• Lise-Lotte Lääne

The concept of an undertaking according to the Estonian Supreme Court

The Estonian Supreme Court made a decision on 25 April 2019 which briefly analysed the concept of an undertaking within the meaning of competition law. (The decision is available here in Estonian: https://www.riigikohus.ee/et/lahendid/?asjaNr=3-16-1267/49) According to the decision, an entity established by local municipalities for performing their obligation to organise waste management does not qualify as an undertaking under competition law.



The story started quite some time ago. The version of the Waste Act, adopted in 2007, foresaw the possibility for the local municipalities to establish a non-profit organisation for carrying out their waste management duties.

More specifically, the transport of waste could be organised in such a way that the sole customer of a waste carrier was a non-profit organisation authorised by the relevant local municipality.

Many Estonian local municipalities used this option.


Several years later, in 2016, the Estonian Competition Authority (the ECA) issued a precept finding that one of these small non-profit organisations held a dominant position in three municipalities and abused its dominant position. Simply put, the ECA reasoned that since the non-profit organisation (the NPO) was the one issuing invoices to waste holders, the NPO was providing, among other services, a customer service consisting of invoicing and customer management. The exactly same service which was also part of the waste management service offered by waste carriers. The ECA concluded that the NPO qualified as an undertaking within the meaning of competition law. The NPO did not agree with this conclusion and challenged the ECA's decision in court.

There were many interesting competition law nuances which were discussed during the proceedings, but in the end, it was the concept of an undertaking that secured a victory for the NPO. The Supreme Court confirmed that the NPO was not an undertaking within the meaning of competition law.


The Estonian Supreme Court referred to EU competition law and the practice of the European Court of Justice: "According to the consistent case-law of the CJEU, the concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal form and mode of financing (see, for example, Höfner, C-41/90, paragraph 21; Joined Cases Poucet and Pistre C-159/91 and C- 160/91, para. 17; Ambulanz Glöckner, C-475/99, para. 19; Albany International, C-67/96, para. 77; MOTOE, C-49/07, para. 21; Compass-Datenbank, C-138/11, para. 35, Copyright and Communication Consulting Agency, C-177/16, para. 32). Economic activity is the provision of goods or services on a given market (Pavlov, C-180/98, para. 75; Wouters et al., C-309/99, para. 47; MOTOE, para. 22; Compass-Datenbank, para. 35; Copyright and Communication Consulting Agency, para. 33). The state itself or the state body may also act as an entrepreneur (Compass-Datenbank, para. 35). However, economic activities do not include activities that are related to the exercise of public authority by nature, purpose and rules to which it is subject (Cali & Figli, C-343/95, paras. 16 and 23; Wouters et al., para. 57; MOTOE, para. 24; Compass-Datenbank, para. 36). Supporting activities in the exercise of public authority (see, for example, Eurocontrol, C-113/07, paras. 72-79) have also been considered to be covered by the exercise of public authority. If the economic activity cannot be regarded as being separate from the exercise of public authority, all the activities of that entity shall be deemed to constitute activities connected with the exercise of public authority (Compass-Datenbank, para. 38)."


The Estonian Supreme Court reasoned that there was no separate market for invoicing and managing waste holders. Where the waste carriers invoiced waste holders directly, the invoicing was considered ancillary to the waste transport service. Where the waste carriers invoiced a local municipality or an NPO authorised by a local municipality, invoicing waste holders was considered ancillary to the local municipalities' public duty to organise waste transport in their territories. Based on this distinction, the Supreme Court concluded that since organising waste transportation was a public duty of local municipalities and invoicing and customer management were ancillary to performing this public function, then the NPO was exercising its public authority in invoicing and managing customers and did not engage in economic activity.


The Supreme Court's conclusion is in line with its earlier decisions where the court found that the fee which NPOs asked from the waste holders was a public monetary obligation (see the decision of 6 January 2015 in case 3-4-1-34-14 and the decision of 30 October 2018 in case 5-18-2). Therefore, it would have been difficult for the Supreme Court to qualify the NPO's activity as an economic activity in its 25 April 2019 decision. If the two earlier decisions had not existed, the conclusion about the NPO not being an undertaking within the meaning of competition law could have been different in the 25 April 2019 decision.


Namely, last year the Supreme Court refused to review a case where the question arose whether notaries are undertakings within the meaning of competition law. (https://www.riigiteataja.ee/kohtulahendid/detailid.html?id=229877275). In that case, the Supreme Court agreed (by refusing to review the case) with the Tallinn Circuit Court that the activity of notaries is an economic activity, and that notaries are active in a goods market - notary services market where notaries compete with each other and with respect to some services also with other service providers. This conclusion was reached despite the notaries being holders of office in public law under Estonian law and most of their services having fees prescribed by law. However, an important difference from the 25 April 2019 decision is the fact that notaries are able to compete with each other while waste transport in local municipalities is organised in a way that there is only one service provider at any given time.


All in all, the concept of an undertaking is still an evolving concept in Estonian court practice. Carrying out public functions can in some cases be considered an economic activity and in other cases a non-economic activity. As always, the devil is in the details.