Non-Economic Activities

Non-Economic Activities - 05.12.Imputability of Aid State aidz

Health insurance which is based on the principle of social solidarity is not economic in nature. Solidarity means that citizens have a right to the service in question and the quality of the service they obtain is not linked to the price they pay, if any. Health services which are provided privately for remuneration are economic in nature. Services provided by a public authority in the exercise of its public duties are not economic in nature, even if market operators offer similar services.



This article examines two Commission decisions concerning measures which were free of State aid. In both cases, the decisive issue was the existence or not of economic activity. The decisions analyse in depth the presence or not of economic activities and also respond to counter-arguments put forward by complainants. As will become clearer below, the existence of a market depends on the policy choices of each Member State. Moreover, the fact that a certain service is also provided by the market should not automatically lead to the conclusion that the service is economic in nature when the state decides to offer the service in the context of exercising its duties and carrying out its obligations to citizens.

i) Compulsory health insurance in Slovakia

Commission decision 2015/248 concerns the capitalisation of a health insurer in Slovakia.[1] In Slovakia health insurance is compulsory and offered by both state-owned and private companies. After several mergers, there are at present three main insurers: VZP [state owned], Dovera [private] and UHI [private]. Health insurance companies can make profits. Their revenues are generated by contributions by members, the state budget (contributions on behalf of the economically inactive persons and a subsidy to cover rises in health service costs) and other income. Profits can be made by health insurance companies by improving their management system and through their negotiations when contracting with healthcare providers such as doctors and clinics.

In the Slovak health insurance system, citizens have a right to a comprehensive cover and at the same time they have an obligation to be insured. However, they can choose the company they prefer and can switch from one to another company once per year. All citizens are legally required to pay insurance contributions. These contributions are defined by law and are proportional to the income of each citizen rather than the insured benefits. There is no link between the payments and the benefits. The benefits are the same for all.

Insurance companies cannot refuse to admit any person who wishes to insure with them, nor can they adjust the level of benefits [which are fairly standard for all insured persons]. However, the Slovak system also operates a risk-equalisation mechanism [RES]. Under RES, companies insuring persons with higher risk, receive funds from companies with persons with lower risk.

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The existence of markets depends on the policy choices of Member States

The Commission began its assessment by restating the legal principles on the definition of economic activity. “(78) According to the CJEU, an economic activity is any activity consisting in offering goods and/or services on a given market. In this context, the question whether a market exists for certain services may depend on the specific way those services are organised and carried out in the Member State concerned. The State aid rules only apply where a certain activity is provided in a market environment. The economic nature of the same kind of services can therefore differ from one Member State to another. Moreover, due to political choices or economic developments, the classification of a given service can change over time. What is not a market activity today may turn into one in the future, and vice versa.”

This is an important clarification which is often forgotten by public officials. The existence of a market depends on the policy choices of each Member State. A market for a given product may exist in one Member State, but not in another. In another very recent decision [SA.39426] concerning rescue aid granted to a health provider in Italy, the Commission found that the provider, PICFIC, was engaged in both economic and non-economic activities. PICFIC was a religious order, founded in 1858, with a vocation to serve in the health and social sectors. PICFIC operated clinics and retirement homes. Because some of its services were provided privately for remuneration, PICFIC was found to be an undertaking in relation to its economic activities.[2]

Solidarity-based system

“(79) In relation to the provision of healthcare, […] the case-law of the CJEU distinguishes between schemes based on the principle of solidarity and economic schemes. (80) The case-law of the CJEU uses a range of criteria to determine whether a social security scheme is solidarity-based and therefore does not involve an economic activity. A number of factors can be relevant in this respect: (i) whether affiliation with the scheme is compulsory; (ii) whether the scheme pursues an exclusively social purpose; (iii) whether the scheme is non-profit; (iv) whether the benefits are independent of the contributions made; (v) whether the amount of benefits paid is not necessarily proportionate to the insured persons’ earnings; and (vi) whether the scheme is supervised by the State. (81) In contrast to solidarity-based schemes, economic schemes are regularly characterised by: (i) optional membership; (ii) the principle of capitalisation — i.e. dependency of entitlements on the contributions paid and the financial results of the scheme; (iii) their profit-making nature; and (iv) the provision of entitlements which are supplementary to those under a basic scheme.”

