In Ordem dos Técnicos Oficiais de Contas v Autoridade da Concorrência(judgment of 28 February 2013), the Court of Justice of the European Union weighed in on the issue whether a regulatory activity of a statutory professional association was an economic activity subject to assessment under competition law or an exercise of public authority outside the reach of competition law. The judgment brings further clarity to the applicability of competition rules to public bodies when carrying out their activity, the topic we addressed in our previous post.
Background of the case
The Order of Chartered Accountants (Ordem dos Técnicos Oficiais de Contas, the OTOC) is a compulsory professional association of chartered accountants in Portugal. By virtue of its statute, which forms an annex of a law, the OTOC is, inter alia, vested with the power “to promote its members’ continued training and professional training and contribute thereto, in particular by the organisation of professional training sessions…”. In furtherance of this mission, the OTOC enacted a regulation requiring all chartered accountants to collect 35 credits annually. The regulation distinguished between institutional and professional trainings. Institutional training, yielding 12 out of 35 credits, was intended to address legislative initiatives and issues pertaining to ethical and professional conducts. This type of training could have been provided only by the OTOC. Professional training could have been provided by the OTOC, the institutions of higher education, the bodies authorised by law to provide training, as well as by other undertakings provided they were accredited with the OTOC and further provided that each particular training they offered was registered with the association. Accreditation/registration was subject to payment of a fee.
The Portuguese competition authority held that the OTOC had infringed Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). In judicial review process, the Commercial Court of Lisbon as the first-instance reviewing court dismissed the finding of abuse of dominance under Article 102 TFEU. However, the court confirmed that the OTOC infringed Article 101 TFEU by artificially segmenting the market for compulsory training services to chartered accountants and reserving one third of that market to itself, and by discriminating against its competitors with respect to provision of professional training services. On appeal, the OTOC’s primary argument was that its training activity was a public service mission derived directly from the law and as such fell outside the sphere of economic activity caught by Article 101 TFEU. In alternative, the OTOC argued, inter alia,that any restrictive effects of its conduct were justified by the need to ensure proper exercise of the profession of chartered accountant and that the contested regulation was exempted under Article 101(3) TFEU because it contributed to improving the provision, distribution and promotion of technical or economic progress and provided users a fair share of the benefit.
Judgment of the Court
On referral from the Portuguese appellate court, the Court first dealt with the issue of whether the disputed regulation on professional training was a decision by an association of undertakings challengeable under Article 101 TFEU, or the OTOC, by adopting the disputed regulation, carried out its function of a public authority. The Court concluded that the OTOC is an association of undertakings subject to competition law.
In making this conclusion, the Court started from a finding that chartered accountants in Portugal are undertakings pursuing an economic activity. In assessing whether the OTOC is an association of undertakings within the meaning of Article 101 TFEU, the Court examined, in line with its previous cases (J.C.J. Wouters and Others v. Algemene Raad van de Nederlandse Orde van Advocaten, Case C-309/99, [2002] ECR I-1577, para. 57), whether the activity in question, by its nature, its aim and the rules to which it is subject, belongs to the sphere of economic activity.
In this respect, the Court concluded that the regulation at issue belongs to the sphere of economic activity and has a direct impact on the market of compulsory training for chartered accountants, since, on the one hand, it vests the OTOC with the right to provide compulsory training for chartered accountants and, on the other, restricts the access of other providers to that market. As a next step, the Court found that, when adopting the contested regulation, the OTOC did not exercise powers which are typically those of a public authority but rather acted as a regulatory body of a profession. This conclusion was supported by the fact that the state had no role in the composition of the OTOC management and no power to review its decisions, including the challenged regulation. Furthermore, no law vested the OTOC with the exclusive authority to provide institutional training to its members or required the OTOC to restrict access to the professional training services. Accordingly, the OTOC was not obliged by law, but chose in its discretion, to act in the manner it did.
The fact that the OTOC was a body regulated by public law was found not to be sufficient to immunize this organization from the applicability of Article 101 TFEU.It was also found to be irrelevant that OTOC did not seek to make a profit from its training activity as it was sufficient for the applicability of Article 101 TFEU that the OTOC’s services exist in competition with other undertakings which provide the same services for profit.
Having found that the OTOC’s challenged regulation was a decision of an association of undertakings liable to the competition provisions of the TFEU, which, furthermore, had an appreciable effect on trade between Member States, the Court turned to the issue of whether the regulation infringed upon Article 101 of TFEU in the manner established by the Commercial Court in Lisbon. In this respect, the Court acknowledged that the regulation did not have distortion of competition as its object, since it sought to ensure the quality of the services offered by chartered accountants. However, the Court agreed with the national court’s finding that the contested regulation was likely to distort competition on the market of compulsory training for chartered accountants, by reserving a significant portion of that market to the OTOC. The Court noted that the division of required professional training into the categories of institutional training and professional training, and the consequent distinction between entities authorized to provide each of these trainings privileging the OTOC over other providers, was not objectively justified.
The Court further examined whether the regulation found to have potentially distortive effect on competition on the market of compulsory training services for chartered accountants was nevertheless exempted from the prohibition by virtue of Article 101 (3) TFEU, but quickly dismissed this possibility since the restrictions imposed on competition by the regulation were found not to be essential for its objective.
