New paper with extended comments on EasyPay from a public procurement perspective (C-185/14)

Ignacio Herrera Anchustegui, from the Faculty of Law of the University of Bergen, and I have just uploaded on SSRN a new paper where we offer comments from a public procurement perspective on the Judgment of the Court of Justice of the European Union of 22 October 2015 in EasyPay and Finance Engineering, C-185/14, EU:C:2015:716 (for an initial reaction, see here).

As the abstract details,
In EasyPay and Finance Engineering (C-185/14), the Court of Justice of the European Union (CJEU) has revisited the concept of undertaking for the purposes of the application of EU competition law. It has clarified the test applicable to economic agents engaging in ‘mixed’ economic and non-economic activities. The EasyPay test determines that, in order not to be qualified as “economic” because of its links with another activity that fulfils an exclusively social function based on the principle of solidarity and entirely non-profit making, an activity must, by its nature, its aims and the rules to which it is subject, be inseparably connected to it. In the paper, we discuss how the CJEU has arguably given a stricter interpretation and adopted a less lenient approach to the severability or separation of activities than in previous cases like FENIN, Selex or Compass-Datenbank. In our view, this interpretation is anchored on a functional analysis of the concept of undertaking, and it is a welcome development that will have far reaching implications.

Beyond that general discussion, the paper focuses on the potential implications of the EasyPay test in the area of public procurement and, in particular, for the activities of central purchasing bodies. We submit that EasyPay facilitates a revision of the current position regarding the direct applicability of EU competition law to entities carrying out public procurement activities and, in particular, central purchasing bodies. We also submit that this is highly desirable because it grants legal certainty to economic operators when dealing with a central purchasing body, to the effect that the purchasing activities will be under competition law and the derived constrains on the market behaviour of large public buyers that may abuse of their buyer power.
The paper is available as: Sanchez-Graells, Albert and Herrera Anchustegui, Ignacio, Revisiting the Concept of Undertaking from a Public Procurement Law Perspective – A Discussion on Easypay and Finance Engineering (C-185/14) (November 26, 2015). Available at SSRN: http://ssrn.com/abstract=2695742.

Another step back in the definition of (public) undertakings for the purposes of EU competition law

Earlier this year, Advocate General  Jääskinen issued his opinion in case C‑138/11 Compass-Datenbank GmbH v Republik Österreich, and I criticised his approach here (in Spanish). The Court of Justice of the EU issued his final Judgment last 12 July 2012 and has substantially followed AG Jääskinen's approach in deciding that
[...] the activity of a public authority consisting in the storing, in a database, of data which undertakings are obliged to report on the basis of statutory obligations, in permitting interested persons to search for that data and/or in providing them with print-outs thereof does not constitute an economic activity, and that public authority is not, therefore, to be regarded, in the course of that activity, as an undertaking, within the meaning of Article 102 TFEU. The fact that those searches and/or that provision of print-outs are carried out in consideration for remuneration provided for by law and not determined, directly or indirectly, by the entity concerned, is not such as to alter the legal classification of that activity (Compass-Datenbank at para. 51).
In my view, the position of the CJEU in Compass-Datenbank is another step in the wrong direction when it comes to applying the concept of 'undertaking' for the purposes of competition law to public bodies developing (actual) economic activities--which follows the already criticised approach in FENIN (C-205/03 P, 11 July 2006) and Selex (C-113/07-P, 26 March 2009) [see http://ssrn.com/abstract=1458949].

Just like it did in FENIN and in Selex, in Compass-Datenbank the CJEU has adopted an economically unsound approach towards the definition of 'economic activity' by finding that:
In the light of the entirety of that case-law, it must be observed that a data collection activity in relation to undertakings, on the basis of a statutory obligation on those undertakings to disclose the data and powers of enforcement related thereto, falls within the exercise of public powers. As a result, such an activity is not an economic activity.
Equally, an activity consisting in the maintenance and making available to the public of the data thus collected, whether by a simple search or by means of the supply of print-outs, in accordance with the applicable national legislation, also does not constitute an economic activity, since the maintenance of a database containing such data and making that data available to the public are activities which cannot be separated from the activity of collection of the data. The collection of the data would be rendered largely useless in the absence of the maintenance of a database which stores the data for the purpose of consultation by the public (Compass-Datenbank at paras. 40 and 41, emphasis added).
In my view, this reasoning falls again in the deffect (or misleading argument) of pegging an activity that is clearly economic (ie maintenance and exploitation of the database) to a non-economic activity (creation of the database by mandatory disclosure and reporting) and considering them non-separable despite the fact that there is no technical or economic hurdle to do so. It is quite telling that the CJEU does not provide any reasons for the finding that the creation of the database and its ulterior economic exploitation 'are activities which cannot be separated'.