On the basis of the above principle, the Commission reached the conclusion that the Slovak system was based on the solidarity principle and that the insurance companies were not undertakings. It provided four reasons.

“(85) First, participation in the public health insurance programme is compulsory by law for most of the population in the Slovak Republic and medical services covered under the compulsory health insurance are provided regardless of the contributions paid by the insured person. An insured person is free to choose any health insurance company and, under the open enrolment obligation, the health insurance company chosen cannot refuse that person insurance on the grounds of his age, state of health or disease risks.”

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“(86) Second, Slovak compulsory health insurance is based on contributions that are fixed by law proportional to the income of the insured, rather than being based on the insured risk (age, health status, disease risks of the insured person). Moreover, there is no direct link between the amount of contributions paid by an individual into the scheme and the value of the benefits received by that same individual from the scheme. As a result, insurance companies have no possibility to influence either the amount of contributions or the minimum level of coverage to which the insured persons are entitled as this is all fixed by national legislation.”

“(87) Third, all the insured are guaranteed by law to receive the same basic level of benefits, which is in fact very high since it covers almost all healthcare procedures provided in the Slovak Republic, meaning that virtually complete healthcare is provided through the compulsory health insurance scheme. The Slovak risk equalisation scheme (RES) ensures that insurance risks are shared and therefore further strengthens solidarity. In addition, the Slovak system imposes the community rating principle, that is, insurers are not allowed to differentiate premiums according to insurance risk, while risk equalisation partially compensates insurers who have a riskier demographic profile in their portfolio by redistributing money from those insurers paying less than average benefits to those paying higher than average benefits to their insured persons.”

“(88) Finally, in addition to all of the above mentioned social and solidarity characteristics, the Commission recalls that Slovak compulsory health insurance is organised and carried out under a strong regulatory framework: the status, rights and obligations of all health insurance companies are established by laws laying down detailed conditions and they operate subject to tight supervision by the State.”

Of course, all of the above features of the Slovak system demonstrate that it is based on the solidarity principle. But there was an additional problem for the Commission: the presence of private, profit-seeking insurance companies which competed with the state-owned company. The Commission had to justify their involvement in a system based on solidarity.

Minimum economic activity is not enough

“(90) The Commission acknowledges that certain features of the Slovak compulsory health insurance system could point to the economic nature of the activities involved in that system: (i) the presence of several insurance operators (public and private) in the Slovak compulsory health insurance sector; (ii) some degree of competition between these health insurers; which are (iii) involved in a for-profit activity; […] Nevertheless, the Commission is of the opinion that the presence of those features does not call into question its conclusion that compulsory health insurance in Slovakia is a non-economic activity.”

“(91) First, the Commission notes that the fact that there are several (public and private) operators active in the compulsory health insurance sector does not in itself confer an economic nature to their activities in a system where, the social features and objectives of the system are predominant, the solidarity principle is central to the operation of that system and State supervision is tight. Such an interpretation would grant inappropriate weight to the organisational arrangements chosen by a Member State in operating part of its social security system, rather than to the substance of the system in question.”

“(92) Second, from the case-law of the CJEU it follows that also the presence of scope for competition in the health insurance system and competition actually happening, even if intended by the legislator and confirmed by the judiciary, does not necessarily confer an economic nature to the activity in question. The CJEU has made clear that for concluding on the economic or non-economic nature of activities in statutory health insurance system which, like the Slovak system, gives some latitude for competition, the nature and degree of this competition, the circumstances in which it takes place and the presence and weight of the other relevant factors are decisive. In the case at hand, the type of competition which is most interesting for consumers — price competition with regard to the level of contributions — is ruled out since Slovak health insurers cannot modify the level of contributions of the insured which are fixed by law. Moreover, the scope for quality competition is rather limited since the Slovak compulsory health insurance system foresees a very wide range of statutory benefits which are equal for all insured persons, thus leaving little scope for insurers to compete for clients on the basis of offering additional (gratuitous) entitlements.”

