On 11 July, the European Court of Justice (ECJ) dismissed an appeal by Federación Española de Empresas de Tecnología Sanitaria (FENIN) against a judgment of the Court of First Instance (CFI) which held that Article 82 EC (abuse of dominance provision) did not apply to the purchasing activities of the organisations in charge of the Spanish health system on the basis that they were not acting as undertakings for the purposes of competition law.
FENIN is an association representing firms who market medical goods and equipment used in Spanish hospitals. In December 1997, it complained to the European Commission alleging that the public bodies managing the Spanish national health system (SNS) were in a dominant position on the Spanish market for medical goods and equipment and that they had abused that position by delaying payment of their debts contrary to Article 82 of the EC Treaty.
The EC competition rules on restrictive practices and abuse of dominance only apply to the activities of "undertakings", i.e., entities engaged in economic activities, whether or not with a view to profit.
In August 1999, the Commission rejected FENIN's complaint. It found that the bodies managing the SNS were not "undertakings" subject to the EC competition law rules and, in particular, Article 82. It reached this view on the ground that the purchasing activities of those bodies were not economic activities, but rather activities carried out for the purpose of providing non-economic health services.
FENIN appealed to the Court of First Instance (CFI) against the rejection of the complaint. In March 2003, the CFI ruled that the Commission had been correct to hold that the SNS entities were not "undertakings" for the purposes of the competition rules and dismissed the appeal.
FENIN appealed the CFI's judgement to the European Court of Justice (ECJ) claiming that the CFI was wrong to hold that the SNS entities were not "undertakings". In particular, it argued that public bodies, including health organisations, of whatever legal nature, must be considered to be “undertakings” in relation to their suppliers and must be subject to competition law. According to FENIN, this was the case either (a) because the activity of purchasing medical products or services is an economic activity (and all entities engaging in economic activities are "undertakings") which is distinct from the subsequent non-economic use of these products or services, or (b) even if the activity of purchasing is not distinct from the subsequent supply, the provision of health services is, itself, economic and subject to the competition rules.
The ECJ's judgement
The ECJ dismissed the first part of FENIN's appeal on the basis that (as the CFI had ruled) in order to determine whether the SNS entities were acting as undertakings when engaging in purchasing activities, one has to examine whether or not the subsequent use of the purchased goods amounts to an economic activity. In other words, it was not appropriate to disassociate purchasing activities from other activities. The Court dismissed the second part of the appeal on technical grounds (because it had not been raised properly before the CFI). Therefore, the question of whether the public provision of health services might be capable, in appropriate cases, of amounting to economic activities remains open.
The FENIN judgement is of key significance for all public sector purchasers. Had the ECJ ruled that they were "undertakings" in the context of their purchasing activities, then this would mean they were subject - to that extent - to the full impact of competition law. This would include fines for anti-competitive conduct and damages claims by third parties injured by such conduct. As things stand (and subject to the wider issue of whether, in any circumstances, their core services amount to economic activities), public sector purchasers can regard FENIN as a very helpful decision.