OPINION OF ADVOCATE GENERAL
JACOBS
delivered on 20 May 1992 ( *1 )
My Lords,
1.
In these proceedings, the applicants seek the annulment under Article 173 of the EEC Treaty of Commission Directive 90/388/EEC of 28 June 1990 on competition in the markets for telecommunications services (OJ 1990 L 192, p. 10). The applicants are, in Case C-271/90, Spain, in Case C-281/90, Belgium and, in Case C-289/90, Italy. In Case C-271/90, France has intervened in support of the applicant. Where reference is made in the rest of this Opinion to the applicants, that term should be understood as including France. Since all three cases are related, the President ordered on 21 November 1991 that they be joined for the purposes of the oral procedure and of the judgment.
2.
The fundamental issue in each case is the extent of the powers conferred on the Commission by Article 90(3) of the Treaty, under which Directive 90/388 was adopted. Article 90 provides as follows:
‘1.
In the case of public undertakings and undertakings to which Member States grant special or exclusive rights, Member States shall neither enact nor maintain in force any measure contrary to the rules contained in this Treaty, in particular to those rules provided for in Article 7 and Articles 85 to 94.
2.
Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community.
3.
The Commission shall ensure the application of the provisions of this Article and shall, where necessary, address appropriate directives or decisions to Member States.’
Directive 90/388
3.
Directive 90/388 (hereafter ‘the services directive’) is one of a series of initiatives taken by the Commission to promote the development of the common market for telecommunications services and equipment: see the Commission's Green Paper on the subject dated 30 June 1987 (COM(87) 290), and its document dated 9 February 1988 on the implementation of that Green Paper (COM(88) 48). In its ‘Guidelines on the Application of EEC Competition Rules in the Telecommunications Sector’ (OJ 1991 C 233, p. 2), the Commission stated that one of the Community's major political aims ‘must be the development of efficient Europe-wide networks and services, at the lowest cost and of the highest quality, to provide the European user in the single market of 1992 with a basic infrastructure for efficient operation’. It added that ‘the telecommunications operators should be allowed, and encouraged, to establish the necessary cooperation mechanisms, in order to create — or ensure — Community-wide full interconnectivity between public networks, and where required between services to enable European users to benefit from a wider range of better and cheaper telecommunications services’ (ibid.)
4.
These objectives enjoy the general support of the Council: see its resolution of 30 June 1988 (OJ 1988 C 257, p. 1). Moreover, the Member States agreed at Maastricht that, in the area of telecommunications, among others, and ‘Within the framework of a system of open and competitive markets, action by the Community shall aim at promoting the interconnection and interoperability of national networks as well as access to such networks’: see the new Article 129b, which is to be added to the EEC Treaty.
5.
The Commission's Guidelines are concerned essentially, according to paragraph 12, with ‘the direct application of competition rules to undertakings, i. e. Articles 85 and 86 of the EEC Treaty’. That paragraph goes on to explain that the Guidelines do not concern the competition rules ‘applicable to the Member States, in particular Articles 5 and 90(1) and (3). Principles ruling the application of Article 90 in telecommunications are expressed in Commission Directives adopted under Article 90(3) for the implementation of the Green Paper.’ The Guidelines refer to two such directives, one of which is the services directive, the validity of which is contested by the applicants in these proceedings.
6.
In an attempt to clarify the thinking behind the services directive, the Commission explains in its pleadings that originally only the operator of a telecommunications network would have offered services consisting in the transmission of signals on it. However, technological and commercial developments have led to an increase in the number of services which can be provided by undertakings separate from the operator of the network by means of equipment which is connected to it. An example cited by the Commission is the automatic dispensing of bank notes. This service is provided by undertakings which rent lines from a telecommunications organization in order to connect to their central computers cash dispensers. A further example given by the Commission is electronic payment at the point of sale. Where this system is employed, payment is made via a terminal connected to the public telephone network. The terminal reads magnetically a card presented by the purchaser and then transmits information relating to the purchaser and to the purchase via lines rented by the financial institution which issued the card to that institution's own computer. Another example mentioned is aircraft seat reservation by computer, which requires a telecommunication line capable of informing the operator which seats are available on which flight. Other examples given are the remote control and surveillance of production facilities, electronic mail and shopping by television.
