Opinion of the Economic and Social Committee on "Private not-for-profit social services in the context of services of general interest in Europe"
Date: 2001-09-12
Institutions: European Economic and Social Committee
Subjects: non-profit organisation, services company, social services

7.11.2001

EN

Official Journal of the European Communities

C 311/33

Opinion of the Economic and Social Committee on ‘Private not-for-profit social services in the
context of services of general interest in Europe’

(2001/C 311/08)

On 1 March 2000, the Economic and Social Committee decided, under Rule 23(3) of its Rules of
Procedure, to draw up an opinion on ‘Private not-for-profit social services in the context of services of
general interest’.

The Section for Employment, Social Affairs and Citizenship, which was responsible for preparing the
Committee’s work on the subject, adopted its opinion on 18 July 2001. The rapporteur was Mr Bloch-
Lainé.

At its 384th plenary session of 12 and 13 September 2001 (meeting of 12 September), the Economic
and Social Committee adopted the following opinion by 92 votes, with one abstention.

1.

Introduction

1.1.
It is no coincidence that the Committee has decided to
draw up this opinion, which stems from, and must be seen in
relation to, the cross-roads of developments that are gradually
defining, framing and enhancing what we call the ‘European
social model’. The main features of these promising trends can
be summarised as follows:

a)

b)

c)

a willingness to make the European Union more than an
economic and monetary entity with a single market, and
more than an area of freedom, security and justice. There
is now a wish to show that social policy is not an
addendum; it is not an auxiliary, subsidiarity sphere of
activity subjugated to economic policy, but a catalyst of
efficiency and productivity, especially in view of its power
to promote cohesion;

the resolve to manage the growing complexity of our
modern societies as well as possible; to make the most of
their many and varied assets, values, strengths, and wealth
of commitments and contributions;
to address their
pluralism as an asset rather than as a handicap; and thus
to provide the widest possible scope for ‘organised civil
society’ to assume its role and responsibilities;

the wish to reconcile concepts such as Union and
subsidiarity, differences and common rules, competition
and the general interest — treating them not as conflicting
forces but as interacting requirements.

At the request of the European Council in Lisbon (1),
1.2.
the Commission has updated (20 September 2000) its 1996
Communication on services of general interest in Europe. This
explanatory document relating to the issues listed above refers

(notably in point 30) to services of general interest conducted
by organisations ‘performing largely social functions, which
are not profit-oriented and which are not meant to engage in
industrial or commercial activity’. This means organisations
such as ‘trade unions, political parties, churches and religious
societies, consumer associations, learned societies, charities as
well as relief and aid organisations’.

1.3.
This opinion, as its title indicates, concerns social
services, which represent just one aspect of the whole issue,
but which incorporate the key features of the ‘European social
model’.

The term (2), in this instance, refers to a category of private
not-for-profit organisations, having different status in different
countries (associations or foundations), that are active in the
health and social spheres, though where necessary conducting
economic activities that are subordinate to their primary social
the term ‘not-for-profit’ means that any
functions. Here,
surplus is not distributed to shareholders but reinvested in the
development of these organisations’ social services of general
interest. It also means, of course, that the primary aim of these
organisations is not to produce the highest possible surplus.

The background to this opinion is both essential and

1.4.
complex:

a)

the situations covered by the term ‘social services’ differ
widely in the countries of the European Union. They are
the result of histories and cultures that cannot be reduced
to one single identity, which creates a complex situation.
But looking at these situations, points in common can
clearly be discerned; these remain constant,
in their
objectives, their methods of action, their position and the

(1) The European Council in Nice reaffirmed the role of ‘services of
general interest’, and adopting the Charter of Fundamental Rights
means ensuring that those rights, which include the right to social
services, can be effectively exercised.

(2) It is important to note that in certain EU Member States (Italy and
Sweden in particular), social welfare work is often carried out by
organisations with cooperative status.

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services that are provided. That is why it is necessary to
consider them quite differently from a marginal hotch-
potch of disparate elements that simply provide support;
they should be considered for what they are, namely an
assembly of measures that is both strong and vulnerable,
familiar and unfamiliar;

b)

‘charitable’,

‘economic’,

in this area, as in others, trying to understand these
different situations is made difficult by all the woolly
terms and definitions: ‘general interest’, ‘social services’,
‘social utility’,
‘social market’,
etc. None of these expressions has exactly the same
meaning, de facto or de jure, in each EU country (or
even within each country). But that is not a reason to
avoid the issue or refrain from action; wisdom dictates
that account be taken of, and the maximum allowance
made for, semantic imprecision, and of course that a
constant effort be made to reduce it and to focus on
the real-life situation.

That

1.5.
purpose is:

is the intention behind this opinion, whose

— firstly, to highlight the contribution of the ‘social services’

considered (2);

— then to note the concerns they feel and that are relevant

to them (3);

— lastly, to suggest one possible approach (4).

