Ramadan Hemat v the Medical CouncilCompetition law - Economic undertaking - Restriction on advertising - Ability of a professional body to restrict a registrant's ability to advertise - Whether defendant association of undertakings - Medical Practitioners Act 1978, s. 69 - Competition Act 2002, ss. 4 & 5 - EC Treaty, arts. 81, 82 & 86.
The High Court (Mr Justice McKechnie); judgment delivered April 7th, 2006.
The term "association of undertakings", in the context of competition law, had to be construed in a broad and functional way, but in order for an entity to be an association of undertakings, the provision or decision it undertook had to be an economic activity.
The defendant, by its nature, aims and rules, including its statutory responsibilities and its powers under s. 69(2) of the Medical Practitioners Act 1978, was driven by public interest considerations rather than being an association whose aim was to protect, conserve or look after the interests of its members. In imposing a restriction on advertising on its members, the Medical Council was acting solely in the public interest as it was statutorily obliged to do.
The High Court so held in declaring that the defendant was not an association of undertakings susceptible to competition law rules.
Gerard Hogan SC and Siobhan Phelan BL for the plaintiff; Eoin McCullough SC and Patrick Leonard BL for the defendant.
Mr Justice McKechnie said that the defendant was a statutory body which, in purported discharge of the responsibilities entrusted to it under section 69(2) of the Medical Practitioners Act 1978, as amended, issued "A guide to ethical conduct and behaviour". As a member of the medical profession, the plaintiff was bound by those guidelines. Alleging that a certain advertisement circulated by him was in breach of this code, the defendant imposed a sanction on him.
The plaintiff instituted proceedings alleging that the defendant was an undertaking or an association of undertakings and claiming that certain provisions of the guide and their application to him, constituted a breach of ss. 4 and 5 of the Competition Act 2002 and/or articles 81, 82 and 86 of the EC Treaty. Having put that in issue, both parties agreed that that matter should firstly be determined before the substantive action embarked upon. Accordingly, the sole issue was "whether the Medical Council was an undertaking and/or an association of undertakings for the purposes of ss. 4 and 5 of the Competition Act, 2002 and/or articles 81 and 82 of EC Treaty".
Mr Justice McKechnie then referred to the submissions of both parties. The plaintiff submitted that, by reference to the principles in Wouters v. The Dutch Bar (Case C - 309/99) E.C.R. I-1577, the defendant should be held to be an association of undertakings. It was also submitted that since the majority of members on the defendant were undertakings in their own right, then the decision by it, which prevented the plaintiff from advertising, was a decision taken by an association of undertakings, and thus given its economic significance, was a decision capable of challenge by reference to both the Competition Act 2002 and articles 81 and 82 of the EC Treaty.
The defendant accepted that the decision in issue was one capable of having economic consequences, but such consequences could equally arise where a power was exercised by Government or other agency thereof. The fact that some persons may have to suffer an economic impact as a result of a government decision was one which may have to be suffered in the greater good. The defendant further submitted that, under the Act of 1978, all of the defendant's functions were directed towards establishing, maintaining and serving the public interest. This included the guide which was, and could only have been, issued for the common good.
In deciding the issue, Mr Justice McKechnie said that the definition of the term "undertaking" directly determined the scope of the competition rules. Unfortunately it had not been possible to date for the European Court of Justice to lay down a general set of rules by, or pursuant to which, the question, as to what constituted an undertaking, could be resolved. Referring to Centro Servizi Spediporto Srl. v. Spedizioni Marittima de Golfo Slr, Mr Justice McKechnie said that articles 81 and 82 of the EC Treaty, were designed to capture conduct by bodies which was inimical to healthy competition and, save in limited circumstances, had no application to sovereign acts of individual states including their laws and regulations. It was, however, more difficult to apply this distinction in practice, particularly when State owned or controlled bodies were involved, or as here, when a regulatory body, heavily influenced by public law, was said by its actions to have engaged in economic activity which distorted competition.
From a review of various decisions of the European Court of Justice, Mr Justice McKechnie stated the following general propositions:
(1) the primary test, which had to be applied in every case in which the issue arose, was that contained in Hofner v. Macrotron (Case C-41/90) ECRI-1979 where the court said "the concept of an undertaking encompasses every entity engaged in an economic activity regardless of the legal status of the entity and the way in which it is financed". All of the other tools developed by the court were auxiliary and supplementary to those criteria; (2) the Hofner v. Macrotron definition had to be given a broad and purposeful application; (3) in applying that definition, the nature, aims and rules of the activity in question could and in many cases had to be considered, with the scope of such inquiry being general but also, of necessity, being case or category specific; (4) the legal and financial structure in which the activity was carried on was irrelevant as was how that structure was treated in domestic law; (5) public authorities, bodies under state ownership or control, bodies to which specific functions had been assigned and other entities subject to public law, were capable of being undertakings for competition purposes; (6) bodies, even though created by and subject to public law and even though regulatory of a business or profession, were still capable of being an undertaking or an association of undertakings within articles 81, 82 and 86 of the Treaty; (7) self employed persons normally were undertakings but those in an employer/employee relationship were not; (8) any entity could be an undertaking for some purposes and not for others.
