OPINION OF MR ADVOCATE GENERAL DARMON

delivered on 16 January 1985 ( *1 )

Mr President,

Members of the Court,

The case which this Court has before it is unusual on more than one count. It is, as has been observed, the first of its kind.

The Italian Government, acting on the basis of Article 173 of the EEC Treaty, has asked the Court to declare void a decision of 10 December 1982, ( 1 ) in which the Commission declared certain provisions, adopted successively by the United Kingdom Post Office and by British Telecommunications (hereinafter jointly referred to as ‘BT’) and designed to curtail the activities of message-forwarding agencies, to be contrary to Article 86 of the Treaty.

Thus the applicant State is not the one in which the undertaking in question has its seat. On the contrary, the Government of the United Kingdom intervened in the proceedings in support of the Commission. Furthermore, BT, which had not implemented the provisions complained of, did not incur any fine, and indeed refrained from seeking the Court's censure of a decision with which it had ‘unilaterally’ complied in advance.

However, I shall leave that paradox aside. BT, which in 1981 succeeded the United Kingdom Post Office and which, since the hearing in this case, has been in the limelight on the London Stock Exchange, is an undertaking to which the United Kingdom granted a statutory monopoly on the management of telecommunications systems. In order to perform its tasks it was assigned rulemaking powers which it exercises by way of ‘schemes’.

It was in the context of those tasks that BT encountered the activities of message-forwarding agencies. Those agencies, combining an advanced technology with ‘UK tariffs [which were]... more attractive’ ( 2 ) than those prevailing abroad, offered the public a new service, handling the reception and transmission, on behalf of third parties, of a volume of messages the charge for which was unrelated to the chargeable length of use of the public network.

They provide, therefore, an expediting service, offering a twofold advantage to those using it; unusually low prices and speed of transmission.

BT considered itself obliged to counter those activities and, availing itself of its rulemaking powers, adopted the contested schemes in pursuance inter alia of the obligations laid upon it by the International Telecommunications Convention.

That Convention (hereinafter referred to as the ‘ITC’), which was signed in 1947 in Atlantic City and renegotiated at Malaga-Torremolinos in 1973, set up the International Telecommunications Union (hereinafter referred to as the ‘ITU’), of which all the States in the Community are members.

Repeating the main points of Article 20-1 of the 1947 Convention, the Convention of 1973, at Article 44-1, provides as follows:

‘The Members are bound to abide by the provisions of this Convention and the Administrative Regulations.’

The Convention further sets up an International Telegraph and Telephone Consultative Committee (‘the CCITT’), the duties of which

‘... shall be to study technical, operating and tariff questions relating to telegraphy and telephony and to issue recommendations on them’. ( 3 )

As a ‘recognized private operating agency’, BT belongs to that committee. ( 4 )

In October 1976, the CCITT issued Recommendation F 60, Section 3.5 of which is worded as follows:

‘Administrative and recognized private operating agencies should refuse to make the telex service available to a telegraph forwarding agency which is known to be organized for the purpose of sending or receiving telegrams for retransmission by telegraphy with a view to evading the full charges due for the complete route. [Such] administrations shall refuse to provide international telex service to a customer whose activity would be regarded as an infringement of the functions of an administration in providing a public telecommunications service.’

On the strength of that text, BT supplemented the two earlier schemes, which had been introduced in order to prohibit the charge made by the forwarding agencies from being ‘such that it enables the originator of the message to send it more cheaply than if he had sent it by means of a telex call made by him directly to the person for whom the message was ultimately intended’, with Scheme T1/1978, which was repealed and repeated by a scheme adopted in 1981 under which the international forwarding of messages by the United Kingdom was forbidden per se.

Those are the four schemes which the contested decision of the Commission treated as being in contravention of Article 86 of the Treaty establishing the European Economic Community.

Since the admissibility of the Italian Government's action is not contested, the various objections raised by the applicant should be considered in turn.

I — Omissions or inadequacies in the statement of reasons

The Italian Government complains that the Commission

(i) has not explained why it regarded BT's exercise of rulemaking powers, that is, its exercise of public authority, as a business activity,

(ii) has not attempted to justify the alleged primacy of Community rules over international rules, and

(iii) has not attempted to substantiate the alleged illegality of BT's monopoly.

