Job Centre: the ongoing demise of public monopolies in Europe.

• Author: Olson, Catherine
• Position: Recent Rulings of the European Court of Justice

1. INTRODUCTION

   `It is ultimately the competitive activities of undertakings driven by self-interest to trade across frontiers, which makes the single market a reality.'(1)

   -- Adam Smith

   In the 1990s, the European Union has become highly focused on competitiveness.(2) The dynamics of economic integration and the need for job growth in the midst of a more globally competitive and technologically-oriented environment have created this impetus.(3) Community institutions, primarily the European Commission (Commission), have focused on promoting economic efficiency via policy harmonization among national economies and liberalization and privatization within national economies.(4)

   The European Court of Justice (Court) has supported the Commission's pro-market efforts.(5) In Job Centre Coop arl, the Court affirmed its legal approaches to support the Commission objective of limiting Member State support for public monopolies.(6) The Court held that Italian legislation prohibiting private entities within Italy from engaging as intermediaries in the State's demand and supply of labor, i.e., private employment/recruitment agencies, violated Community Law and thus, was invalid.(7)

   In light of legal precedent, as well as political and economic forces within the Community, this Case comment discusses how the Court uses the Treaty of the European Union's (EU Treaty) legal mechanisms or "tools" to promote the Commission's objectives. This comment argues that Job Centre confirms the Court's legal approach in order to support the Commission's objective of liberalizing public monopolies. The Court's approach has been to rely increasingly upon Article 90 of the competition articles and to interpret its terms favorably toward the Commission's perspective, finding Member States liable more frequently for public monopoly behavior. Nevertheless, Job Centre is also a political reminder to the Court that Community law is reaching into realms traditionally managed by Member States,. Considering that the Court's ability to influence stems from Member State courts, the Court needs to balance its support for the Commission with Member State concerns.

2. BACKGROUND

   1. Community "Tools"

      The European Union was initially created as the European Economic Community (EEC) in 1958.(8) The treaty that created the EEC, commonly known as the Treaty of Rome, ambitiously sought to establish a common market.(9) While the EEC has emended the Treaty of Rome several times to widen and deepen economic and political integration, the fundamental economic tools have remained the same.(10) In particular, the Treaty of Rome has aimed to promote free movement of goods, services, labor, and capital (the four freedoms),n and to ensure that competition among the States do not become distorted as a result.(12) The Community framers, however, also envisioned some autonomy for Member States in maintaining their own economic and social policies.(13) Thus, while economic integration of Member State policies was the primary goal of the EU Treaty, it also provided Member States with some ability to manage and control their own individual policies.

      For the purpose of this discussion, the EU Treaty articles pertaining to competition will be analyzed. The "competition articles" promote economic integration by ensuring that Member State markets act efficiently but fairly.(14) Article 86 of the EU Treaty is a mechanism for controlling the abusive nature of monopolistic entities, or "undertakings." It prohibits undertakings from: 1) holding a dominant position within a substantial part of the common market; 2) and abusing the dominant position which could potentially affect trade between Member States.(15) Article 86 has been a powerful tool for the Community to ensure that European markets remain competitive as integration continues.

      Article 90 of the EU Treaty is similar to Article 86, but it focuses on "public undertakings" otherwise known as state monopolies; those undertakings "provided exclusive rights by the State" - otherwise known as state-supported monopolies.(16) In particular, Article 90(1) obligates Member States to refrain from maintaining measures that support a public or exclusively-granted undertaking, which are contrary to the EU Treaty, especially the competition articles.(17) However, the Article does not preclude granting exclusive rights to entities so long as they do not violate other EC law.(18) Therefore, the framers' balancing between Member State rights and Community objectives, creates an inherent tension between the States and the Community.