7.
Faced on the one hand with these developments at the technical level and on the other with the danger that the existence in the Member States of telecommunications organizations enjoying special or exclusive rights for the provision of public telecommunications networks and telecommunications services would lead to a partitioning of the national markets, the Commission decided that legislation was necessary. The legislation envisaged was to have two main elements: first, the prompt elimination of infringements of Community law in the field of telecommunications services and the prevention of future infringements; secondly, the harmonization of the technical conditions governing telecommunications services. The second of those objectives is intended to be achieved by Council Directive 90/387/EEC on the establishment of the internal market for telecommunications services through the implementation of open network provision (OJ 1990 L 192, p. 1), which was adopted on the same day as the services directive. Directive 90/387 is, according to Article 1(1), concerned with ‘the harmonization of conditions for open and efficient access to and use of public telecommunications networks and, where applicable, public telecommunications services’. The services directive is designed to contribute to the achievement of the first of the two objectives mentioned. The Commission took the view that the providers of telecommunications services faced a variety of obstacles throughout the Community and that an act of general application would be a more effective and appropriate way of achieving that objective than bringing a series of infringement proceedings against the Member States concerned.
8.
The preamble to the services directive contains a lengthy explanation of the mischief with which it is intended to deal. According to recital 2, the right to provide and operate telecommunications networks in the Member States and the right to provide related services are generally conferred on one or more telecommunications organizations which hold exclusive or special rights. Recital 4 states that ‘All Member States have either themselves imposed or allowed their telecommunications administrations to impose restrictions on the free provision of telecommunications services.’ Indeed, according to recital 5, the grant of special or exclusive rights to undertakings to operate the network ‘inevitably restricts’ ( 1 ) the provision of telecommunications services by other undertakings to or from other Member States. There then follow some examples of such restrictions, which are said in principle to be contrary to Article 59 of the Treaty, although it is accepted that certain restrictions on the freedom to provide services may be justified. Where this is not the case, recital 12 states that ‘The maintenance or introduction of any exclusive or special right... is therefore a breach of Article 90 in conjunction with Article 59.’
9.
The preamble to the services directive goes on to state that measures must also be taken to guard against the risk that telecommunications organizations will abuse the dominant position for the creation and exploitation of the network which they enjoy by virtue of the special or exclusive rights conferred upon them by the Member States. Moreover, according to recital 15, ‘Where a State grants special or exclusive rights to provide telecommunications services to organizations which already have a dominant position in creating and operating the network, the effect of such rights is to strengthen the dominant position by extending it to services.’ Accordingly, recital 17 states that ‘The exclusive rights to telecommunications services granted to public undertakings or undertakings to which Member States have granted special or exclusive rights for the provision of the network are incompatible with Article 90(1) in conjunction with Article 86.’ The Commission none the less accepts that, as in the case of Article 59, certain derogations from Article 86 of the Treaty may in the present context be justified.
10.
Thus, the principal objectives of the services directive are the abolition of restrictions on the freedom to provide services imposed by telecommunications organizations to which the Member States have granted special or exclusive rights and the elimination of abuses by such organizations of the dominant position they are said to hold for the creation and exploitation of the network. In order to achieve those objectives, the services directive imposes certain specific obligations on the Member States, particularly with regard to the role played by telecommunications organizations in regulating the provision of telecommunications services and with regard to the contractual relationship between such undertakings and their customers.
11.
Thus, recital 28 states:
‘Under national legislation, telecommunications organizations are generally given the function of regulating telecommunications services, particularly as regards licensing, control of type-approval and mandatory interface specifications, frequency allocation and monitoring of conditions of use. In some cases, the legislation lays down only general principles governing the operation of the licensed services and leaves it to the telecommunications organizations to determine the specific operating conditions.’
12.