On the last point, the Commission rightly argues that it has never maintained that there was any such illegality.

As far as the first point is concerned, the decision under challenge points out ( 5 ) that BT is an economic entity carrying on activities of an economic nature and, as such, is an undertaking within the meaning of Article 86 of the EEC Treaty. However laconic it may be, that explanation none the less constitutes an adequate statement of reasons.

Turning lastly to the primacy of Community rules over any international rules which might apply, the Commission, which had initially envisaged giving the reasons for its decision in this regard, in the end took the view that it was not obliged to pass judgment on the possible applicability of Article 234 of the Treaty, in a decision which was addressed, not to a State, but to an undertaking. It may be observed that, as the Commission has remarked, it would have been for the United Kingdom, as a member of the ITU, to intervene if need be in the procedure culminating in the decision in question, in order to have the matter discussed and hence elicit a statement of reasons in that regard. It refrained from doing so, and BT seems implicitly to have abandoned its submission on that point during the procedure, since, in its letter to the Commission of 22 October 1982, it stated:

‘It is not accepted that, in the context of this case, the CCITT Recommendation directly conflicts with Articles 85 (1) and 86 of the Treaty of Rome. Consequently, British Telecommunications has unilaterally decided to withdraw the particular restrictions at issue and will amend the Telecommunications Scheme accordingly and advise other administrations and UK message-forwarding agencies of this decision.’ ( 6 )

The contested decision is thus not vitiated by any omission or inadequacy in the statement of the reasons on which it is based.

II — Obligations arising under the ITC

The Italian Government claims that, by adopting the disputed schemes, BT did no more than comply with the obligations imposed on it by Article 6-3 of the Telegraph Regulations of Geneva of 1973 and by Recommendation F-60 of the CCITT.

I have already quoted the last-mentioned text. Article 6-3 of the Telegraph Regulations, the provisions of which must be complied with by members of the ITU, requires administrations or recognized private operating agencies to

‘... undertake to stop, at their respective offices, the acceptance, transmission and delivery of telegrams addressed to telegraphic re-forwarding agencies and other organizations set up to forward telegrams on behalf of third parties so as to evade full payment of the charges due for the complete route ... ’.

It cannot be maintained, without being contradicted by Article 6-3 itself, that the existence of the message-forwarding agencies is, as such, illegal. The article seeks to prevent activities whose purpose is fraudulent, not to prohibit those which are rendered beneficial by the optimum ultilization of advanced technology. Since the agencies concerned pay the full charges for the whole route covered, corresponding to the length of their use of the public network, they cannot be subject to Article 6-3, as the tariff in force is graded according to the length of use and not the number of messages transmitted.

It would, moreover, be paradoxical to rely on international legislation on telecommunications in order to curb the effects of technological progress, when it is precisely one of the objectives of the ITU to

‘... promote the development of technical facilities and their most efficient operation with a view to improving the efficiency of telecommunications services, increasing their usefulness and making them, so far as possible, generally available to the public’. ( 7 )

It therefore remains to be determined whether Recommendation F-60 authorized BT to adopt the measures which could not be prescribed pursuant to Article 6-3 of the Regulations. That question must be answered in the negative.

The relevant provisions on this point are contained in Article 1 of the Telegraphic Regulations, which provides as follows:

‘(1) The Telegraph Regulations lay down the general principles to be observed in the international telegraph service.

(2) In implementing the principles of the Regulations, administrations ( 8 ) should comply with the CCITT Recommendations, including any instructions forming part of those Recommendations, on any matters not covered by the Regulations.’

The conclusion, which can come as no surprise since the document in question is described as a recommendation adopted by a consultative body, is that the provisions in point are merely guidelines which, it is carefully stated, the contracting parties ‘should’ observe.

The Italian Government cannot therefore validly claim that BT was obliged by Recommendation F-60 to adopt the measures to which the Commission took objection.

It follows from that analysis that the measures in question were in no way made mandatory by the instructions in the texts adopted in implementation of the ITC.

Thus the rules laid down by BT must be considered solely in the light of Community law, and consequently there are no grounds for envisaging, in this case, the application of Article 234 of the Treaty or for considering the plea of misuse of powers put forward by the applicant State.

