88 Article 2 of the Commission‟s Transparency Directive I (1982) ECR 2545, 25-26; It can also be found in Article 2(1) of the Council Directive 93/38/EEC [1993] L 99/84 which provides a definition of „public undertaking‟ in the public procurement (Directive of 1993 relating to the excluded sectors); Alpha Flight/Áeroports de Paris [1998] OJ L 230/10, 50; Ilmailulaitos/Luftfartverket, [1999] OJ L 69/24, 21-22;
See also Article 2.2 of the Commission Directive 2000/52/EC amending Directive 80/723/EEC on the transparency of financial relations between Member States and public undertakings [2000] OJ L 193/75.
89 Sierra, above n 3, 40-41.
90 International Competition Network (ICN), Report on the Objectives of Unilateral Conduct Laws, Assessment of Dominance/Substantial Market Power and State-created Monopolies (2007), 65
<http://www.icn-moscow.org/page.php?id=7>.
91 Ibid.
30 desire for national champions, etc.92 Practices in developed and developing countries show that state monopolies are often given exclusive and special rights that enable them to have a dominant position in the market. Simply put, exclusive rights and privileges granted to a public undertaking make it possible for this undertaking to become a monopoly. This is demonstrated through the practice of EC competition law.
As the object of the grant of exclusive rights is to exercise an economic activity, an entity to which exclusive rights are granted must be an undertaking. Exclusive rights can be granted to an undertaking by a member state93 and can be given to both public and private undertakings. Such rights are defined by the European Commission as:
[t]he rights granted by a member state or a public authority to one or more public or private bodies through any legal, regulatory or administrative instrument, reserving for them the right to provide a service or undertake an activity…94
A similar definition is also found in a number of directives by the European Commission regarding competition in telecommunication services,95 even though the two concepts
„special‟ and „exclusive rights‟ were previously considered to be one and the same.96 By contrast, the ECJ considers them as two distinct concepts and this is generally advocated by scholars.97 In the simplest meaning, special rights are those granted to a limited number of undertakings,98 while exclusive rights are given to a single one.99 Thus, the distinction primarily lies in the number of beneficiaries. It is noted that state monopolies in this question are different from other monopolies which also benefit from the government (sometimes these are called government granted monopolies). Even though
92 UNCTAD, „Relationships between a Competition Authority and Regulatory Bodies‟, above n 1, 4.
93 Sierra, above n 3, 29.
94 Spain, Belgium and Italy v Commission joined cases (C-271/90) (C-281/90) and (C-289/90) [1992] ECR I-5833.
95 For example, Article 1 (1) and recital 2 of the Commission Directive (EEC) 90/388 on Competition in the markets for telecommunication services [1990] OJ L192/10, 10-16.
96 Sierra, above n 3, 5.
97 Ibid; Franỗoise Blum and Logue, above n 23; Ritter and Braun, above n 45; Jones and Sufrin, above n 4.
98 For example, according to the Advocate General‟s opinion in Spain, Belgium and Italy v Commission (Telecom Services) at an oral hearing, the European Commission explained that: „special rights are the rights held by a limited number of telecommunications organisations chosen in discretionary and subjective manner by the State concerned‟. See Spain, Belgium and Italy v Commission joined cases (C-271/90) (C- 281/90) and (C-289/90) [1992] ECR I-5833.
99 Sierra, above n 3, 12. See also Air Inter SA v Commission (Air Inter) (T-260/94) [1997] ECR II-0997 120-121.
31 they both enjoy exclusive rights and privileges, state monopolies are in nature state owned enterprises, while the latter can be private firms. This is important because state monopolies are special subjects under competition law. They participate in the market as business entities, while maintaining links with their governments. Special and exclusive rights make it possible for them to hold market powers in the market where they can also serve political purposes.