According to recital 29:
‘This dual regulatory and commercial function of the telecommunications organizations has a direct impact on firms offering telecommunications services in competition with the organizations in question. By this bundling of activities, the organizations determine or, at the very least, substantially influence the supply of services offered by their competitors. The delegation to an undertaking which has a dominant position for the provision and exploitation of the network, of the power to regulate access to the market for telecommunications services constitutes a strengthening of that dominant position. Because of the conflict of interests, this is likely to restrict competitors' access to the markets in telecommunications services and to limit users' freedom of choice... This combination of activities therefore constitutes an abuse of the dominant position of telecommunications organizations within the meaning of Article 86. If it is the result of a State measure, the measure is also incompatible with Article 90(1) in conjunction with Article 86.’
13.
Moreover, according to recital 31:
‘The holders of special or exclusive rights to provide telecommunications services that will in future be open to competition have been able in the past to impose long-term contracts on their customers. Such contracts would in practice limit the ability of any new competitors to offer their services to such customers and of such customers to benefit from such services. Users must therefore be given the right to terminate their contracts within a reasonable length of time.’
14.
In recital 33, the Commission explains its recourse to Article 90(3) in order to achieve the objectives of the services directive as follows:
‘Article 90(3) assigns clearly-defined duties and powers to the Commission to monitor relations between Member States and their public undertakings and undertakings to which they have granted special or exclusive rights, particularly as regards the removal of obstacles to freedom to provide services, discrimination between nationals of the Member States and competition. A comprehensive approach is necessary in order to end the infringements that persist in certain Member States and to give clear guidelines to those Member States that are reviewing their legislation so as to avoid further infringements. A Directive within the meaning of Article 90(3) of the Treaty is therefore the most appropriate means of achieving that end.’
15.
The following are among the main provisions of the services directive.
16.
The first paragraph of Article 2 requires the Member States to ‘withdraw all special or exclusive rights for the supply of telecommunications services other than voice telephony’ and to ‘take the measures necessary to ensure that any operator is entitled to supply such telecommunications services’.
17.
By virtue of the first paragraph of Article 4, ‘Member States which maintain special or exclusive rights for the provision and operation of public telecommunications networks shall take the necessary measures to make the conditions governing access to the networks objective and non-discriminatory and publish them.’
18.
Article 6 requires the Member States inter alia to abolish existing restrictions on the processing of signals before their transmission via the public network or after their reception, unless the necessity of such restrictions for compliance with public policy or essential requirements is demonstrated. ( 2 ) The expression ‘essential requirements’ is defined by Article 1(1) as ‘the non-economic reasons in the general interest which may cause a Member State to restrict access to the public telecommunications network or public telecommunications services. These reasons are security of network operations, maintenance of network integrity, and, in justified cases, interoperability of services and data protection.’
19.
Article 7 requires the Member States to ensure that certain administrative, technical and supervisory functions are carried out by a body which is independent of any public or private body to which special or exclusive rights have been granted for the provision of a public telecommunications network or telecommunications services.
20.
According to Article 8:
‘Member States shall ensure that as soon as the relevant special or exclusive rights have been withdrawn, telecommunications organizations make it possible for customers bound to them by a contract with more than one year to run for the supply of telecommunications services which was subject to such a right at the time it was concluded to terminate the contract at six months' notice.’
21.
Finally, the Member States are required by Article 9 to communicate to the Commission the information necessary to allow it to draw up regular reports on the application of the directive.
The Court's judgment in Case C-202/88
22.
The essence of the challenge mounted by the applicants is that the Commission did not have the power under Article 90(3) of the Treaty to adopt the services directive. That claim has a number of aspects, some of which were withdrawn following the judgment of the Court in Case C-202/88 France v Commission [1991] ECR I-1223. In that case, a similar challenge was mounted by France, supported by Italy, Belgium, Germany and Greece, to the validity of the second directive mentioned in the Commission's ‘Guidelines on the Application of EEC Competition Rules in the Telecommunications Sector’, referred to above. The directive in question, which was adopted over two years before the services directive, was Commission Directive 88/301/EEC on competition in the markets in telecommunications terminal equipment, OJ 1988 L 131, p. 73. Like the services directive, Directive 88/301 (hereafter ‘the terminal equipment directive’) was adopted under Article 90(3) of the Treaty. Its main provisions, which are in many respects similar to those of the services directive, are as follows.
