The Senate has referred a question to the Court of Justice of the European Union for a preliminary ruling in an administrative case in which parties to proceedings are disputing whether a municipality has been rightly held liable for abuse of a dominant position.

The Jelgava City Municipality, referring to the in-house procedure, did not apply the then applicable Law on Procurement for State or Local Government Needs and selected the service provider without holding a tender. The contract for cooperation in waste management, system development and promotion was concluded with Jelgavas komunālie pakalpojumi SIA, partly owned by the municipality.

Having examined an application submitted by a private person, the Competition Council of Latvia initiated an investigation into the activities of the municipality in the period 2004-2020. As a result of the investigation, abuse of dominant position was established and a fine was imposed. The municipality disagreed with the decision and referred the case to court.

The Regional Administrative Court rejected the application. The municipality appealed against the judgment to the Senate. The Senate decided to refer a question to the Court of Justice of the European Union for a preliminary ruling on the interpretation of a provision of the Treaty on the Functioning of the European Union concerning the prohibition of abuse of a dominant position.

The Senate had doubts as to whether the municipality was acting as a market participant when it decided to provide waste management services via an in-house company. In view of the fact that the organisation of waste management falls within the sphere of the exercise of public authority and that this authority derives from legislation, and that the municipality has to decide on the manner in which the waste management service is to be provided in accordance with the procedure and conditions laid down by law, the Senate concluded that, when deciding on the manner in which the waste management service is to be provided, the municipality is not engaging in competition but is exercising public authority.

The considerations also gave rise to doubts that the municipality was exercising a dominant position in the market. In its essence, the authority (or the ability to influence the market) of a municipality to take such a decision derives not from its economic position in the relevant market, but from the fact that it has a statutory public law obligation to organise waste management in the relevant territory. Whether the municipality is properly exercising this public law powers could be examined under the administrative procedure in the context of a breach of public procurement law.

Decision of the Senate of 8 January 2025 in case No SKA-18/2025 (A43003821)

 

Ilze Butkus, Communication adviser of the Supreme Court

Telephone: +371 67020302; e-mail: ilze.butkus@at.gov.lv