the constraints imposed by universality of access are not, by themselves, capable of rendering the activity concerned non‑economic in nature. A higher level of solidarity is achieved where the service in question is available free of charge, as there is then no connection between the cost of providing the service and the price paid by the user. One final factor is decisive in determining that a sector does not operate under market conditions. If public and private entities provide the same services, any analysis will have to be undertaken within the framework of Article 86(2) EC. By contrast, if health care services may be delivered only by bodies controlled by the State, which are obliged to treat all patients coming to them free of charge, there can be no question of market forces being involved, and the activity will then be guided solely by the principle of solidarity.

32. Although the present case involves the health sector, it can none the less be distinguished from the cases referred to above. The judgment under appeal shows, that while the SNS manages the health insurance system in Spain, it is also responsible for providing health care services to its members. If the relationships of the recipients of the health care with the organisation in charge of the national health system were at issue, it would be appropriate to rely on the criteria for assessing the degree of solidarity of the system, as developed by the Court since Poucet and Pistre. However, the point raised by the appeal is a different one, as it involves the economic nature, on the one hand, of the provision of free health care services to members and, on the other, of the purchase of medical goods and equipment from suppliers (paragraph 40 of the judgment under appeal). In order to address that point, it will be necessary, in the light of the analysis set out above, to determine whether the judgment under appeal was correct in holding that those activities are not economic in nature.

III – Assessment of the ground of appeal

33. After dealing with the Commission’s objections as to admissibility, I shall first consider the second part of the appeal, as, if the Court of First Instance was incorrect in classifying the provision of free health care services by the SNS as non-economic in nature, its conclusion would thereby be affected. Secondly, I shall address the connection between the purchases and the use to which they are put, which forms the subject-matter of the first part of the appeal.

A – Admissibility

34. The Commission submits that the second part of the ground of appeal raised by FENIN is inadmissible because it was never raised at first instance and because it relates to questions of fact.

35. According to the Commission, FENIN did not, in its written pleadings before the Court of First Instance, raise the issue that the activity carried on by the organisations managing the SNS as providers of health care services does not constitute an economic activity.

36. It must however be noted that in reply to a question put by the Court of First Instance on 8 February 2002 regarding the judgment in Smits and Peerbooms, ( ) the appellant commented on the economic characteristics of health services provided free of charge. Accordingly, since the classification of that activity, which the SNS carries out, formed part of the discussion before the Court of First Instance, it should be held that it formed part of the subject-matter of the dispute before it.

37. Furthermore, the Court of First Instance addressed that question in paragraph 40 of its judgment, where it held that the activity was non‑economic in nature. It is settled that a party may challenge the reasoning which forms the basis of the ratio of the judgment. ( ) The second part of the ground of appeal should therefore be declared to be admissible.

38. The classification of an activity as economic or non-economic, as undertaken in paragraph 39 of the judgment under appeal in relation to the free provision of health services, is a matter which is subject to review by the Court under the appeal and is not a finding of fact. ( ) It follows that none of the grounds of inadmissibility raised by the Commission is such that the second part of the appeal should be rejected.

B – The nature of the activity comprising the free provision of health services to members of the SNS

39. In paragraph 39 of the judgment under appeal, the Court of First Instance held that ‘the SNS, managed by the ministries and other organisations cited in the applicant’s complaint, operates according to the principle of solidarity in that it is funded from social security contributions and other State funding and in that it provides services free of charge to its members on the basis of universal cover’. Applying the case-law of the Court of Justice regarding the concept of an undertaking, the Court of First Instance deduced from that that ‘in managing the SNS, these organisations do not … act as undertakings’.

40. According to the appellant, the Court of First Instance committed two errors of law, the first in failing to give a functional interpretation to the concept of an economic activity, and the second in giving a wide interpretation to the principle of solidarity.

41. The appellant maintains that the first error arises from the failure of the Court of First Instance to classify each activity of the SNS separately. That Court classified the activities of the SNS from an overall perspective, without taking account of the fact that the SNS both provides compulsory health insurance cover to its members and is required to provide them with health care services free of charge. Even if the fact of being insured implies a right to treatment, the provision of health care services can be considered separately from the requirement to have insurance. While the compulsory insurance requirement may be governed by the principle of solidarity, so long as competition between health service providers prevails, those insured remain free to choose who will treat them.

42. The judgment under appeal shows that the SNS is indeed entrusted with both those activities. It is also clear that, rather than classifying each activity separately, the Court of First Instance adopted a single, global, classification of the SNS.