23.
By virtue of Article 2, Member States which have granted to undertakings special or exclusive rights for the importation, marketing, connection, bringing into service or maintenance of telecommunications terminal equipment are to ensure that those rights are withdrawn and inform the Commission of the measures taken to that end.
24.
According to Article 3, Member States are to ‘ensure that economic operators have the right to import, market, connect, bring into service and maintain terminal equipment’. Member States are, however, entitled, in the absence of technical specifications, to refuse to allow terminal equipment to be connected and brought into service where it does not meet certain requirements and to require economic operators to possess the technical qualifications needed to connect, bring into service and maintain terminal equipment.
25.
Under Article 6, Member States are to ensure that, as from 1 July 1989, responsibility for drawing up technical specifications, monitoring their application and granting type-approval is entrusted to a body independent of public or private undertakings offering goods or services in the telecommunications sector.
26.
Article 7 requires the Member States to take the steps necessary to enable leasing or maintenance contracts which concern terminal equipment subject to exclusive or special rights to be terminated with notice of a maximum of one year.
27.
By virtue of Article 9, Member States are required to provide the Commission with an annual report allowing it to monitor compliance with Articles 2, 3, 4, 6 and 7.
28.
In Case C-202/88, the applicant put forward a number of grounds on which it considered the terminal equipment directive invalid. Like the present cases, that case turned on the interpretation of Article 90 of the Treaty and the extent of the powers enjoyed by the Commission under Article 90(3). The scope of Article 90(2) was not in issue before the Court, since the statement in recital 11 of the terminal equipment directive, that the conditions for applying that provision were not fulfilled, was not contested. The scope of Article 90(2) is not in issue in the present cases either, but for a slightly different reason. The Commission accepts that some restrictions on the provision of telecommunications services are justified under Article 90(2): see e. g. recital 20 of the services directive. The applicants have not challenged the Commission's view of the effect of Article 90(2) in these circumstances and it will not therefore be necessary for the Court to address that question.
29.
In its judgment in Case C-202/88, the Court made it clear that Article 90(3) conferred on the Commission the power to lay down general rules specifying Member States' obligations under the Treaty with regard to the undertakings referred to in Article 90(1) and (2). The outcome of the case therefore depended on whether the Commission had stayed within the limits of the normative power conferred on it by the Treaty: see paragraphs 14 and 15 of the judgment.
30.
The French Government argued that, in so far as the directive was intended to put an end with immediate effect to particular national measures which were contrary to the Treaty, the Commission should have made use of the procedure set out in Article 169 of the Treaty rather than Article 90(3). That argument was rejected by the Court which stated, at paragraphs 17 and 18 of the judgment:
‘It must be held in that regard that Article 90(3) of the Treaty empowers the Commission to specify in general terms the obligations arising under Article 90(1) by adopting directives. The Commission exercises that power where, without taking into consideration the particular situation existing in the various Member States, it defines in concrete terms the obligations imposed on them under the Treaty. In view of its very nature, such a power cannot be used to make a finding that a Member State has failed to fulfil a particular obligation under the Treaty.
However, it appears from the content of the directive at issue in this case that the Commission merely determined in general terms obligations which are binding on the Member States under the Treaty. The directive therefore cannot be interpreted as malting specific findings that particular Member States failed to fulfil their obligations under the Treaty ....’
31.
The French Government argued in addition that, by adopting a directive requiring the complete abolition of special or exclusive rights relating to telecommunications terminal equipment, the Commission had exceeded the power of surveillance conferred on it by Article 90(3), which presupposed the existence of special and exclusive rights. The view that the maintenance of those rights constituted in itself a ‘measure’ within the meaning of Article 90(1) was said to be inconsistent with the terms of that provision.
32.
