Transcript Competition law - the next major battleground for private

Competition law –
the next major battleground
for private operator challenges?
Thibault Verbiest
Senior Partner, ULYS law firm
Member of the Paris and Brussels Bars
European Gambling Briefing
Brussels
Content
• Introduction: the situation up to now
• EC competition rules
 Obligations on undertakings: article 81 & 82
 Obligations on Member States: article 86 (1) as a
tool to challenge national gambling operators
• Concessions under Community law
• Conclusion
Internal Market complaints
• Legal basis for complaints: art.49 EC Treaty
► freedom to provide services
• Gambling services = services (Schindler)
• Possible restrictions for imp.reas.gen.int
(consumer protection, fight against fraud) +
proof of a consistent gaming policy
(Gambelli).
Internal Market complaints
• Drawbacks
Commission case-by-case assessment: art.
226 EC Treaty ► ECJ only last resort
No legal certainty: discretionary power to
investigate complaints
Time consuming: internal market ► 25
commissioners unanimity
From internal market complaints to
competition law…
• Some operators turn to competition law
 Private operators confronted to national monopolies which
enjoy protection through exclusivity: Française des Jeux,
Holland Casino, Coni etc…
 Competition issue: monopoly, exclusivity ► market
power ► dominance ► possible abuse of dominant
position
 Less time consuming ► no unanimity required to
investigate complaint
 DG competition enjoys large powers
EC Competition rules
• Article 3 (g) EC Treaty: the activity of the Community shall
be to institute a system ensuring that competition in the
internal market is not distorted.
• Article 4: the activities of the Member States and the
Community shall be conducted in accordance with the
principle of an open market economy with free
competition.
• Article 10 ► obligations on Member States to take all
appropriate measures to ensure fulfilment of the
obligations arising out of the Treaty / to abstain from any
measure which could jeopardise the attainment of the
objectives of the Treaty.
• Article 81 & 82: obligations on undertakings
• Article 86: obligations on Member States
Obligations on undertakings
under competition rules
• Article 81 EC Treaty prohibits “agreements
between undertakings, decisions by
associations of undertakings and concerted
practices which may affect trade between
Member States and which have as their
object or effect the prevention, restriction
or distortion of competition within the
common market.”
Article 81
• Up till now, article 81 not the proper tool to challenge
national gambling operators: would mean that national
gambling operators agree for example to apply dissimilar
conditions to equivalent transactions with other parties,
thereby placing them at a competitive disadvantage
(article 81.1 (d))
• Why? In general national operators do not enter into
collusive conduct
 There is usually only one operator ► no agreement (!)
 If there are several national operators, they do not
compete on the same markets ► no interest in collusive
conduct ► eg, FDJ operates on lotteries and sports betting
market / PMU on horse betting.
Obligations on undertakings
under competition rules
• Article 82 EC Treaty
“ Any abuse by one or more undertakings of
a dominant position within the common
market or in a substantial part of it shall be
prohibited as incompatible with the
common market insofar it may affect trade
between MS.”
Article 82
• Article 82 applies to the unilateral conduct of a
dominant firm ► national gambling operators
often enjoy significant market power ►
monopolies, exclusive rights ►may lead to
abuses ► eg, extension of dominance to the
internet
• Monopolies are subject to art.82 (Case ERT v
Dimotiki).
• Art.82 may be a useful tool to challenge national
gambling operators.
Obligations of Member States
under competition rules
• Article 86 (1)
“ In the case of public undertakings and
undertakings to which Member States grant
special or exclusive rights, Member States shall
neither enact nor maintain in force any measure
contrary to the rules contained in this Treaty, in
particular to those rules provided for in article 12,
and articles 81 to 89.”
• Article 86 (1) : direct effect
Article 86 (1)
• Article 86 seems most adequate tool to challenge national
gambling operators: why?
 National gambling operators are often public undertakings
(eg, FDJ owned at 72% by the French State) or
undertakings to which MS grant special or exclusive
rights (eg, a body granted a monopoly for the provision of
gambling services)
 Art.86 has a large scope of application since it must be
read in conjunction with other Treaty provisions (reference
rule) ►not limited to competition rules ► eg, measures
that infringe article 49 may also infringe art.86.
Article 86 (1) : examples
• ECJ, ERT v. Dimotiki, 1991:
 The existence of monopoly itself not contrary to Treaty but
manner in which monopoly is exercised can be contrary
to Treaty
 Article 86 (1) prohibits the granting of an exclusive right to
retransmit television broadcasts to an undertaking which
has an exclusive right to transmit broadcasts, where those
rights are liable to create a situation in which that
undertaking is led to infringe Article 82 of the Treaty by
virtue of a discriminatory broadcasting policy which
favours its own programmes.
Article 86 (1): examples
• ECJ, RTT v GB-Inno-BM, 1991
 The Court has also held that an abuse within the meaning
of Article 82 is committed where, without any objective
necessity, an undertaking holding a dominant position on
a particular market reserves to itself an ancillary activity
which might be carried out by another undertaking as
part of its activities on a neighbouring but separate
market, with the possibility of eliminating all competition
from such undertaking.
 Where the extension of the dominant position results from
a State measure, such a measure constitutes an
infringement of Article 86 in conjunction with Article 82
of the Treaty.
Article 86 (1): application to
national gambling operators
• The challenge today for remote gambling operators ►
most national gambling operators have seen their
offline exclusivity extended to the internet (eg, Holland
Casino, Française des Jeux, Pari Mutuel Urbain).
• This extension could be challenged in the light of art.86 (1)
read in conjunction with art.82 since it leads national
operators to use their already dominant position on the
offline market in order to operate on the online market,
under authorization of the State (see case-law).
• This extension is the more anticompetitive as the
traditional separations between gambling markets
offline is no longer applicable to the internet ► online
gaming operators, including national operators, tend to
offer all kinds of gambling services from betting to casino.
Other issues:
concessions under Community law
• Directive 2004/18 on the coordination of
procedures for the award of public works
contracts, public supply contracts and public
service contracts
• Commission interpretative communication
submits services concessions to the principles and
rules enshrined in the EC Treaty
• Awarding authority must give reasons for refusing
or rejecting an offer so that any tenderer who
considers that it has suffered damage can open an
appeal procedure.
Other issues:
concessions under Community law
• Equality of treatment: Provisions reserving public contracts only to
companies of which the State or the public sector is a major, or the
sole, shareholder contravene the principle of equality of treatment.
• Transparency: ECJ, Telaustria judgment: awarding authority's
obliged to guarantee all potential tenderers a proper degree of
advertising in awarding concessions.
• Proportionality: A Member State may not impose conditions that are
excessive and disproportionate when selecting candidates. Nor should
the duration of the concession be set in such a way that it limits
open competition beyond what is required to ensure that the
investment is paid off and there is a reasonable return on invested
capital, whilst maintaining a risk inherent in exploitation by the
concessionaire.
• Mutual recognition: A Member State must accept the products and
services supplied by economic operators from another Member State.
It must also accept the technical specifications, checks, diplomas,
certificates and qualifications required in another Member State if
these are recognised as equivalent
Conclusion
• Article 86 (1) may constitute an alternative legal basis to
internal market complaints but can be combined with free
movement rules: large scope of application
• The Commission could address appropriate directives or
decisions to Member States (art.86 (3) ), such as requiring
them to allow private operators to offer their services
online
• With State licences expiring, Member States will be
obliged to abide by the rules set out by the Commission
regarding services concession, ie, to open services
concession to private gambling operators.
Thank you for your attention
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