In EU competition law, the term „exclusive rights‟ refers to those granted to a single undertaking by excluding competitors, in order to reserve a certain activity in a given geographic area.100 A non-exhaustive list of exclusive rights is taken from the EC Commission‟s Directives and ECJ cases. They are enumerated by Lennart Ritter and David Braun101 as monopolies for importing, supplying, connecting, putting into service and maintaining goods or equipment, such as telecommunications terminal equipment,102 the exclusive rights to provide telecommunications services,103 the exclusive right or franchise for commercial television advertising,104 the exclusive right to operate an employment agency,105 the exclusive power to collect and distribute mail,106 the grant of exclusive licenses for collecting waste oil,107 the exclusive right to insure certain types of insurance risks,108 to issue conformity certificates for imported vehicles,109 or telecommunications terminals,110 or to provide funeral services within a certain geographic area.111
Hence, it can be inferred that exclusive rights granted to a public undertaking
100 Ritter and Braun, above n 45, 64.
101 Ibid 64 -65.
102 Telecommunications Directive Terminal Equipment (1991) ECR I-1223, 31-44.
103 Telecommunications Directive Services (1992) ECR I-5833.
104 Sacchi v Tele Biell (C-155/73) [1974] ECR 409, 12-15; Telemakerting (C-311/84) [1985] ECR 3261, 11- 18.
105 Hoffner v Macrotron (C-41/90) [1991] ECR I-1979, 25.
106 Corbeau (C-320/91) [1993] ECR I-2533; Commission’s Notice on Portal Services [1998] OJ C 39/2, 4 interpreting Directive 97/67/EC on Portal Services [1998] OJ L 15/14.
107 SNFR v Inter-Huile [1983] ECR 555.
108 Ameyde v UCI [1977] ECR 1091, 18-22.
109 General Motors (C-26/75) [1975] ECR 1367, 4-10; British Leyland [1986] ECR 3263, 3-10.
110 Telecommunications Directive Terminal Equipment [1991] ECR I-1223, 31-44.
111 Funeral Services (C-30/87) [1988] ECR 2479, 16.
32 (public/state-owned enterprise) will enable it to be a monopoly in a certain area. In other words, a monopoly position of a public enterprise in a particular industry (the provision or supply of goods and services) results from the benefits of the grants of exclusive rights from its state government or public authorities.
When exclusive rights are granted to a public undertaking there is a blurred distinction between the public authority which grants the rights and the public undertaking which receives them.112 Thus, the term „state monopoly‟ does not cover all undertakings which are granted exclusive rights. Exclusive rights can be granted to an undertaking directly and indirectly and and the aims of granting exclusivity to the beneficiary are also varied, resulting in different consequences.
An exclusive right will enable the granted undertaking to be the only one to carry out a certain economic activity and will imply the exclusion of other competitors who wish to participate in this given area. Not only will exclusivity facilitate the beneficiary to attain a prevailing position in the market, it will help to prevent third parties from exercising the rights in question by making use of the jus prohibendi principle. Whether or not permission to carry out activities is given to third parties depends on the authorisation of the beneficiary.113 The concept of „exclusive rights‟ is different from that of „dominant position‟ and and it does not necessarily mean a grant of exclusivity will always bring a dominant position in the market to a beneficiary, because it still depends on the scope of the relevant market.114
In any case, it is possible to say that exclusivity is important for turning an undertaking into a monopoly. As governments have good reasons to grant exclusivity to their public enterprises, the creation of state monopolies by means of exclusivity is understandable.
Furthermore, as the definition of „exclusive rights‟ is wide and and the legislation and procedures by which exclusivity is given to a public undertaking are not clearly limited, due to the lack of formalism, countries seem to find it useful to maintain the grant of exclusivity, while substituting other terms for it, such as „concessions‟, „franchises‟,
112 Sierra, above n 3, 30.
113 Ibid 7.
114 In the GT Link, the ECJ held the viewpoint that the grant of exclusive rights to an undertaking will automatically create a dominant position to this undertaking if „…[t]he reserved activity constituted by itself a relevant market or a substantial part of a relevant market‟. See GT- Link (C-242/95) [1997] ECR I- 4449.
33
„licences‟, „authorisations‟, etc.115
With regard to special rights, even though they may be granted to a limited number of undertakings, it can also be concluded that such rights will enable a certain group of undertakings to achieve, or have more opportunity to achieve, economic strength in the market, thus making it possible for them to turn into monopolies in particular markets or industries. It can consequently be inferred that a group of public undertakings for that reason finds it easier to become state monopolies.