      Article 90(2) of the EU Treaty focuses on the public undertaking itself and emphasizes that even public undertakings that serve a general economic interest or have a revenue-producing character can be subject to the EU Treaty.(19) However, a public undertaking may be exempt if the application of EU Treaty rules would obstract the undertaking's performance.(20) The purpose and nature of the undertaking can thus, justify its exemption. But, if trade is affected "to such an extent" that it would be contrary to the interests of the Community, then the public monopoly might not be exempt.(21) The Community-Member State tension again emerges since public monopolies serving public interests may be exempt from the EU Treaty, but not in certain circumstances.

      Article 90(3) also plays a unique role in the Community-Member State dynamic. It empowers the Commission "to ensure the application of the provisions of this Article" and to "address appropriate directives or decisions to Member States."(22) This section differs from the rest of the EU Treaty, which only authorizes the Council of Ministers, in conjunction with the European Parliament, to enact legislation.(23) Relying on Article 90(3), the Commission can issue binding directives and regulations to Member States on its own.(24) Moreover, Article 90(3) does not provide Member States with any ability to justify their position in additional proceedings, as opposed to procedures provided when they violate the freedom articles.(25) With the Court establishing the legitimacy of Article 90(3), the Commission has used it frequently to enact legislation that aims to liberalize traditional state monopolies.(26)

      The EU Treaty also provides a specifically important tool for the Court for imposing Community law on Member States. Article 177 grants the Court authority to provide preliminary rulings interpreting the EU Treaty, as well as Community institutional behavior and legislation.(27) The Court's purpose is to guarantee that Community law will remain uniform among all Member States via their national courts.(28) Although the Court is only supposed to "interpret" Community law, it frequently makes clear to national courts how they should apply the law.(29) Thus, under Article 177, the Court has considerable influence in the application of Community law among Member States.(30)

   2. Increased Focus on Competition and Member State Reservations

      Community competition policy has monitored the economic integration process via the use of the EU Treaty's freedom and competition articles.(31) However, the drive for completing the common market, and thus, for increased the use of competition policy became a prime focus following the adoption of the Single European Act (SEA) in 1987, which aimed to complete an internal market by 1992.(32) The Commission has been the most pro-market institution in the Community, and coupled with support from the Court, the Commission increasingly has been involved with initiating legislation and overseeing Member State action in order to complete the internal market.(33) The Commission, however, has found that competitiveness continues to be hampered, inter alia, by a still-rigid and centralized regulatory environment within the Member States.(34) It specifically has made liberalization of public and state-supported monopolies a main priority.(35) For instance, the Commission, supported by Court decisions, has been able to introduce competition into previously state-run services such as telecommunications, broadcasting, electricity, gas, postal delivery, and now employment.(36)

      Although the Community's push toward improved competitiveness through liberalization of state monopolies has been generally supported by Member States, Member States have been concerned about the Community's encroachment into their authority to provide public services.(37) Several States have suggested amending the EU Treaty to consolidate a special place for public services.(38) For instance, France revealed the perspective that public services are not purely economic entities that should merely respond to market efficiency because they serve an important purpose in providing "economic and social cohesion in Europe."(39) In particular, streamlining public employment services may increase Member State concerns, considering that these services traditionally fell within the realm of Member States' labor and employment policies.(40) Thus, while liberalization of public monopolies promotes the necessary Community goals of increased competitiveness and employment, Member States have expressed their reservations about whole-heartedly subjecting all public entities to market forces.

3. JOB CENTRE: FACTS AND PROCEDURAL HISTORY

   Job Centre is a company that was in the process of becoming established in Italy.(41) The enterprise intended, inter alia, to conduct an employee placement service, providing both permanent and temporary employment within Italy.(42) Moreover, Job Centre aimed to solicit business from workers or undertakings beyond the Member State.(43) A mandatory placement system in Italy, however, administered by public placement offices prevented the establishment of intermediaries in the labor market.(44) In particular, Civil Code Law No. 264, established in 1949, prohibits pursuit "of any activity, even if unremunerated, as an intermediary between supply and demand...