The Court also rejected that argument, pointing out that the power of surveillance conferred on the Commission by Article 90(3) entitled it to spell out the obligations of Member States under the Treaty: see paragraph 21 of the judgment. The ambit of that power therefore depended on the scope of the rules the Commission was seeking to enforce. Even if Article 90 presupposed the existence of undertakings having special or exclusive rights, it did not follow that all such rights were necessarily to be considered compatible with the Treaty. The question of their compatibility with the Treaty depended on the rules to which Article 90(1) referred.
33.
Moreover, the Court did not think that the Commission could be considered to have trespassed on the powers of the Council: the possibility that the Council might adopt legislation under a general power conferred on it by the Treaty (e. g. Article 100a or Article 87) in one of the fields covered by Article 90 did not prevent the Commission from exercising the powers it enjoyed under that article (see Joined Cases 188/80 to 190/80 France, Italy and United Kingdom v Commission [1982] ECR 2545, paragraph 14).
34.
The validity of Articles 2, 6, 7 and 9 of the terminal equipment directive was also challenged, on the ground that they were wrongly based on alleged breaches by the Member States of Articles 30, 37, 59 and 86 of the Treaty. This challenge was upheld by the Court in two respects only.
35.
First, the Court said that, as far as the special rights mentioned in Article 2 were concerned, neither the preamble nor the operative part of the directive made it clear precisely what special rights were envisaged and how any such rights might be contrary to the Treaty. It followed that the Commission had not justified the obligation imposed on Member States to withdraw special rights of importation, marketing, connection, bringing into service and maintenance of telecommunications equipment. Article 2 of the directive was therefore annulled in so far as it required the abolition of those rights.
36.
Secondly, the Court annulled Article 7 of the directive, which required Member States to facilitate the termination of certain types of contract, on the basis that the Commission's powers under Article 90 of the Treaty-were confined to measures taken by the Member States. Anti-competitive behaviour attributable to undertakings acting on their own initiative could only be challenged by the Commission by way of individual decisions adopted under Articles 85 and 86 of the Treaty. Since the directive contained no indication that the holders of special or exclusive rights had been required or encouraged by State measures to enter into contracts of extended duration, Article 90 could not be considered an appropriate basis for removing the obstacles to competition presented by such contracts.
37.
The Court also annulled Article 9 of the directive, in so far as it required the Member States to provide a report allowing the Commission to monitor compliance with the provisions of Article 2 dealing with special rights and with Article 7. The validity of Article 2, in so far as it dealt with exclusive rights, and of Articles 6 and 9 was, however, upheld by the Court.
The validity of the services directive
38.
In my view, the judgment in Case C-202/88 effectively resolves the arguments put forward in the course of the written procedure in the present cases. That judgment makes it clear that the Commission has the power under Article 90(3) to adopt directives spelling out the obligations of Member States under the Treaty in particular fields. It is not prevented from exercising that power by the fact that Article 169 of the Treaty might offer an alternative means of action against individual Member States. Moreover, it does not follow from Article 90(1) that the existence of undertakings to which the Member States have granted special or exclusive rights is necessarily compatible with the Treaty. However, the Commission's powers under Article 90 are confined to measures taken by the Member States and it is not entitled to adopt measures under that article which are intended to deal with the behaviour of private parties.
39.
At the hearing, however, a number of new points were raised in the light of the Court's ruling in Case C-202/88. The Belgian Government argued that the Commission was only entitled to apply provisions of Community law by means of a directive adopted under Article 90(3) where their effect in a particular context was sufficiently clear. According to the Belgian Government, the application of Article 59 in the field of telecommunications services is a matter of such complexity that the Commission has no power to apply it in that field under Article 90(3) in the absence of a Council directive clarifying its effects.
40.
I am unable to accept this argument, which is not supported either by the text of Article 90 or by the terms of the judgment in Case C-202/88. On the contrary, in paragraph 21 of that judgment, on which the Belgian Government relies, the Court expressly acknowledged that the Commission had the power, acting under Article 90(3), to specify the obligations imposed on Member States by the Treaty. In any event, the test advocated by the Belgian Government would be extremely difficult, if not impossible, to apply in practice, for there would always be room for argument whether a particular provision of Community law was clear enough to justify recourse to Article 90(3). That test, if adopted, would therefore damage both legal certainty and the effectiveness of the Commission's powers under that provision.