43. Case-law shows that it is essential to consider each activity carried out by an organisation separately, in order to determine whether it should be classified as an economic activity. ( ) A separate classification, on the basis of each activity undertaken, is all the more necessary where a public body is concerned, as it can act as an economic operator in relation to only one activity, while at the same time carrying on functions that are non-economic in nature.

44. In classifying the SNS from a global perspective, without considering its activity as a provider of free health care separately, the Court of First Instance therefore erred in law. However, that error would have no bearing on the conclusions reached in the judgment under appeal if the activity of providing free health care were itself to be classified as non-economic in nature. ( )

45. The appellant contends that the Court of First Instance was wrong to classify the activity of providing free health care as non‑economic by giving a wide interpretation to the concept of solidarity. That part of the appeal bears on the main issue which the Court of Justice has to dispose of in this case, namely whether the activity of the SNS in providing free health care services was correctly classified as non-economic.

46. In order to reach the conclusion that the SNS carried out an activity that was non-economic in nature, the Court of First Instance interpreted Poucet and Pistre, FFSA and Others and Albany and held in paragraph 38 of the judgment under appeal ‘that the organisations managing the health funds … were fulfilling an exclusively social function, that their activity was based on the principle of national solidarity and, lastly, that they were non-profit-making, the benefits paid out being statutory benefits that bore no relation to the level of contributions’.

47. However, the criterion laid down by the Court in those judgments does not form the appropriate basis for classifying the nature of an activity of providing health care. While, as mentioned above, in the judgments relied on by the Court of First Instance the Court of Justice considered whether compulsory membership of a sickness or insurance fund was compatible with Community competition law, it is clear that the activity which falls to be classified is not that of compulsory health insurance, which is also carried on by the SNS, but rather that of the provision of health care. Accordingly, the degree of solidarity which exists in that sector must be assessed in the light of factors other than those which apply to the activity of a sickness or insurance fund. ( )

48. As the Court has given numerous rulings regarding medical activities in the context of the freedom to provide services, it may be helpful to draw a parallel with that case-law in order to assess the nature of the provision of free health care services by the SNS to its members.

49. Under Article 50 EC ‘services shall be considered to be “services” within the meaning of the Treaty where they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons’. ( ) More generally, the Court has ruled that ‘medical activities fall within the scope of Article 60 of the Treaty’. ( ) In that regard, it is worth quoting Advocate General Tesauro, who stated that the social security sector does not constitute ‘an island beyond the reach of Community law’, ( ) so that national rules relating to it do not fall outside its scope. The Court has held that the autonomy of the Member States as regards the organisation of their social security systems does not preclude the application of the fundamental freedoms. ( ) However, it is left to national legislation to determine ‘first, the conditions concerning the right or duty to be insured with a social security scheme and, second, the conditions for entitlement to benefits’. ( )

50. The fact that the State is involved in financing medical benefits does not mean that a medical activity does not fall to be classified as a service. ( ) Case-law has also determined that the mere fact that a medical benefit may be provided free of charge to the patient is not sufficient to take that activity out of the scope of Article 49 EC. Indeed, the Court expressly held in Smits and Peerbooms that health services provided free of charge by hospitals are services within the meaning of Article 49 EC. It is not relevant that the service is not paid for by its recipients, since ‘payments made by the sickness insurance funds … are indeed the consideration for the hospital services and unquestionably represent remuneration’. ( )

51. At first sight, it appears desirable to adopt the same solution in the field of the freedom to provide services and in that of freedom of competition, since those provisions of Community law seek to attain the common objective of the completion of the internal market. ( ) However, the scope of freedom of competition and that of the freedom to provide services are not identical. There is nothing to prevent a transaction involving an exchange being classified as the provision of services, even where the parties to the exchange are not undertakings for the purposes of competition law. ( ) As stated above, ( ) the Member States may withdraw certain activities from the field of competition if they organise them in such a way that the principle of solidarity is predominant, with the result that competition law does not apply. By contrast, the way in which an activity is organised at the national level has no bearing on the application of the principle of the freedom to provide services. Thus, although there is no doubt that the provision of health care free of charge is an economic activity for the purposes of Article 49 EC, ( ) it does not necessarily follow from that that the organisations which carry on that activity are subject to competition law.

52. In the present case, it does not appear that the activity of providing health care to its members carried on by the SNS is of a different kind from that which was carried on by the public hospitals in Smits and Peerbooms. While it does not comprise only hospital care, it none the less includes such care. Similarly, if patients do not pay medical practitioners the amount owing in respect of treatment provided to them, those practitioners are nevertheless remunerated. But, in order to determine whether that activity should be subject to competition law, it is necessary to establish whether the State, with a view to adopting a policy of redistribution by entrusting that activity exclusively to State bodies which would be guided solely by considerations of solidarity, intended to exclude it from all market considerations.

