1 A Broader Definition of Social Services (SSGI) devising a specific treament GCLC and DG COMP Conference on revising the Monti/Kroes package Bruges 30 September 2011 Wolf Sauter

2 Social services of general interest What are SSGI and where do they come from? What is their status in EU law? What is the impact of the proposed changes?

3 What is origin of SSGI concept? Identified by the Commission in 2006 Context difficulties adopting Services Directive Final version excluded –health services –(certain) social services –Services of general economic interest (SGEI)  Commission came to focus on social services in context SGEI and competition/state aid

4 What are social services? Broadly speaking Community documents since 2006 distinguish three categories –Health services –Statutory and complementary social services e.g. related to unemployment, retirement and disability –Other essential services provided directly to the person or family e.g. social housing, debt management, drug treatment

5 Social or economic services? Classification as “social” is not enough If economic: SGEI and EU law relevant  On one hand internal market, state aid, competition rules apply  On other hand qualified exceptions to these rules may apply If non-economic SGI: EU law irrelevant  So far SSGI no separate legal signifcance

6 Defining SSGI National authorities: subsidiarity principle But in order to qualify for Monti/Kroes package –Act of entrustment –Clear mandate: public service task –Detailed rules for public service compensation Sometimes derived from context (BUPA)

7 Relevance of qualification SSGI Binary systems of EU law rules –Free movement based on the definition of services –Competition/state aid based on the definition of undertaking Proportionality based system of exceptions –Article 106(2) TFEU  Altmark –Exception to competition state aid and free movement –Analysis analogous to free movement exceptions: proportional pursuit of public interest

8 Competition rules For competition and state aid norm is undertaking –Functional approach –Provision of goods or services (potentially) in competition (Glöckner) –Not: state prerogatives; solidarity

9 Exceptions to the state aid rules SGEI Article 106(2) TFEU Altmark case and 2005 Monti/Kroes framework: relevance to social services Healthcare examples of Commission Decisions –Irish risk equalisation system I and II –Dutch risk equalisation system –Brussels hospitals

10 Social services after Altmark Commission Decision 2005/842/EC of November 2005 –General de minimis threshhold € 100 million turnover and € 30 million compensation –Special volume threshholds for sea and air transport –Hospitals and social housing carrying out SGEIs irrespective of compensation level

11 Devising a specific treatment? Hospital and social housing services Exempt from prior notification requirement Hence standard “stand still” obligation lifted And compatible with internal market Provided legal act of entrustment with SGEI –Nature and duration of obligations –Undertaking and territory connerned –Nature of special/exclusive rights –Parameters of compensation –Arrangements for overcompensation

12 Comments on the 2005 regime Selective: just hospitals and social housing: why? “At current stage of development of the internal market the intensity of distortion of competition in those sectors is not necessarily proportionate to the level of turnover and competition.” Implications not always clearly understood at national level –E.g. not sufficient to be a hospital –Need for SGEI entrustment  Is the SGEI discipline effective in absense of notification?  2011 proposals broader scope but similar reasoning

13 Scope of the 2011 Proposal Hospitals providing medical care including emergency services as SGEI SGEI meeting essential social needs regarding healthcare, childcare, labour market access, social housing and the care and social inclusion of vulnerable groups  Also healthcare other than hospital care and new set of social services now covered –Selection criteria not clear: how are the services concerned selected? –Are certain social services excluded or is this set meant to be all-inclusive? –Why list hospital and emergency services separately from healthcare? And why have a separate regime for healthcare and social services?

14 Reasoning of the Proposal Not the urgency of health and social needs is cited “Relatively minor distortion of competition is involved in the sectors concerned at current stage of development” –Standard is actual competition –Not potential competition or stepping stones for competition  Present approach may become a brake on competition  At odds with foreclosure and network arguments in Framework  What data based on the application of the current system?  How will we know if Decision leads to more SGEI designations?

15 Conclusion Purpose of concept of social services of general interest not clear: economic dimension is decisive If state prerogatives or solidarity are predominant  no undertaking so competition rules and SGEI are not applicable SSGI that are undertakings providing SGEI will now enjoy a broader block exemption

16 Conclusion The requirements for applying the proposed Decision may de facto mean additional controls on SSGIs However, the proposed Commission block exemption may also chill competition Social services that are SGEI can by definition be provided in competition: why go down the road of specific treatment?