“(93) Third, the Commission considers the non-economic nature of the activity of compulsory health insurance not to be affected by the fact that health insurance companies engage in quality competition and procurement efficiency competition by buying healthcare and related services of good quality from providers at competitive prices. In this way, the insurance companies, through an activity severable from their contracts with the insured persons within the compulsory health insurance procure the inputs necessary to fulfil their role within that system. It follows from the case-law of the CJEU that if the system of compulsory health insurance is due to its inherent features of a non-economic nature, then the activity of procuring inputs necessary to run this system is likewise of a non-economic nature.”

“(94) Fourth, the fact that the regulation of compulsory health insurance in Slovakia allows health insurers to make profits and to distribute some profits to their shareholders does not change the non-economic nature of their activities since they are performed in a system which has a strong presence of all the above mentioned features indicating the non-economic nature. The mere fact that health insurers are allowed to make profits and to distribute some profits cannot in itself overturn the predominance of the system’s social features and objectives, the central role of the solidarity principle in it and the tight degree of State regulation and supervision under which it operates.”

“(95) As a result, due to the limited nature of competition that was introduced into the Slovak compulsory health insurance system (i.e. only limited quality competition and no price competition at all) as well as the restrictions on the way profits can be made and used, the elements of competition and profit-orientation which are present in the Slovak system of compulsory health insurance do not call into question the predominant social, solidarity and regulatory features indicating the non-economic nature of the activities performed by health insurance companies in that system. Rather, the elements of competition and profit-orientation present in the Slovak system of compulsory health insurance should be considered to pursue the prime objective of encouraging the insurance companies to operate in accordance with the principles of sound management in the interest of a proper functioning of that social security system, thereby contributing to ensure that the social and solidarity objectives of that system are attained.”

Conclusions and some observations

Solidarity means that consumers have a right to the service and their payments are not linked to what they obtain from the system. By contrast, in the market no one has any right or obligation apart from the price they are willing to pay or accept, while the amount and quality of what is supplied depends directly on the price paid.

From this case we must deduce that a system which is predominantly based on solidarity does not become economic in nature when operators have a small degree of discretion to compete on quality and to make profit from efficient provision of services.

In practice, the problem is where to draw the dividing line between economic and non-economic activities. This case also demonstrates that it may not be desirable to eliminate competition completely even in a system which is based on solidarity. This is because even when prices are fixed, providers can still compete on quality, which is good for citizens. But too much competition in a system that is based on solidarity may destabilise it. This can happen when new companies attract low-risk persons, which leads to a virtuous circle of lower costs and lower prices. But, as customers defect from other, more costly and more expensive insurers, they leave behind less healthy persons, which leads to a vicious circle of cost escalation. In the end, if insurers cannot control rising costs due to high-risk portfolios they will go bankrupt. That is why insurance systems which are based on solidarity and introduce competition, such as that of Ireland, also have a mechanism for equalising risk which results in levelling of costs. Entry of insurers strengthens competition, risk-equalisation dampens competition. It is hard to tell where the market ends and where social solidarity starts.

ii) Electronic procurement in the Netherlands

Commission decision SA.34646 concerned the electronic procurement platform, TenderNed, in the Netherlands.[3] Following the adoption of the new package of EU directives on public procurement in 2014, the Netherlands decided to establish an electronic procurement [e-procurement] platform called TenderNed. Several privately-operated platforms submitted a complaint to the Commission alleging that illegal State aid had been granted to TenderNed.

TenderNed was developed in-house as a project of the Ministry of Economic Affairs, Agriculture and Innovation. TenderNed consists of a number of functionalities, made available to potential tenderers at no cost: A publication module, which can be used for the publication of tender notices and documents; a tendering (submission) module, allowing for the uploading and downloading of tenders and bids; and an e-guide, which supports contracting authorities.