53. The judgment under appeal shows that the SNS is obliged to guarantee universal cover to all its members free of charge. However, the Court of First Instance did not state whether the requirements of the market are entirely satisfied by public bodies or whether private organisations having the characteristics of an undertaking take part in it as well. The essential information for concluding that the activity of providing health care of the SNS is of a non-economic nature is therefore not available.

54. It appears that the Ley 15/1997 of 25 April sobre habilitación de nuevas formas de gestión del Sistema Nacional de Salud ( ) authorises the SNS to sub-contract the provision of health care to private entities. The replies of the Spanish Government to the question put to it by the Court of First Instance on 15 January 2002 also show that some health care is provided by the private sector. The case should therefore be referred back to the Court of First Instance for it to make the necessary findings in fact in order to determine whether public and private health sectors coexist in Spain or whether the solidarity which exists in the provision of free health care is predominant.

55. In any event, were it to be concluded that the SNS carries on an economic activity, that would not call into question the social objectives pursued by the SNS, because such a conclusion does not preclude the implementation of the principle of solidarity, whether in relation to the method of financing by social security and other State contributions or in relation to the provision of services provided to members free of charge on the basis of universal cover. The application of competition law and a recognition that certain sectors must be subject to special rules are not mutually incompatible. On the contrary, the purpose of Article 86(2) EC is precisely to provide a basis for conferring exclusive rights on undertakings entrusted with the operation of services of general interest. ( ) The likely effects of making certain activities carried on by undertakings entrusted with the operation of services of general interest subject to competition law do not lead to a reduction in social protection any more than do those which arise from the application of the principle of freedom of movement to the health sector. In both cases, Community law seeks to incorporate principles of openness and transparency into health systems originally conceived on a national scale. ( )

56. In the present case, however, although it is clear that the SNS is indeed entrusted with providing health services free of charge to its members on the basis of universal cover (paragraphs 39 and 40 of the judgment under appeal), by contrast, the management role of the SNS, which is imposed on the ministries and other organisations referred to in the complaint, is not clearly defined. An organisation can be classified as an undertaking by reason of the economic activities it carries on only if it is the actual medium through which the activities in question are carried on. ( ) Thus, even if it were established that the SNS was to be regarded as an undertaking for the purposes of competition law, it would still be necessary to be satisfied that the organisations referred to in FENIN’s complaint are the medium through which those activities are carried on. The Court of First Instance would have to make a finding in this regard if it were to conclude that the activity of providing health care carried on by the SNS was economic in nature.

57. For the reasons set out above, I propose that the Court should uphold the second part of the appeal and refer the case back to the Court of First Instance for it to make the findings in fact necessary to determine whether or not the activities of the organisations which manage the SNS are economic in nature and, accordingly, whether the Commission’s rejection of FENIN’s complaint was well founded.

C – The link between the purchasing activity and the nature of the activities for which the goods or services are intended

58. Were the Court to decide, contrary to what is proposed, to uphold the judgment under appeal in so far as it classifies the provision of free health care as a non-economic activity, it would remain necessary to consider the first part of the ground of appeal, which challenges the connection made between the nature of the purchasing operation and the subsequent use of the goods acquired.

59. In the first part of the ground of appeal, FENIN criticises paragraph 36 of the judgment under appeal, which states that ‘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’. The Court of First Instance went on to hold that ‘it would be incorrect … to dissociate the activity of purchasing goods from the subsequent use to which they are put’, and that ‘the nature of the purchasing activity must … be determined according to whether or not the subsequent use of the purchased goods amounts to an economic activity’.

60. FENIN contests the link made by the Court of First Instance between the nature of a purchase and that of its subsequent use. The link is founded on an incorrect interpretation of the case-law, gives rise to practical difficulties and reduces the effectiveness of Community competition law.

61. FENIN submits, in the first place, that the case-law on which the Court of First Instance relied in its analysis, namely Commission v Italy ( ) and Consiglio Nazionale degli Spedizionieri Doganali v Commission, ( ) does no more than classify the provision of goods or services on a market as an economic activity, without ruling on the nature of a purchasing activity. Those cases are accordingly irrelevant for the purposes of holding that a purchase does not constitute an economic activity.

62. It is true that one of the criteria which is relevant for classifying an entity as an undertaking is its participation in a market. The essential characteristic of a market is that it involves exchanges between economic operators in the form of supplies and purchases. In that context, it is impossible to see how the one can be made subject to review under competition law while the other is excluded from it, as the two are reciprocal. None the less, that analysis does not of itself invalidate the reasoning of the Court of First Instance which led it to treat the classification of a purchase as being dependent on its subsequent use.

