Am I an “undertaking”? Am I a subject of competition law? – is a common question of any company and even of a natural person.
Well … please don’t be frustrate to find out that:
There is no legal definition of the “undertaking”
Although the subjects of any matter are usually unequivocal determined, competition law does not provide any legal definition to its undertakings. Their meaning is exclusively the result of the case law and legal doctrine interpretation.
The “undertaking” concept is a distinctive one
The “undertaking concept” is neither similar to the more familiar legal categories of natural or legal persons, nor “identical to the question of legal personality for the purposes of company law and fiscal law” (see Polypropylene Case). The EU courts (“the courts”) ruled that, in certain circumstances, both a company – a legal person, as well as an individual – a natural person (e.g. a lawyer or an opera singer) could qualify as undertakings, while in other cases, neither a legal person, nor a natural one may fall within the said category (e.g. an employee or a genuine agent).
Despite this ambivalence, the courts upheld a common element specific to any undertaking, irrespective of whether or not it is a legal or a natural person – it is economically active. It was argued that “the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way it is financed” (e.g. Macrotron Case). Moreover, it was confirmed that “competition rules in the Treaty do not apply to activity which by its nature, its aim and the rules to which it is subject does not belong to the sphere of economic activity” (e.g. Wouters Case).
Although it seems clear that the economic activity is a sine qua non condition for an undertaking, particular questions may arise:
a) what is an economic activity after all? Or
b) what if an entity is not specifically set up for an economic reason but provides some economic activities in addition to the non-economic ones?
The courts dealt with these questions many times and their answers could be very briefly summarised as follows:
a) An economic activity consists in “offering goods or services on a given market” (e.g. Commission v Italy or FENIN v Commission).
As it could not be a simpler and clearer definition, the exemptions are far more challenging and complex.
For exemple, an exemption was held by the courts in case of the entities acting on the basis of solidarity (e.g. FENIN Case) or in the exercise of their public power (e.g. Eurocontrol Case). Such activities do not have an economic goal although they may consist in providing certain goods and services on a given market.
Another exemption could be seen in the cases were an entity was found to provide an economic activity and thus, to be an undertaking, although it does not offer any goods or services on a given market. This is the case, for exemple, of a “facilitator” to a cartel (see Organic Peroxides Case), who can be an undertaking although it does not itself produce the goods or services that are cartelised.
b) As to the second question, it seems that neither the economic purpose (e.g. Italy v Sacchi) nor the profit-motive (e.g. Van Landewyck v Commission) of the entity are an essential element of an undertaking. It was found, for example, that during 1990 World Cup, FIFA was an undertaking for the economic activities carried out (e.g. conclusion of advertising or TV broadcasting contracts) although FIFA’s main purpose is sport activity which is not an economic activity in itself. In all this cases, as well as in many others, one may notice that only a part of the entity’s activities is economic while the rest is not. For these situations it was developed the so-called “functional approach”, according to which “an entity might be regarded as undertaking for a part of its activities [which is economic], while the rest fall outside the competition rules” (e.g. Ambulanz Glockner).
It is a relative concept
Although some guidance to determine if a natural or legal person is an actor of competition law can be found within the case law, as demonstrated above, this fact does not provide an absolute certainty that the criteria used in a particular case, will be applied, mutatis mutandis, in another similar one. Advocate General Jacobs noticed in Albany Case that „the notion of ‘undertaking’ is relative and has to be established in concreto with regard to the specific activity under scrutiny.”
It has a dual purpose
Somehow contradicting the aforementioned, there are situations in which an entity is not held liable for its anti-competitive behaviour although its activity under scrutiny is found to be, without any doubt or exemption, an economic one. There are the cases in which its behaviour (and its economic activities too) is not independent and attributable to the said entity. Advocate General Jacobs considered a dual purpose of the undertaking concept because “it makes possible to determine the categories of actors to which the competition rules apply” and also “it serves to establish the entity to which a certain behaviour is attributable.” This second purpose was the strongest incentive for the “single economic entity” („SEE”) doctrine, that will be discussed in the next post.
Broadly speaking, the undertaking concept involves: jurisprudence, doctrine, piecemeal approach, uncertainties and contradictions, challenge, innovation, case by case assessment.
In a nutshell, we dare to argue that it is highly likely to be un undertaking if you (legal or natural person) provide an economic activity, as your main purpose or only as an auxiliary activity. Conversely, it is very unlikely to be an undertaking if you act on the basis of solidarity or in the exercise of a public power.