Reality seems to indicate otherwise, and there are several Member States (like Spain), where private companies successfully use the databases created by public authorities or chambers of commerce as a result of the mandatory disclosure and reporting of corporate statements and accounts--and there is no clear technical or economic barrier for this market not to flourish in Austria or any other country. Some additional facts or arguments on the non-separability of the activities would have been extremely desirable in order to understand the reasoning behind the CJEU's decision in Compass-Datenbank (which, in my opinion, results exclusively from the hands-off approach the CJEU has been keeping for too long in connection with the antitrust treatment of public undertakings).

The position of the CJEU is equally criticisable when it comes to disregarding the expliotation of IP rights by public entities as an instance of 'economic activity' for the purposes of EU competition law. In its very broad terms, the position in Compass-Datenbank equates to a blank exclusion of public IP-related activities from competition scrutiny, as the Court found that:
[...] a public entity which creates a database and which then relies on intellectual property rights, and in particular the abovementioned sui generis right, with the aim of protecting the data stored therein, does not act, by reason of that fact alone, as an undertaking. Such an entity is not obliged to authorise free use of the data which it collects and make available to the public. [...] a public authority may legitimately consider that it is necessary, or even mandatory in the light of provisions of its national law, to prohibit the re-utilisation of data appearing in a database such as that at issue in the main proceedings, so as to respect the interest which companies and other legal entities which make the disclosures required by law have in ensuring that no re-use of the information concerning them is possible beyond that database  (Compass-Datenbank at para. 47, emphasis added). 
Once again, this does not make any functional sense. If the whole purpose of collecting and disseminating the corporate information in the first place is to guarantee that third parties dealing with the undertakings concerned have reliable access under reasonable economic conditions to information that may be crucial for their dealings and market activities, identifying a public interest in keeping the use of such information limited is simply a non sequitur. Therefore, there does not seem to be a good justification for the exclusion of IP rights' exploitation as an economic activity as such either.

Finally, the CJEU enters into a circular reasoning when it comes to appraise whether the fact that the public body obtains revenues makes any difference in the analysis:
The fact that the making available of data from a database is remunerated does not have any bearing on whether a prohibition on the re-use of such data is or not economic in nature, provided that that remuneration is not itself of such a nature as to enable the activity concerned to be classified as economic [...]. To the extent that the remuneration for the making available of data is limited and regarded as inseparable from it, reliance on intellectual property rights in order to protect that data, and in particular to prevent its re-use, cannot be considered to be an economic activity. Such reliance is, accordingly, inseparable from the making available of that data (Compass-Datenbank at para. 49, emphasis added).
Some questions spring to mind as to how to determine at which point remuneration for any services alter their classification from a non-economic (ie free?) to an economic (ie profit-making) activity. Other than that, if the generation of revenue depends on its source for the purposes of determining whether the revenue-generating activity is economic or not, then it is not a separate criterion and this type of circular reasonings should be avoided to prevent unnecessary confusion in the CJEU's case law.

In short, in my opinion, the position of the CJEU in Compass-Datenbank  simply defies the economic rational underlying the functional approach towards the concept of undertaking in the previous case law--which defines it as any entity that carries out an 'economic activity', regardless of its legal nature and source of financing. If 'economic activities' are not properly identified (as in FENIN, Selex and, now, Compass-Datenbank), the concept of 'undertaking' becomes unjustifiedly narrow and leaves unscrutinised public (actually economic) activities that raise significant competition law concerns (in the Compass-Datenbank due to the existence of a legal monopoly that excludes the existence of competition in the market for company information services). One cannot avoid wondering whether the analysis of the situation under the 'essential facilities doctrine' in Microsoft (Case T-201/04, 17 September 2007) would offer the same results (ie whether similar actions by a private undertaking would qualify as 'economic activities' and, hence, trigger tough antitrust intervention).

In conclusion, simply, I consider the recent Judgment of the CJEU in Compass-Datenbank  another step back in the definition of (public) undertakings for the purposes of EU competition law.