Presence of economic activity

Since there was no doubt that the Ministry had expended state resources in developing TenderNed, the decisive issue was whether it carried out an economic activity.

The Commission first explained that “(50) […] The question whether a market exists for certain services may depend on the way those services are organised in the Member State concerned and may thus vary from one Member State to another. (51) Activities which fall within the exercise of public powers are not of an economic nature justifying the application of the Union’s competition rules. Therefore, Article 107 TFEU does not apply where the State acts “by exercising public power” or where authorities emanating from the State act “in their capacity as public authorities” or if the activities carried out are connected to the functions of the State through their nature, aim and the regulation to which those activities are subject.”

Then the Commission noted that under the 2014 Procurement Directives, Member States are obliged “(58) […] to ensure that contracting authorities and economic operators are offered free of charge guidance and information on the interpretation and application of Union public procurement law, as well as to support contracting authorities with regard to planning and carrying out procurement procedures.” The setting up of TenderNed was the means chosen by the Netherlands to comply with the requirements of EU law.

Indeed, the Commission confirmed that TenderNed’s activities “(63) […] are not economic in nature, but constitute the means by which contracting authorities and special sector entities in the Netherlands fulfil their statutory obligations under the national public procurement rules, which flow from the Union Procurement Directives, and the means by which The Netherlands fulfils its obligations under those Directives.” “(64) Contracting authorities and special sector entities are therefore acting in their capacity of public authorities when complying with those statutory obligations so that TenderNed should be considered, by extension, to act in a similar capacity when providing them with the means to ensure those obligations are complied with. Indeed, the Court of Justice has already accepted that the activity of a public authority consisting “in the storing, in a database, of information which undertakings are obliged to report under statutory obligations (emphasis added), does not constitute an economic activity”. The Commission considers the same reasoning to hold where the activity consists of ensuring that contracting authorities and special sector entities comply with their statutory obligations to publish tender announcements and tender public procurement contracts, as well as the Dutch State’s obligations to ensure statistical reporting obligations to the Commission and the reporting obligations to the Dutch parliament. TenderNed’s activities should therefore not be considered economic in nature, so that its funding does not constitute aid for the purposes of Article 107(1) TFEU.”

The Commission concluded its assessment by responding to the arguments of the complainants, the main of which was that the market already provided similar services. The Commission stated in this connection that “(68) […] the State does not forego the right to carry out an activity that it deems necessary to ensure its public bodies comply with their statutory obligations by acting at a point in time when private operators – perhaps due to lack of prior action by the State – have already taken the initiative to offer services to the same end. Ensuring public authorities comply with their statutory obligations by channelling public procurement may be an economic activity for the complainants. It is not, however, an inherent economic activity, but rather a service of general interest, which can be commercially exploited only so long as the State fails to offer that service itself.” “(69) […] Commercial operators are, in other words, free to develop a differentiated offer of public procurement-related services in terms of quality or added value.”


Competition is the essence of the concept of the market. In a sense, TenderNed was competing with other platforms. But it is always the prerogative of the state to decide whether it can live with a product offered by private operators or whether it should offer directly what it believes the market should obtain. When the product in question is not linked to its tasks as public authority, then the supply by the state of that product is an economic activity. When, however, it is linked to its official tasks, it is not economic in nature, even if private operators offer very similar products.


[1] The full text of the decision can be accessed at:

[2] The text of this decision can be accessed at:

[3] The text of the decision can be accessed at:



Phedon Nicolaides

Dr. Nicolaides was educated in the United States, the Netherlands and the United Kingdom. He has a PhD in Economics and a PhD in Law. He is professor at the University of Maastricht and the University of Nicosia. He has published extensively on European integration, competition policy and State aid. He is also on the editorial boards of several journals. Dr. Nicolaides has organised seminars and workshops in many different Member States, and has acted as consultant to several public authorities.

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