63. In the second place, FENIN maintains that the judgment under appeal and the judgment in Pavlov and Others are inconsistent. In the latter case, the Court of Justice held, in determining whether membership by medical practitioners of a retirement fund was economic in nature, that membership was closely linked to their professional activities and was thus to be regarded as belonging to that, economic, activity. ( ) As Advocate General Jacobs proposed, ( ) the Court distinguished between activities related to the medical practitioners’ economic sphere and activities related to their personal sphere. Only intermediate demand, in contrast to final demand, may be considered to belong to the economic sphere. ( ) On the other hand, demand by private individuals, which is always final demand, is outside the scope of competition law.

64. The judgment under appeal is not inconsistent with this analysis in any way. Where public organisations carry out both economic activities and activities of another kind, it is only demand which is linked to their economic activities which may fall within the scope of competition law. By contrast, purchases intended for use in non‑economic activities are comparable to final demand by consumers and are not subject to competition law. But it cannot be denied in the present case that the purchase of medical goods and equipment is linked to the activity of the SNS in providing health care services.

65. The appellant claims that, in determining whether the purchasing activity of the SNS was economic in nature, the Court of First Instance should have considered whether it was liable to have anti-competitive effects in order not to create ‘unjustified areas of immunity’. However, such a criterion cannot be accepted, since it would amount to subjecting every purchase by the State, by a State entity or by consumers to the rules of competition law. On the contrary, as the judgment under appeal rightly pointed out, a purchase falls within the scope of competition law only in so far as it forms part of the exercise of an economic activity. Moreover, if the appellant’s argument were to be adopted, the effectiveness of the rules relating to public procurement would be reduced. ( ) The link established between the conduct complained of by the complainants and the non‑economic activity of the organisation referred to was also at the heart of the reasoning applied in Eurocontrol in order to hold that competition law did not apply. It was held that the receipt of a payment by Eurocontrol was not economic in nature, since it was made in the course of carrying out a non-economic activity.

66. Ambulanz Glöckner, which was cited by the appellant in support of its position, confirms on the contrary the approach taken by the Court of First Instance, since the Court of Justice did not accept in that case that the refusal of a public authority to grant an authorisation to a carrier should be considered under Article 81 EC, as that decision did not represent the exercise of an economic activity but, on the contrary, sought to regulate and circumscribe it. Thus, where a purchase is linked to the performance of non-economic functions, it may fall outside the scope of competition law. That conclusion is consistent with the economic theory according to which the existence of a monopsony does not pose a serious threat to competition since it does not necessarily have any effect on the downstream market. Furthermore, an undertaking in a monopsonistic position has no interest in bringing such pressure to bear on its suppliers that they become obliged to leave the upstream market. ( ) There is therefore no reason to set aside the judgment under appeal on the ground that it incorrectly interpreted the case-law relating to whether or not a purchase is an economic activity.

67. Finally, FENIN argues that the interpretation of the Court of First Instance was wrong in that it gives rise to a number of practical difficulties. It maintains that at the time of purchase, it is effectively impossible to distinguish between purchases intended for economic activities and those to be used for non‑economic activities.

68. It is true that it is sometimes difficult to separate economic activities from those which are not economic when they are carried on by the same body or organisation. However, and contrary to what the appellant contends, that difficulty does not change the criterion for determining whether competition law applies, which is that of the exercise of an economic activity. The inevitable result of that criterion thus remains that organisations carrying on mixed activities are subject to competition law only in respect of that part of their activities which is economic in nature. ( ) If the appellant’s reasoning were to be adopted, whenever a body carried on an economic activity, it would be subject to competition law as regards all its activities. Such a conclusion would be incompatible with the functional criterion of an undertaking which has been established in case-law.

69. As none of the arguments set out in the first part of the appeal has established that the purchase of medical goods and equipment by the SNS should have been dissociated from the provision of health care services, the judgment under appeal should be upheld in that regard.

IV – Conclusion

70. In the light of the above considerations, I propose that the Court should:

(1) uphold the second part of the appeal and refer the case back to the Court of First Instance of the European Communities for it to make the findings of fact necessary to determine whether or not the activity of the organisations managing the Spanish national health service is economic in nature and, accordingly, whether the rejection by the Commission of the European Communities of the complaint submitted by the Federación Española de Empresas de Tecnología Sanitaria (FENIN) was well founded;

(2) dismiss the first part of the appeal.