III — The application of Article 222 of the EEC Treaty

From the above provision, under which ‘this Treaty shall in no way prejudice the rules in Member States governing the system of property ownership’, the applicant draws the inference that Community law guarantees the existence of the monopoly held by BT, which is consequently entitled to defend its exclusive rights by adopting the contested measures. The monopoly, according to the applicant, extends not only to the management of telecommunications systems, as the Commission maintains (paragraph 33 of its decision), but to the whole range of telecommunications services, including international services. BT was therefore entitled to oppose the development of forwarding agencies, whose activities threatened the very existence of the monopoly granted to it.

In reply to that line of argument, it is sufficient to state that the actual existence of forwarding agencies has never been challenged by BT; this contradicts the assertions of the Italian Government. Furthermore, the United Kingdom stated unequivocally that the monopoly granted to BT did not extend to the provision of telecommunications services, with the result that the submission in question must, like the previous one, be rejected.

IV — The application of Article 86

According to the applicant, Article 86 cannot apply to the conduct of an undertaking in the performance of rulemaking functions which fall within the ambit of public law; at all events, the conduct in question may not be described as improper.

1. The nature of the functions performed by BT

In the view of the Italian Government, BT's exercise of rulemaking powers accruing under public law cannot fall to be considered on the basis of Article 86, which is reserved for business activities.

That argument cannot be accepted. There can be no doubt — as the Commission has demonstrated — that BT carried on a commercial activity. To accept the arguments developed by the applicant would be tantamount to setting aside the application of the Treaty provisions which ensure observance of the fundamental principle of free competition whenever the activities of undertakings entail the exercise of statutory powers. As this Court has held in its judgment in Inno v ATAB, ( 9 ) unless Article 85 et seq. are to be deprived of all effectiveness, undertakings may not evade the application of the competition rules of the Treaty merely on the ground that their conduct has been made possible by central government.

Consequently, the regulatory form of the measures adopted by BT to prohibit the service of transmitting international telecommunications messages, performed by forwarding agencies, cannot preclude the applicability of Article 86 of the Treaty.

2. Abuse of a dominant position

The Italian Government claims, in substance, that the measures adopted by BT constitute a means of protection against improper practices of forwarding agencies, whereby customers are able to avoid the full payment of the charges due for international telecommunication messages. Those practices are made possible by the current differences between tariffs, and, because of the resultant deflection of traffic, amount to depriving public services of the most lucrative share of the telecommunications traffic.

That submission has no basis in fact. As has already been observed, the development of a service for the transmission of international telecommunication messages by forwarding agencies operating mainly in the United Kingdom is the fruit of a private initiative which managed to take advantage of a technological advance and a pricing policy which, it may be useful to recall, is determined and hence controlled by the public authorities.

V — The application of Article 90 (2)

The Italian Government maintains that, if Article 86 were to be applied to BT by prohibiting it from protecting itself against the activities of forwarding agencies, BT would thereby be prevented from performing the functions of a public service which were assigned to it. Consequently, it argues, the provisions of Article 90 (2) must be applied in this instance.

On that point, it is sufficient to recall that BT has not brought an action against the contested decision, and to note that the United Kingdom took the view that the rules drawn up by BT to deal with the forwarding agencies were not necessary for the performance of its functions as a public service. However, without prejudice to the prerogatives conferred by the Treaty on the competent Community institutions, an opinion of that nature may be expressed only by the Member State responsible for the undertaking. It follows that, in the circumstances of this case, that submission must be held to be inadmissible.

I therefore propose that the Court should :

dismiss the Italian Government's application for annulment, and

order the applicant to pay the costs.

( *1 ) Translated from the French.

( 1 ) Commission Decision No 82/861/EEC (Official Journal 1982, L 360, p. 36).

( 2 ) Decision No 82/861, cited above, paragraph 14.

( 3 ) Articles 5.4 (d) and 11-1 (2) of the 1973 Convention.

( 4 ) Article 11-2 (b) of the 1973 Convention.

( 5 ) Commission Decision No 82/861) cited above, paragraph 25.

( 6 ) Commission Decision No 82/861, cited above, paragraph 24.

( 7 ) Article 4-1 (b) of the International Telecommunications Convention, 1973, (Malaga-Torremolinos).

( 8 ) Or recognized private operating agencey(-ies).

( 9 ) Case 13/77, Inno v ATAB [1977] ECR 2115, paragraphs 30 to 34.