Post Modernisation Judgments Of Ireland's Competition Court: A Quick Look Review

Author:Mr Philip Andrews
Profession:McCann Fitzgerald
 
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  1. Introduction

    Since modernisation of EU and Irish competition rules in the early 2000's, four major competition law judgments have been handed down by Ireland's Competition Court: ILCU, Hemat, BIDS and, most recently, Panda Waste. Each has been controversial. ILCU and BIDS were appealed, resulting in reversals of the Competition Court's approach on fundamental substantive issues in each case. Hemat, while upheld on appeal, was openly criticised by senior officials from the Irish Competition Authority.1 No less controversial is Panda Waste, in which the Competition Court found local government policy on collection of municipal waste to be in violation of Irish competition rules (and, in so holding, ignored a Competition Authority decision on the pro-competitive benefits of the impugned practices). It too is to be appealed.

    The foregoing has occurred notwithstanding two important modernisation-driven innovations: the practice, since 2004, of a single specialist judge hearing all substantive competition law cases, as well as the now near-standard inclusion of economics, particularly expert economic testimony and micro-economic analytical tools, into Competition Court assessments (with the Court in ILCU and BIDS going so far as to appoint its own expert economic assessor).2 Why have these changes not improved predictability in judicial outcomes?

    From a quick-look review of the four judgments, with particular focus on Panda Waste, two possible explanations are proposed.

    First, key concepts that define the law's scope – in particular, related concepts of "undertaking" and "economic activity" – have been interpreted in a somewhat ad hoc manner, leading to major differences in outcomes. In Hemat, regulation with "economic consequences" is not an economic activity, so competition rules do not apply. But in Panda Waste, regulation "aimed at directly affecting the market" is such an activity, so competition rules do apply. As a direct result, in one case (Hemat) competition law has a relatively rare application to regulation, while in another (Panda Waste) competition law attains almost constitutional stature.

    Second, while expert economic testimony and micro-economic analytical tools are now an established part of Competition Court judgments, there appears still to be some variance in the economic doctrine underlying the major cases. Does this matter? A quick look review of ILCU, Hemat, BIDS, and Panda Waste suggests it may: in each case, there appears to be a nexus between the economic underpinnings preferred by the Competition Court and the substantive liability standard applied. In Panda Waste, the Competition Court's strong affirmation of atomistic competition as the superior mechanism for governing the sector fairly jumps from the page. As a result, an expansive view of wrongful behaviour is applied. In contrast, in Hemat and BIDS, the Court seems to have less faith in free market competition, going so far in BIDS as to endorse a sector-wide private re-ordering of the market.

  2. Background to Panda Waste

    On 3 March 2008, Dublin's four local authorities agreed an important change to their joint approach to waste management. The change, which involved a formal variation to the Waste Management Plan for the Dublin Region 2005 - 2010 (referred to both in the Panda Waste judgment and in this note as "the Variation"), sought to significantly alter the way in which household waste was collected across Dublin. Henceforth, collection of household waste would be carried out by a single waste operator, to be either a Dublin local authority or a private operator selected via competitive tender.

    The implications for private waste collection firms operating in Dublin were obvious: once implemented, the Variation would prevent multiple waste collectors operating within the same area in Dublin. In the words of the opening paragraph of the Panda Waste judgment, "[t]he Variation would have the effect of excluding private operators from the domestic waste collection market ... and would vest all rights to collect waste in a single operator."3

    Two of Ireland's leading private waste operators – Nurendale Limited, trading as Panda Waste Services, and Greenstar Limited – challenged the Variation on both competition and administrative law grounds. This article discusses only the Court's competition law analysis of their challenge although, ultimately, the legal challenge succeeded on both fronts.

  3. The Scope of Competition Law – What is An Undertaking?

    Panda Waste

    The most controversial aspect of the Panda Waste judgment is doubtless its finding that adoption of the Variation by the four local authorities can be construed as an economic activity, and therefore susceptible to review and prohibition under Irish competition law.