41.
It follows from the Court's case-law that the Commission is entitled, provided it does not interfere with the jurisdiction of the Council, to act under Article 90(3) in order to ensure, in the case of undertakings which fall within the scope of Article 90(1) and (2), that the Member States comply with all their obligations under the Treaty. I do not consider that it is open to a Member State to say that a measure adopted on that basis should be quashed because the effect of the relevant provisions of Community law was not previously clear. It may be noted that, in the present case, the Belgian Government has not challenged the Commission's view of the effect of Article 59 in the market for telecommunications services.
42.
As far as Article 86 is concerned, the Belgian Government accepted at the hearing that it had the effect claimed by the Commission and that it was clear enough to be applied under Article 90(3). None the less, the Belgian Government maintains that it is possible to envisage a number of ways in which Member States could comply with their obligations under Article 86 in the field covered by the services directive and that in these circumstances the Commission was not entitled to require the Member States to adopt one particular way of achieving that result. By way of example, the Belgian Government says that it is possible to comply with Article 7 of the directive in a number of ways. Far from supporting the Belgian Government's argument, however, this suggests that Article 7 simply imposes on the Member States the result to be achieved, while leaving to the national authorities the choice of form and methods, in accordance with Article 189 of the Treaty. The Belgian Government has not specified any other respect in which the directive might have been made more flexible while at the same time offering equivalent safeguards against infringements of Article 86. I would therefore reject the argument that the Commission exceeded its powers under Article 90(3) by laying down too rigid a framework for the elimination of infringements of Article 86.
43.
The Italian Government argued at the hearing that for a Member State simply to create a dominant position by the grant of special or exclusive rights within the meaning of Article 90(1) was not as such incompatible with Article 86. The Italian Government cited in support of that proposition the Court's ruling in Case C-179/90 Merci Convenzionali Porto di Genova v Siderurgica Gabrielli [1991] ECR I-5889. According to the Italian Government, Article 86 is only infringed where there is an abuse of a dominant position. It was therefore inconsistent with the principle of proportionality for the Commission to require all special and exclusive rights for the supply of telecommunications services other than voice telephony to be withdrawn: it should simply have taken action against specific abuses of the dominant positions held by undertaltings enjoying such rights.
44.
It will be observed, however, that the Court acknowledged in the Porto di Genova case that a Member State acted in breach of Article 90(1) in combination with Article 86 when an undertaking to which it had granted exclusive rights was led, simply by exercising those rights, to abuse its dominant position or when the rights in question were liable to create a situation in which the undertaking concerned was induced to commit such abuses: see paragraph 17 of the judgment.
45.
Moreover, an argument similar to that put forward in these proceedings by the Italian Government was rejected in Case C-18/88 RTT v GB-Inno-BM [1991] ECR 5941. There the Court was asked for a preliminary ruling on the compatibility with Articles 30 and 86 of the Treaty of national rules granting to a public body, acting under the authority of the competent minister, responsibility for establishing and operating a public telephone network, the right to supply telephones and the power to license for connection to the network telephones which it had not supplied itself. In the course of the proceedings, it was argued that the designation as the licensing authority of a body which was in competition with applicants for licences did not in itself constitute an abuse within the meaning of Article 86 in the absence of specific cases of abuse, such as the discriminatory application of the rules relating to the grant of licences. That argument was rejected by the Court, which ruled that the extension, without objective justification, of the monopoly for setting up and running the telephone network to the market for telephones was in itself prohibited by Article 86 and, where the extension was the result of a measure adopted by the State, by Article 90(1) in combination with Article 86: see paragraph 24 of the judgment.
46.