2. Contribution of social services of general interest in

Europe

As

2.1.
stated in Declaration 23 appended to the
Maastricht Treaty, the European Union recognises ‘charitable
associations and foundations as institutions responsible for
social welfare establishments and services’ and the need for
cooperation with associations in the social sector. The
importance of such cooperation is also stressed in the White
Paper on the future of European social policy. However, the
contributions of these organisations is strangely relatively
unknown.
In the EU their role varies from country to
country depending on the measures taken to guarantee
citizens’ political, civil, economic and social rights and the
way the social protection system is conceived and structured.
Their position is determined by national historical, cultural
and ideological foundations and by the respective modes of
action of central and local government, profit-making private
operators and non-profit-making private bodies. However,
regardless of
the wide diversity of arrangements, certain
constant factors can be observed.

a)

b)

Firstly,
in many countries, welfare organisations —
civil society actors — have practical responsibility for
providing services and managing institutions in the
sphere of health and social care: retirement homes,
centres for children and adults with disabilities, youth
protection agencies, educational social activities, hostels
and social rehabilitation centres, day nurseries, child-
minding centres, health care centres, social centres, not-
for-profit private care centres and home help, nursing
and medical assistance, home assistance, carer and other
services.

In many EU countries, public authorities have for some
decades made the sensible decision to use private not-for-
profit social operators in the sphere of health and welfare.
The current and future requirement to contain public
spending (i.e. reduce its rate of increase) while needs are
growing and becoming more complex, confirms the
useful role and potential of these operators, which can be
defined as ‘private not-for-profit providers of services of
general interest’.

c)

These not-for-profit organisations contribute to the devel-
opment of economic growth and national wealth. They
play a major role in creating jobs and promoting local
development.

2.2.
The social services with which this opinion is con-
cerned are a key component of social protection schemes in
all EU Member States. Without them, the most intrinsically
well-planned and substantial financial input could not attain
its objectives and impact, at any rate not effectively since the
tools for implementation would be lacking. For optimal effect,
financial aid must be backed by the necessary different
channels to ensure consultation, back-up, support, partnership,
grassroots involvement and flexibility. Public authorities must
also involve the social services in question as far as possible in
the strategic objectives they are pursuing.

2.3.
The ‘social services’ covered by this opinion all con-
tribute to the general interest on three major fronts in that
they:

a)

reflect constantly changing social requirements and seek
to protect those who are most vulnerable:

— they detect and identify, by acting as watchdogs, the
increasingly serious shortcomings, social needs and
distress stemming from an ever-wider range of
sources and assuming increasingly complex forms
and expressions;

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— they place pressure on the public authorities to
make greater provision for recognising and guaran-
teeing the fundamental rights of everyone;

3. Concerns

— they strive to move beyond the narrow concept of
assistance and to inculcate a sense of responsibility
in the persons they support, encouraging them to
take their own lives in hand;

— they have considerable potential for finding innova-

tive ways of addressing needs.

b)

create or recreate the social fabric:

The ‘social services’ covered by this opinion are currently
experiencing grave anxiety (1). Is this justified? And if so, why?

In many EU Member States there are now three types of
players in the sphere of health and welfare services: public
authorities, profit-making bodies and private not-for-profit
bodies. In view of this competitive situation (except in certain
sectors that are not of interest to profit-making operators), it
must be ensured that the particular requirements of the not-
for-profit group are not overlooked or ignored. Care should
also be taken to apply the provisions relating to public
contracts with a measure of flexibility.

— not satisfied with simply providing a service, they
highlight the idea of interaction by involving individ-
uals and families in public action;

Their concern cannot be explained solely by the relative
ignorance or underestimation of their influence and role. The
problem — and it is a real problem — is the future that lies
ahead from the angle of European competition law.

— they develop a networking spirit, looking beyond

the confines of instant results;

3.1.

At first sight, their alarm could appear unwarranted.

— they build a system fostering the pooling of know-
ledge and experience among people from all social
groups — volunteers, employees and users;

c) mobilise a feeling of solidarity among citizens:

— they stimulate society’s capacity to take charge of
itself and to dialogue with the decision-makers
(public authorities, economic operators);

— they are open to all and not merely to a limited

number of groups;

— they are proof that cohesion, solidarity and action
to fight exclusion cannot be dependent on the
goodwill of the public authorities alone, even if the
latter must continue to play a key role as guarantor;
and that civil society has a contribution to make on
a voluntary, consensual basis;

— they rely to varying degrees on unpaid workers,
on commitments which are not confined to tax
contributions or cash gifts and on the voluntary
sector;

a)

b)

c)

The Commission Communication on ‘services of general
interest’ states (Article 30): ‘More generally, according to
the case law of the Court of Justice, many activities
conducted by organisations performing largely social
functions, which are not profit-oriented and which are
not meant to engage in industrial or commercial activity,
will normally be excluded from the Community compe-
tition and internal market rules’ (2).

