Certain political forces at the Parliament and elsewhere have criticised the European Commission for what they consider as excessive initiatives on market cover. I have twice recently asked myself the question about the final liberalisation phase of postal traffic and free competition for gambling and the lottery. In these two areas, restrictions continue to affect optimum functioning of the single market. We need to know whether these restrictions are justified or abusive. Are the reasons valid that lead some member states to limit competition, when the principle of the single market is supposed to prevail?
Developments at the Court of Justice. The problem is not a new one, it's been there ever since the setting up of the single market. However, there have been developments over the years, notably at the Court of Justice.
At the outset, the principle of free movement (of goods, people, services and capital) was an absolute priority. It was essential to assert it and ensure that it worked correctly. Only firm action by the Commission, with the decisive backing of the Court of Justice rulings, could tackle protectionist temptations and practices by member states and pressure groups. But as the markets opened up (thanks, notably, to the “Cassis de Dijon” ruling in 1979 and Jacques Delors' Single Act), the Court of Justice began to think more about motives for justifying or maintaining restrictions. Single market principles of course remain untouchable but some exemptions should be allowed.
I regard the decisive turning point as the Court of Justice' ruling on 24 November 1993 (Keck-Mithouard) through which the Court explicitly displayed the political courage to correct its previous jurisprudence. This case involved the questions of Saturday closing for shops and boutiques in Germany. The Court had firstly ruled that this closure represented a barrier to free movement of goods because imported products were only on sale for five instead of six days a week. It was obviously a bad decision because Saturday closing was not discriminatory (national markets were subject to the same system). In no way did it attempt to hinder the free movement of goods. Instead it sought to respond to local traditions (religious or otherwise) and social considerations. The decision in question stated, “contrary to previous rulings”, certain sales practices, such as Saturday closing, do not obstruct trade between member states, on the condition that they are applied in the same way to national products and those from other member states. The Court concluded, that, “these regulations are therefore not covered in the application of Article 30 of the Treaty”.
This ruling opened the door to other Court decisions that acknowledged that derogations to the principle of the single market are possible if they appear necessary in meeting imperatives on questions of health and consumer protection and fair trade. Seven years later, Professor Thibaut Flory from the University of Paris II pointed out that previous Court rulings (on the Danish drink recipient system and waste disposal in Wallonia) established the fact that, “environmental protection prevails over the principle of free movement of goods”. This guideline was then extended to even more areas. The Court authorised the Finnish “slot machine” monopoly due to its social objectives; approved restrictions to the free provision of services, which it justified for “overriding reasons in the interest of the general public” and allowed Sweden, for reasons of public health protection and public safety, to limit the movement of a chemical product.
Concerns about last postal monopoly. I'll come back to the two cases in point. The first Commission initiative to be evaluated, by taking the jurisprudence of the Court into account, involves the introduction of free competition into the final segment of postal activity, which remains, in most member states, a state monopoly, namely, that for post weighing up to 50 grams. The fundamental question raised by this initiative has already been posed for other “economic services of general interest”. How can the provision of a universal service be guaranteed in a system of free competition? “Cost pricing” is not applicable.
A letter is stamped in the same way for an address in a nearby road or a very remote place where access is difficult. All the evidence would suggest that the real cost is not the same. Simply opening up to competition (without any corrective measures) could result in private operators invading the most profitable markets and leaving those most costly to the public body.
The Commission has taken this into account and its proposal contains several other formulas for tackling this difficulty, with the result that Mr McCreevy, when presenting his project last October, declared, “universal service will be guaranteed in all member states” (see the report by Mathieu Bion in EUROPE 9289).
The different options, however, are so complicated (compensation fund, fee system, compensation from companies responsible for ensuring a universal service etc) that there are doubts about it working effectively. There is a fear that the traditional operator will in practice have to take care of the universal service, and be responsible for the obligation of daily postal distribution in exchange for state aid or a bureaucratic and complex system. The formula imposed on new operators with regard to their responsibility for parts of national territory is at risk of creating privileged and neglected zones in our countries. All this for getting rid of the last “reserved domain” in a sector that is already broadly liberalised and where the monopoly has disappeared from the majority of operations.
Member states and EP divided. The first exchange of views at the Council illustrated divisions among member states: Germany supports the Commission project, others oppose it. The United Kingdom and Sweden gave positive reports of their national liberalisation experiences that have already been carried out. Most member states called for clarifications and guarantees for safeguarding the universal service, and expressed doubts and concerns. Several ministers asked whether it was reasonable to shake up a system that worked (and which in several member states is constantly improving) in the name of an abstract principle. We can see that the liberalisation already carried out, or planned, at a national level in countries of northern Europe, has been better organised (Germany, United Kingdom, Netherlands, Sweden and Denmark) and that all member states, or almost all, authorise or will authorise a certain flexibility on tariffs for post from companies, either by way of partial derogation or the single stamp price rule.
The debate has begun at the European Parliament. The vice president of the transport committee, Gilles Savary, took a clear position when he spoke of, “the cult of competition confined by real mysticism”. He is not asking for the monopoly to be maintained (while pointing out that the Americans kept it for distribution) but rather, the opportunity to preserve a “reserved domain” for letter distribution.
Lottery and gambling ups the ante. Commissioner Charlie McCreevy does not intend to introduce European regulation because, in his opinion, the result would be the most anti-liberal of legislative acts. His aims are more modest: no uniform rules (this sector is excluded from the application of the “services” directive) but the removal of discriminatory provisions which reserve these activities for national bodies, or which grant them exclusive rights or specific advantages. Member states will maintain the right of protecting objectives of a general character, such as protecting their users, but by measures “necessary and proportionate to the objectives”, and which are, above all, identical for national and non-national operators (see EUROPE 9309). The analysis of the current situation led the commissioner to open infringement procedures against around ten countries (including Germany, France and Italy). The examination of their reactions is still ongoing.
The Commission's attitude is being opposed by most member states subject to these procedures, and has already seen some sharp words exchanged at the European Parliament. Through the Schindler and Läara decisions, the Court of Justice recognised the right of member states to apply restrictions and even establish monopolies if the reason is to defend the general interest: maintain public order, protect the consumer and prevent organised crime etc. The Gambelli decision of 2003 then stipulated that in order for national restrictions to be licit, they had to be necessary and proportionate to non-discriminatory objectives.
A study commissioned, it is true, by the national lotteries, provides a sombre view of the consequences of an unbridled opening up of gambling and lotteries to private operators: a massive reduction in aid to charitable works (33% of national lotteries' turnovers are reserved for paying taxes and charitable work, while the figure for private operators is an average of 3%), an increase in the number of gamblers, and an end to support for the equestrian sector etc. (See the summary of this report by Mathieu Bion in EUROPE 9338). Are these reasons valid for justifying exclusive rights? Stakeholders are set on doing battle because a lot of money is, if we may say, at stake.
The Commission now has to decide whether it will be going on to the next stage of sending out “reasoned opinions”.
(F.R.)