    Following review of ECJ jurisprudence on the concept of an undertaking (and citing, in particular, Case C-49/07 MOTOE, Case T-196/04 Ryanair, and Case C-309/99 Wouters), the Court in Panda Waste adopted a "unified approach" test to determining when a public body or authority exercising regulatory powers constitutes an "undertaking."4

    Applying this unified approach test to the action of the local authorities in adopting the Variation, the Court held that the local authorities' involvement in economic activities in downstream local waste markets meant that a policy decision on the future organization of such markets was also an economic activity.

    Specifically, the Court held that " ... where the regulatory acts impact on private operators on the same market where also the [local authorities] commercially engage, the regulatory role performed will not preclude them from being found to be undertakings." The Court went on to determine that, because the Variation was " ... aimed at directly affecting the market for domestic waste collection," it followed that " ... the Variation is of an economic, rather than an administrative, nature."

    ILCU

    Like in Panda Waste, one of the most controversial aspects of ILCU related to the Competition Court's approach to the concept of an undertaking. In ILCU, a voluntary association of credit unions (the Irish League of Credit Unions) was found to be engaged in an economic activity via the provision to its members of an ill-defined, but "complex bundle" of "representation services" (including certain self-regulation activities carried out by the ILCU vis-à-vis its members).5 Accordingly, the ILCU was found to be an undertaking for purposes of EU and Irish competition law. On foot of that finding, the Competition Court held that the ILCU was (a) dominant in the provision of such representation services to credit unions (including to its own members), and (b) abusing that dominant position by refusing to provide non members access to the facilities of its own members.6

    The Competition Court's decision that the ILCU constituted an undertaking was based primarily on the court's findings that the lobbying and representational services provided by ILCU were "tradable services" (by which the Court appeared to mean provided in return for payment). Hence, the judgment takes some care to reject defence arguments that the advocacy and other representation services provided by ILCU to its members were not traded. The Competition Court found that "[w]hile it may not be the case in Ireland, representational and lobbying services are both well established and well rewarded in other jurisdictions, notably the US."7

    Thus, the test as to whether a particular service is an economic activity as per ILCU is whether the services at issue are "traded" (in other words, provided for reward) in Ireland or elsewhere.

    Hemat

    The foregoing may be contrasted with the approach in Hemat. In that case, adoption by the Medical Council of advertising restrictions on medical practitioners was found not to be an economic activity notwithstanding explicit Court acceptance that the advertising restrictions at issue had "economic consequences."8 Accordingly, the Medical Council was found to be neither an undertaking nor an association of undertakings for purposes of EU and Irish competition rules.

    In so deciding, the Competition Court declined to follow a "unified approach," stating that " ... considerable caution must be used in assimilating different functions as in principle each separate activity must be individually considered. It is only in the rarest of occasions that a composite view will be appropriate." Rather, the test applied in Hemat was whether the Medical Council was " ... driven by public interest considerations, and the extent of these public interest considerations."9

    Two key factual conclusions caused the Competition Court to find this "public interest" test met. First, the Competition Court noted that the " ... general underlying intention of the legislation was to protect the public interest."10 Second, the Competition Court noted that the level of input, influence, supervision and ultimate control which the governing legislation vested in the Minister for Health and Children, was "very significant." It followed in the Competition Court's view that the Medical Council was not engaged in an economic activity when enforcing restrictions on advertising.

    BIDS

    In BIDS, the High Court found it "uncontroversial" that each of the private firm beef processors involved in BIDS constituted an undertaking for purpose of Article 101 TFEU.11 Accordingly, it was not disputed that BIDS constituted an "association of undertakings."

    Undoubtedly, the BIDS approach to the concept of undertaking and association of undertakings is the least controversial among the four major cases. More notable is the BIDS verdict.12 Notwithstanding that BIDS was found to...

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