The Communication specifies that whenever such organ-
isations engage in economic activities, application of
Community rules will respect ‘in particular the social and
cultural environment in which the relevant activities take
place’.

The Communication indicates that competition rules in
principle only apply when the activities of the organis-
ations concerned relate, for instance, to:

— services associated with mandatory membership of

a basic social security scheme;

— activities of institutions performing a social function,
and largely not-for-profit, which do not seek to
exercise a commercial activity;

— however, there is concern that certain providers of
‘social services’ are becoming less able to combat
exclusion and to innovate, because of their depen-
dence on public financing.

(1) They are also afraid of being ‘exploited’: reduced to the role of
carrying out orders, delivering services and providing support, on
the basis of the public funding allocated to them. But this is not
the issue addressed here. It could be useful to discuss it in a later
opinion.

(2) COM(2000) 580 final.

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— activities entirely restricted to a specific Member
State and thus in no way impeding trade between
the Member States.

4. Possible approaches

In the light of the above, one could well ask: what need is
there to worry? Surely any fears are imaginary.

A closer scrutiny shows that the problem is not just an
3.2.
illusion and that the social services concerned are not ‘playing
scared’, on the following grounds:

a) many of these services,

in order to fulfil their tasks,
exercise activities in economic areas where commercial
firms operate; the latter consider that they are exposed to
a form of unfair competition;

b)

in many Member States, the central government rightly
feels that it is its duty to examine carefully — especially
from the tax angle — whether exemptions granted for
social services from national and EU competition law
rules are warranted, thereby triggering a debate which is
still in full swing. The stand on principle adopted by the
State in a debate of this kind can be summarised as
follows: ‘what matters is not who you are, it is what you
do’;

c)

the Commission communication sets out three principles
for application of competition rules:

— neutrality, with regard to the public or private

ownership of companies;

— freedom for Member States to define services of

general interest;

— proportionality requiring that restrictions of compe-
tition do not exceed what is necessary to guarantee
effective fulfilment of the general interest mission.

But this statement is not enough to explain everything.

3.3.
It is therefore understandable that the ‘social services’
concerned are so eager to be more fully informed about the
‘rules of the game’ to apply to them in future within the Union.
For them, visible legal certainty is important in a sphere where
there is still unquestionably a fairly large grey area.

After having pointed out and recommended some points of
reference, the Committee’s aim in this section is to propose a
possible course of action.

4.1.

Points of reference

a)

b)

c)

d)

e)

It is important — if not really necessary — to point out
that the European Union and each of its members have
opted for the principle of an open market economy
(Articles 4 and 98 EC Treaty) based on free competition
(Article 3(1)(g) EC Treaty) which must be protected
against unjustified distortions; the EU has set itself other
objectives than the competition principle. Its members
have also chosen to implement a social policy (Article 136
ECT),
to strengthen economic and social cohesion
(Article 158 ECT) and to ensure a high level of social
protection (Article 2 ECT).

Social protection is, in principle, a Member State com-
petence. However the Commission is the guardian of
the Treaties and its duty to intervene with regard to
‘competition rules’ and the ‘internal market’ cannot be
called into question.

is incumbent upon the Commission to seek —
It
after consulting the Member States — to promote the
maximum possible clarity and legal certainty, and to take
into account the role of social services of general interest
for the common development and promotion of civil
society. For the reasons stressed in the first part of this
opinion, these services are entitled to expect clearer
boundaries for competition-based economic activities, in
order to raise their profile and enable them to accomplish
their objectives successfully.

The Committee considers that social services need to
be treated differently from the vast number of actors
interest (transport,
responsible for services of general
energy, communications, etc.).

A difficult but fundamental question with regard to the
European social model,
is to know how to reserve a
legitimate and useful place in the EU for social services
which strikes a balance between those which are entirely
public and those which are entirely profit-driven. In some
sectors social services usually have to undertake economic
activities. However if their potential contribution and
spheres of activity are to be respected, care must be taken
not to take them for granted and to indiscriminately
subject them to the same treatment as profit-making
companies with which they work side by side and
encounter in some areas.

