Should national health services be subject to EU competition law?

The Advocate-General has provided an opinion in a case which aims to clarify when public services organisations are subject to EU competition law. CMS Cameron McKenna partner, David Marks, discusses the elements of the FENIN case with Lucy Trevelyan...

Another step has been taken in a case which will clarify when public services organisations generally and health services in particular are subject to EU competition law, says CMS Cameron McKenna partner, David Marks.

The judgment of the European Court of Justice (ECJ) in the case of FENIN (Federación Española de Empresas de Technología Sanitaria) is still some time off but the Advocate General has now provided an opinion. The case has already been considered by the European Commission and the Court of First Instance (CFI).

Marks explains that FENIN, an association of businesses which market medical goods and equipment used in Spanish hospitals, complained to the European Commission that several public bodies which run the Spanish national health system were abusing a dominant position by paying sums invoiced to them only after an average 300-day delay.

“The Commission rejected FENIN’s complaint on the basis that the organisations in question were not undertakings in the meaning understood in EU competition law, so could not be subject to EU competition law.”

When the appeal went to the CFI, says Marks, FENIN argued that by purchasing goods, the organisations were involved in economic activity, so were undertakings subject to competition law.

Marks says: “The CFI disagreed. It stated that purchasing goods cannot in itself be an economic activity: purchasing goods can only be an economic activity where the subsequent use to which those goods are put itself involves an 'economic activity'.

“The CFI considered that the key characteristic of 'economic activity' is the offering of goods and services on a given market. In this case, the organisations operated according to the principle of solidarity in that they were funded from social security and state contributions and provided free of charge services on the basis of universal cover, so were found not to be engaging in economic activity. On that basis, the CFI decided that their purchasing could not be an economic activity either and the organisations therefore could not be undertakings subject to EU competition law.”

Advocate General Maduro’s opinion, he says, agrees with the CFI’s view that purchasing is not in itself an economic activity and that the act of purchasing goods cannot be dissociated from the subsequent use to which those goods are put.

He adds, however: “AG Maduro believes that in order to determine whether the provision of health care by the Spanish national health system should be subject to competition law, it is necessary to establish whether the state intended to exclude all market considerations from the provision of health care by the Spanish national health system, by entrusting the activity exclusively to state bodies which would be guided solely by the principles of solidarity.

“He believes that the CFI judgment did not consider this point. He added that even if the CFI were to find that the provision of health care by the Spanish national health system does constitute an economic activity and therefore there is an undertaking for the purposes of competition law, it would still be necessary to be satisfied that the organisations about which FENIN complained are the medium through which the Spanish health service provides health care services. The CFI did not consider this point.”

He says that AG Maduro wants the ECJ to remit this part of the case to the CFI to make a finding of fact.

“AG Maduro’s opinion suggests the route which the ECJ should take when it gives its final judgment in this case, but the opinion is not binding on the ECJ. Public service organisations will follow closely the ECJ’s verdict, but they are likely to have to wait at least a year for it.

If the ECJ follows AG Maduro’s opinion and refers back part of the case to the CFI, we can expect an even longer wait for a final view on whether an undertaking involved in purchasing and provision of health care as part of a national health service is subject to competition law.”

He says that If the ECJ also focuses on whether the state excludes all market considerations from the provision of health care by national health systems, difficulties may arise in applying this approach in practice, particularly in countries such as the UK where the distinction between public and private sector is becoming “increasingly blurred”.

“For example, in the UK health sector, the state encourages public entities to include market considerations and privately paid services in their business plans. In the meantime, a long wait for a definitive resolution to this case will be extremely frustrating, particularly for the competition authorities of Member States of the EU and for the European Commission if faced with similar complaints.”

The Office of Fair Trading said following the CFI’s judgment on FENIN that it was “for the time being, unlikely to take forward cases involving public bodies which are engaged in a mixture of purchasing and direct provision of goods and services for non economic purposes, for example purposes which are purely social, environmental or national security related”. Marks adds: “Until a definitive conclusion is reached in the FENIN case, we do not expect this approach to change. While public authorities may be happy with this, parties doing business with them may not.”

(08/02/06)

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Case annotations in other services:-
Federación Nacional de Empresas de Instrumentación Científica, Médica, Técnica y Dental (FENIN) v European Commission: T-319/99 [2003] ECR II-357, [2004] All ER (EC) 300 [2003] 5 CMLR 34, 72 BMLR 128