Thus, it follows from the case-law that the Commission is entitled, in the exercise of its powers under Article 90(3), to require Member States to withdraw exclusive rights which they have previously granted where the exercise of those rights is liable to infringe Article 86 or where they have the effect of strengthening an existing dominant position. The Commission is not confined to acting against specific abuses committed by the dominant undertaking. Moreover, the argument of the Italian Government does not address the question whether it was necessary to require the withdrawal of the special and exclusive rights in question in order to put an end to infringements of Article 59 of the Treaty. The Court acknowledged in Case C-260/89 ERT [1991] I-2925, at paragraph 20, that although the existence of a monopoly in the provision of services was not in itself contrary to Community law, that would be the case if the monopoly was organized in such a way as to interfere with the freedom to provide services. The Italian Government does not contest the Commission's assessment that that is liable to be the result of the grant of special or exclusive rights for the supply of certain types of telecommunications services.
47.
In the light of the Court's ruling in Case C-202/88, however, there are a number of provisions of the services directive which must be considered of doubtful validity. I shall deal first with the provisions of that directive concerning special rights and then examine Article 8 of the directive.
48.
The Court's ruling in Case C-202/88 underlines the importance of distinguishing between special rights and exclusive rights in the context of Article 90. It was the Commission's failure to explain what type of special rights were concerned or why they might be contrary to the Treaty which led to the annulment of Article 2 of the terminal equipment directive in so far as it extended to such rights.
49.
It will be noted that, although Article 1 of the terminal equipment directive refers to ‘special or exclusive rights for the importation, marketing, connection, bringing into service of telecommunications terminal equipment and/or maintenance of such equipment’, that directive contains no definition of the expression ‘special or exclusive rights’. The terminal equipment directive may in this respect be contrasted with the services directive, the second recital of which states that:
‘In all the Member States the provision and operation of telecommunications networks and the provision of related services are generally vested in one or more telecommunications organizations holding exclusive or special rights. Such rights are characterized by the discretionary powers which the State exercises in various degrees with regard to access to the market for telecommunications services.’
Moreover, Article 1 of the services directive defines ‘special or exclusive rights’ as ‘the rights granted by a Member State or a public authority to one or more public or private bodies through any legal, regulatory or administrative instrument reserving them the right to provide a service or undertake an activity’.
50.
It is therefore reasonably clear that where a Member State grants to a single undertaking the sole right to operate a public telecommunications network or to provide telecommunications services, that undertaking enjoys an exclusive right within the meaning of the services directive. Where the right to operate the network or to provide telecommunications services is granted to more than one undertaking, but the number of such undertakings is limited, those undertakings enjoy special rights for the purposes of that directive. This interpretation of the expression ‘special or exclusive rights’ was confirmed at the hearing by the Commission, which explained that special rights are the rights held by a limited number of telecommunication organizations chosen in a discretionary and subjective manner by the State concerned. I therefore consider that the distinction drawn by the services directive between special and exclusive rights has been sufficiently clearly defined.
51.
It will be observed that the preamble to the services directive makes extensive reference to both exclusive and special rights and draws the same conclusions in respect of both types of right as to their compatibility with Articles 59 and 86. Whilst I accept that the grant of both special and exclusive rights may have an equally deleterious effect on the freedom to provide services, an undertaking which holds special rights in the sense in which that term is used in the directive may not hold a dominant position on the relevant market. Indeed, this was accepted at the hearing by the Commission, which expressly abandoned the suggestion that the grant by a Member State of special rights in this field was contrary to Article 86 in combination with Article 90(1), although it remains of the view that the grant of such rights is inconsistent with Article 59 in combination with Article 90(1).
52.
The preamble to the directive, however, makes no distinction in this respect between the grant of special rights and the grant of exclusive rights: the grant of all such rights is treated as if it contravenes both Article 59 and Article 86. At the hearing, the Commission suggested that this difficulty could be overcome by simply deleting from the preamble certain phrases which suggested that the grant of special rights was incompatible with Article 86. I am not convinced that the problem can be resolved so easily. Since the Commission is the only institution involved in the adoption of directives or decisions under Article 90(3), it is in my view particularly important that such legislation should be fully reasoned. As it stands, the preamble to the services directive must therefore be considered inadequate to satisfy the requirements of Article 190 of the Treaty. It is therefore necessary to consider the effect on the validity of the directive of the defect in the reasoning which I have identified.