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When social services — especially associations, foun-
dations and charitable organisations — undertake market
activities, they do not wish to restrict their role to
providing segmented market services as is the case for
profit-making companies (which nevertheless provide a
valuable and efficient service). Instead, they also con-
tribute to the social fabric.

f)

The EU must respect its founding principles, in particular
those on competition. There is no question of neglecting,
bypassing or amending them. The aim is to interpret,
manage and apply them as well as possible and, with this
in mind, to develop their implementation procedures. It
would be unfortunate on such an issue to bring the
Community provisions on competition law into conflict
with the concern to ensure suitable, specific and relevant
treatment for services of general interest. Private not-for-
profit social services are not demanding that they be
given a monopoly. They do not refuse to compete with
all other players with respect to quality of services. But
they ask that quality criteria should not be oversimplistic.
They point out — and furthermore must constantly
prove — that as well as the usual requirements relating
to safety and professional competence that apply to all
providers in their spheres of activity, their particular
capacity to deal with human beings as people should be
taken into account (the word ‘people’ does not mean
exactly the same as ‘individual’,
‘beneficiary’,
‘user’, ‘customer’, etc.).

‘citizen’,

They also ask that when they are made to compete,
account should be taken of the fact that they are operating
little interest
in difficult or costly areas that are of
to private profit-making operators. They point to the
difficulty that would arise if profit-making operators —
which still do their job well and are clearly very useful —
only dealt with the most solvent people (while still
receiving public funding), but called for strict ‘equality’
with regard to the right to compete.

This would ultimately undermine the ‘European social
model’.

g)

Such an error, if it were made, could only lead to what
logicians call aporia, in other words a contradiction in
logic with no solution; in simpler terms, an impasse. That
would be regrettable. One condition for overcoming that
aporia is to recognise, with regard to the implementation
of competition law procedures, the increased importance
of the Union’s social objectives since the Amsterdam
Treaty.

4.2.

Possible courses of action

With regard to competition rules, in order to achieve a clearer
delimitation of the applicable provisions, two main approaches
to social services of general interest and profit-making com-
panies are conceivable and possible.

4.2.1.
The first would be to amend Treaty Article 16 by
introducing a general exemption principle for categories of
social services provided exclusively by private not-for-profit
operators. This suggestion has its own logic and its advocates,
who readily refer to the EC Court of Justice judgement of
17 June 1997 (the Sodemare affair).

— Such a move would have the advantage of being clear. It
would translate the desire to write into the basic texts of
the Union the concern for a balance between the principle
of competition and the need to circumvent the dangerous
effects of applying that principle too dogmatically: weak-
ening social cohesion, discouraging not-for-profit oper-
ators, ‘creaming off’ low-risk groups.

— But it could entail risks: opening up the possibility
for abuse; provoking general outcries by profit-making
economic operators; providing unconditional exemptions
for social services, which would be dangerous first and
foremost to themselves. From the perspective of their
proclaimed ethical clarity, it would prove a ‘poisoned
chalice’ and therefore work against them.

4.2.2.
Another approach, and a pragmatic one, which has
already been adopted quite effectively in some Member States,
would be to draw up more detailed criteria for competition
rules and areas which deserve to be exempted from them,
while exploring and discussing the issue in greater depth.

4.2.2.1.
This does not have to be done in an excessively
complicated and potentially paralysing way; it is a matter for
dialogue which could be recommended by the Commission,
which would also define its objectives, general themes and
spirit. At the end of the process, a way should be found for the
European bodies to agree on a clear conclusion, recognising
certain specific circumstances requiring that certain compe-
tition rules, such as those mentioned in Chapters I and II of
Title VI of the Treaty, be waived. When the time was right,
the Commission could draw up regulations on exemptions
following authorisation from the Council (Article 89, Council
Regulation of 7.5.98; Article 83, Council Regulations of 19/65
and 28.21/71), and/or adopting directives (Article 86(3) EC
Treaty; for example the directive on transparency).

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4.2.2.2.
The Committee does not under-estimate the mag-
nitude of the work which needs to be undertaken to progress
in this course of action. It does, however, feel that the deadlines
should not be too lengthy.
If this option is chosen, the
Committee is ready to cooperate actively.

5. Conclusion

5.1.
It is obvious that it is difficult to reconcile respect for
competition rules with the special characteristics of economic
activities carried out by social services of general interest.

5.2.
Private not-for-profit social services of general interest
do not belong exclusively to either the public or profit-making
domain. However they are intimately linked to the public
domain by their dialogue procedures and the financial

resources allocated to them; equally, it is increasingly common
for them to operate in the commercial sector. Nevertheless,
the services they provide cannot be reduced to purely public
criteria, nor are they limited to providing market services.

5.3.
In many Member States their concern is not to be used
instrumentally, and not to be overlooked. Such a fear is by no
means unwarranted, and this is what leads them to request
derogations that may in some cases be controversial.

5.4.
In claiming consideration for their specific circum-
stances they are seeking to challenge not reason, but the
imagination, which are not the same thing. Nor are the two
necessarily mutually exclusive. In view of the importance of
the issues at stake, such as social cohesion and the fight against
various forms of exclusion, the Committee considers that it
would be wrong in this instance not to try to combine the
two.

Brussels, 12 September 2001.

The President

of the Economic and Social Committee

Göke FRERICHS