Subsidiaries awarded by authorities are not economic activities in terms of competition rules

The Competition and Consumer Appeal Tribunal presided by Mr Justice Mark Chetcuti held in a judgement on 19 May, 2015 that subsidiaries given by public authorities such as the Malta Tourism Authority is not an economic activity and therefore, any difference in treatment of allocations of subsidiaries cannot breach the competition rules. 

This was held in Malta Bargains Limited (UK) v Awtorita tat-Turismu ta’ Malta u Direttur Generali, Ufficju tal-Kompetizzjoni.

Malta Bargains Limited (UK) filed a complaint against the Malta Tourism Authority (MTA) on 31 July, 2012 because it claimed that the latter breached articles 5 and 9 of the Competition Act after discriminating against them, since a number of tour operators in competition with the company were given a subsidiary of £10 for every passenger brought to Malta without any limitation, while this company was given the same subsidiary for a maximum of 5,000 passengers. The Office of Competition ruled that the MTA is not an enterprise as defined by the Competition Act and offers no service to the market, nor preformed an economic activity. Therefore, the rules outlined in Articles 5 and 9 of the Competition Act did not apply to the Authority. 

The company appealed this ruling and asked the court to order the Office to investigate the complaint. 

Mr Justice Chetcuti quoted from authors who held that “the concept of an undertaking encompasses every entity in an economic activity, regardless of the legal status of the entity or the way in which it is financed. It is irrelevant that the body is not profit making or that it is not set up for an economic purpose. The basic test is therefore, whether the entity in question is engaged in an activity that is an economic one involving the offering of goods and services on the market…”

It is in these terms that the Office of Competition held that the MTA is a public entity which has its functions listed in Malta Travel and Tourism Services Act (Chapter 409 of the Laws of Malta). The MTA does not offer products and services to the market, but carries out its powers according to a law.

The Appeals Tribunal quoted from the same authors Jones and Surfin that “…where the entity acts in the exercise of official authority (the latter activities being outside the scope of the competition rules). An entity public or private which performs tasks of a public nature, connected with the exercise of public powers or in the exercise of official authority will not be an undertaking and so will be immune from the application of the rules.”

The appellant company drew parallels in another case Bargain Holdings Limited -v- MTA (Complaint number 1/2004), which held that the members of the MTA are derived from the industry and therefore they were in a position to influence the market to their own advantage either individually or as a group. The legislative structure may serve as a cartel where companies that are supposed to be competing in a fair market would be found cooperating together against competitors. In this case the Commission ordered an investigation. The Office of Competition disagreed with this comparison, since the case had dealt with the composition of the MTA and not whether the same authority acts as an undertaking.

The Appeals Tribunal quoted from a European Court judgement Diego Cali v SEPG (1997), which held that an entity which was set up to take care of the environment of the port of Genoa was not an economic activity, since it was acting in the public interest. In another case Corinne Bodson -v- Pompes Funebres des Regiones Liberees Sa (1988) the Court held that the competition rules do not apply, when the entity is preforming public duties.

Mr Justice Chetcuti turned down the appeal of Malta Bargains Limited UK, since it decided that the awarding of subsidiaries was not contrary to the Competition Act.

Malcolm Mifsud, Partner, Mifsud & Mifsud Advocates

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