53.
The directive contains a number of provisions which appear from the preamble to be based on the proposition that an undertalcing to which special rights have been granted in the field covered by the directive holds a dominant position on the relevant market. Articles 2 and 4 expressly mention special rights and, like Article 2 of the terminal equipment directive, should in my view be quashed in so far as they extend to such rights. This will effectively involve simply striking out the references to special rights.
54.
In addition, Articles 3, 6 and 7 impose on the Member States a number of specific obligations with regard to ‘telecommunications organizations’. These are defined by the first indent of Article 1(1) ( 3 ) as ‘public or private bodies, and the subsidiaries they control, to which a Member State grants special or exclusive rights for the provision of a public telecommunications network and, when applicable, telecommunications services’. Thus, Articles 3, 6 and 7 are, like Articles 2 and 4, also based in part on statements in the preamble as to the effect of Article 86 which the Commission no longer seeks to defend. Unlike Articles 2 and 4, the provisions of Articles 3, 6 and 7 concerning special rights cannot be severed from the remaining provisions of those articles. In my view, however, the three articles concerned can be confined to undertakings to which exclusive rights have been granted by annulling the reference to special rights in the definition of telecommunications organizations contained in Article 1(1) of the directive. This would effectively mean no more than deleting the words ‘special or’ after the word ‘grants’ in that definition.
55.
Finally, I turn to Article 8 of the directive. That article requires the Member States to ensure that certain types of contract can be terminated, yet the judgment in Case C-202/88 establishes that anti-competitive behaviour engaged in by undertakings on their own initiative can only be challenged by the Commission by means of individual decisions adopted in application of Articles 85 and 86 of the Treaty. The Court made it clear that Article 90 only permitted the Commission to take action in respect of measures adopted by the Member States.
56.
The Commission claimed at the hearing that it had drawn the necessary consequences from the Court's ruling in Case C-202/88 and was considering the possibility of taking action under Regulation No 17 (OJ, English Special Edition 1959-62, p. 87) against undertakings which imposed contracts of the type in question on their customers. It added that it was also examining the extent to which the laws of the Member States required or encouraged the conclusion of such contracts. It would then consider in the light of that examination whether Article 8 should be repealed or whether the reasoning underpinning it should be altered.
57.
Although the Commission stopped short of admitting that Article 8 of the directive was invalid, it is in my view clear that that is in fact the case. Like the terminal equipment directive, the services directive contains no suggestion that undertakings to which special or exclusive rights have been granted have been required or encouraged by State measures to enter into contracts of the type mentioned in Article 8. It follows that the Commission had no power to adopt such a provision under Article 90(3). Article 8 of the directive must accordingly be quashed.
Conclusion
58.
I am therefore of the opinion that:
(1)
The following provisions of Commission Directive 90/388/EEC of 28 June 1990 should be declared void:
—
Article 1(1), first indent, in so far as it includes in the definition of ‘telecommunication organizations’ public or private bodies, and the subsidiaries they control, to which a Member State grants special rights for the provision of a public telecommunications network and, when applicable, telecommunications services;
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Articles 2 and 4, in so far as they extend to special rights;
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Article 8.
(2)
For the rest, the applications should be dismissed.
(3)
The parties and the intervener should bear their own costs.
( *1 ) Original language: English.
( 1 ) None of the other language versions contains a word corresponding to the advert) ‘inevitably’ in the English version.
( 2 ) The English text of Article 6 is garbled, but it is clear from the other language versions that this is intended to be its effect. It is wholly unacceptable that Community legislation should be published in a form in which it is simply unintelligible without reference to other language versions.
( 3 ) The English text of the first indent of Article 1(1) uses the word ‘telecommunication’ in the singular, but it is clear from the other language versions that the definition relates to the term ‘telecommunications organizations’ used elsewhere in the directive.
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