Background
The municipality of Jelgava, Latvia, owned 51% of Jelgavas komunālie pakalpojumi SIA, a waste collection and treatment company; a private company owned the remaining 49%. In 2004, the municipality awarded that company a contract to provide municipal waste-management services through an in-house procedure without a competitive tender. The contract was scheduled to run through 2029.
In 2021, Latvia’s Competition Council fined the municipality under national competition law. It concluded that the municipality had acted as an undertaking, that the municipality and the service provider held a dominant position because of the provider’s exclusive right, and that awarding that right through the in-house procedure—despite the municipality’s lack of full control over the company—had unlawfully excluded potential competitors.
After the Regional Administrative Court dismissed the municipality’s challenge, the municipality appealed to Latvia’s Supreme Court. That court asked the CJEU whether a municipality engages in an economic activity, and therefore acts as an undertaking for purposes of Article 102 TFEU, when it awards municipal waste-management services to a company that it partially owns.
The Court’s Holding
The CJEU held that the municipality’s award decision did not constitute an economic activity. Although providing municipal waste-management services is itself economic activity, the municipality was not offering goods or services for remuneration when it determined how those services would be organized. It was acting as the competent public authority under Latvian legislation implementing EU waste rules.
The municipality’s partial ownership of the selected provider did not alter that conclusion. Nor did it matter whether the arrangement was characterized as a public-service concession or a public-service contract: the relevant decision remained an exercise of public powers rather than market conduct by an undertaking.
The Court also held that a possible violation of EU or national public-procurement rules did not transform the award into an abuse of dominance under Article 102. Such a decision may, where appropriate, be challenged before the national bodies responsible for reviewing the legality of public-authority contracting decisions.
Key Takeaways
- Municipal waste-management services are economic activity, but a municipality’s public-law decision about how to organize those services is not necessarily economic activity.
- A municipality does not act as an undertaking under Article 102 merely because it awards the service to a company that it partially owns.
- A potentially unlawful in-house award may raise public-procurement issues without constituting abuse of a dominant position by the municipality.
Why It Matters
The judgment distinguishes a public authority’s organization and award of a municipal service from the economic activity of actually providing that service. Article 102 scrutiny depends on the nature of the particular conduct, not simply on the authority’s ownership interest in the selected provider or the commercial nature of the underlying service.
The ruling also keeps competition-law and procurement-law analysis separate. An award that may fail the legal requirements for an in-house procedure does not, for that reason alone, become an abuse of dominance, although an appropriate challenge may remain available through the competent national review mechanisms.