In addition to those general points, the European Court of Justice had also identified more particular criteria in many of the reported cases. Examples of such specific tests were: where powers were exercised, which were typically those of a public authority or which formed part of the essential functions of the State, the bodies in question were held not to be undertakings for the purposes of articles 81, 82 and 86 of the EC Treaty; where professional services were offered on a market in return for a fee and where the financial risk was individually assumed, the performer of such a service was an economic operator, and; the role or influence of public interest considerations was a significant factor in evaluating the activity in question.
Mr Justice McKechnie said that the various tests and criteria developed by the European Court of Justice were not rigidly defined or immovably fixed, but rather were interchangeable and could therefore be used separately or accumulatively depending on the circumstances in question.
When one applied the appropriate criteria to the defendant, one could see that there were no other bodies competing with it in respect of the activity in question. Likewise, there was no market in which the defendant participated for the purposes of discharging its functions. In addition, it did not offer any goods or services in return for a fee, nor did it assume the financial risks involved. Moreover, it was non profit-making and did not seek to acquire assets.
Whilst all of those factors were helpful in demonstrating that the defendant could not be categorised as an undertaking by reference to such matters, they did not, by themselves, conclusively determine the issue. Nor did the fact that the defendant was a regulatory body governed by public law, however important that might be. The principal test, in applying the Hofner v. Macrotron definition, was to firstly determine whether, by its nature, aims and rules, including its statutory responsibilities and its powers under s. 69(2) of the Act of 1978, the defendant was driven by public interest considerations, and if so, the extent of such considerations.
Having been established under the Medical Practitioners Act 1978, the defendant's statutory functions were in the public interest. Whilst some of those functions were also in the interests of the profession, in the context of the issue under discussion, that consequence could not be equated with an association whose aim was to protect, conserve or look after the personal interests of its members. In fact, Mr Justice McKechnie said that he could see nothing in the provisions to what one would typically find in the rules of a trade association or indeed of a professional association. The regime under the Act of 1978 was entirely different from such bodies and by its structure and provisions was focused almost exclusively on those who received service from the medical profession and not on the profession itself. That general view of the Act was supported by the decision in Philips v. Medical Council 2 IR 115.
Under s. 69(2) of the Act of 1978, the defendant issued the guide being challenged. Mr Justice McKechnie read that subsection in the context of the entire Act and also as containing a requirement similar in nature to that placed on the defendant under both subs. (1) and subs. (3) of that section, which functions were public in nature and directed to the common good. As all statutory powers had to be exercised for the purposes, express or implied, for which they were enacted, Mr Justice McKechnie was satisfied that public interest criteria was inherent in the exercise by the defendant of its power under s. 69(2) of the Act of 1978 in issuing the guide on ethical conduct and behaviour whose purpose, aim and direction was to serve the general good. This was made clear from the introduction to the guide where it was stated that the "Medical Council exists to protect the interest of the public when dealing with doctors". He was fortified in that view by the fact that the State had retained substantial powers over significant areas relating to the preparation for, and thereafter to the practice of medicine, which on an executive basis had been entrusted to the defendant.
Mr Justice McKechnie held that, in publishing the guide to ethical conduct, including the restriction on advertising, the defendant was acting solely in the public interest as it was statutorily obliged to do so, and was not engaged in economic activity. To do otherwise would be to act ultra vires. The mere fact that some economic consequences could follow, could not alter the status of the body as the existence of such consequences was not the test. In any event, Mr Justice McKechnie did not believe that the defendant was an undertaking or an association of undertakings within articles 81 or 82 of the EC Treaty.
The question then arose as to whether that conclusion could stand in view of the European Court of Justice's decisions in both Pavlov v. Stichting Pensioenfonds Medische Specialisten (Case C-180/98) ECR I-6451 and Wouters v. The Dutch Bar. The findings relied upon by the court in order to establish the foundation for its decisions in those cases, or findings of an equivalent type, could not be made in respect of the defendant as the defendant did not act for or behalf of or otherwise represent the interest of individual doctors. Secondly, the principles by which it had to perform its functions were driven by public interest criteria and accordingly, the performance of such functions was carried out in the public interest and for the general good. Thirdly, it was not composed exclusively of members of the medical profession nor were all of its member's undertakings in their own rights. Such findings formed the core basis upon which the European Court of Justice came to its conclusion in both Pavlov v. Stichting Pensioenfonds Medische Specialisten and Wouters v. The Dutch Bar. It had to therefore follow that those cases were distinguishable from the present case.
In conclusion therefore, Mr Justice McKechnie held that the defendant in issuing the guide to ethical conduct and behaviour was not an undertaking or an association of undertakings for the purposes of competition law.
Solicitors: O'Hanrahan Lally & Co. (Dublin) for the plaintiff; McDowell Purcell (Dublin) for the defendant.
• Paul Christopher - Barrister