WRITTEN QUESTION E-0836/98 by Esko Seppänen (GUE/NGL) to the Commission (26 March 1998)

Subject: Economic association and user discounts for its members

Astonishment has been caused in Finland by a letter sent on behalf of the Commission according to which an economic association is not permitted to afford advantages to its members on the basis of their membership. The organisation in question is the Helsinki Telephone Association, which has half a million members, which anybody who so wishes may join, and which charges its members a smaller fixed monthly subscription than other users of telephone services. The Commission considers that, although the discount is freely available to all on the same terms, it restricts competition.

In adopting this position, the Commission has delivered a serious blow to business activities carried on by cooperatives or in any other corporate form whereby the organisation does not constitute a limited company. In the Commission's opinion, therefore, only limited companies should be allowed to exist within the EU. What is the Commission's position with regard to legitimate cooperative enterprise and user discounts granted to members of such cooperatives?

Answer given by Mr Van Miert on behalf of the Commission (6 May 1998)

In the framework of its duty to implement the competition rules of the EC Treaty, the Commission has reviewed in various areas the granting of cumulative rebates by dominant undertakings, which have the effect of preventing market entry by new competitors. The Commission intervened in the past against rebates paid in respect of the customer's total purchases of all products from the supplier over a period conditional on the customer purchasing all of its requirements from the relevant supplier over this period. The Court of justice has confirmed in subsequent judgements that such rebates could constitute abuses of dominant position (e.g. judgement of 9 November 1983 in the Michelin case ((ECR p. 3 461. ))). The Commission applies the same approach to all commercial organisations, which are in dominant positions, without regard to the legal status under which they are incorporated. In the letter mentioned by the Honourable Member, the Commission underlines in particular, that 'This matter does not concern the fact that local operators have chosen to operate voice telephony service as co-operatives'. The assessment concerns the position of the local telecommunications service providers on the markets as former monopolies which still seem to be in dominant positions, and not the specific form of organisation.

In that letter, the Commission expressed its concerns to the Finnish government that it had formally abolished the exclusive rights of the incumbent local telephone operators, without taking the necessary measures to prevent the relevant companies to entrench, even after liberalisation, their dominant market position by continuing to link the remuneration of their members with their actual usage. In order to give new entrants a fair chance, this remuneration should not 'bind' the customer to only one service provider which has secured its position. The Commission believes that the Finnish authorities may need to take further action in this respect.

There is nothing in the Commission's letter which distinguishes between limited companies and cooperatives. It would certainly be incorrect to say that the Commission believes that only limited companies should be allowed to exist in the Community. On the other hand, cooperatives are not immune from Community competition rules. If a dominant limited company would not be allowed to give rebates to its shareholders in circumstances like those of the Finnish local enterprises, then a cooperative is not free to do so.