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The EU Treaties and the Charter of Fundamental RightsA Commentary$

Manuel Kellerbauer, Marcus Klamert, and Jonathan Tomkin

Print publication date: 2019

Print ISBN-13: 9780198794561

Published to Oxford Scholarship Online: March 2021

DOI: 10.1093/oso/9780198794561.001.0001

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Article 116 TFEU

Article 116 TFEU

Chapter:
(p.1258) Article 116 TFEU
Source:
The EU Treaties and the Charter of Fundamental Rights
Author(s):

Manuel Kellerbauer

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198759393.003.214

Abstract and Keywords

Article 96 EC Where the Commission finds that a difference between the provisions laid down by law, regulation or administrative action in Member States is distorting the conditions of competition in the internal market and that the resultant distortion needs to be eliminated, it shall consult the Member States concerned.

Keywords:   European Commission’s consultation process, TFEU Art 116(2) as a legal basis, existing measures

(ex Article 96 EC)

  • Where the Commission finds that a difference between the provisions laid down by law, regulation or administrative action in Member States is distorting the conditions of competition in the internal market and that the resultant distortion needs to be eliminated, it shall consult the Member States concerned.

  • If such consultation does not result in an agreement eliminating the distortion in question, the European, Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall issue the necessary directives. Any other appropriate measures provided for in the Treaties may be adopted.

Commentary

  1. A. General remarks

  2. B. Conditions for recourse to Article 116 TFEU

    1. 1. Differences between MS’ rules or administrative actions

    2. 2. The distortion of competition

  3. C. The consultation process provided for in Article 116(1) TFEU

  4. D. The legal basis of Article 116(2) TFEU

A. General remarks

1 Article 116 TFEU, the original version of which dates back to the ToR, is intended to address distortions of competition resulting from existing differences between national legislation. The article provides for a two-step procedure. The Commission first needs to ‘consult’ the MS whose laws, regulations, or administrative provisions seem to distort the conditions of competition. It is only if this consultation does not yield an agreement eliminating the distortion that the Commission may propose that the Council issue ‘the necessary directives.’

2 Despite the potentially wide scope of Article 116 TFEU, its consultation process has rarely been used and no legal act has been adopted on its basis. In the past, this might have been due to the assessment that the provisions that are now Articles 116 and 117 TFEU are ‘among the most obscure of the Treaty, because neither their subject matter nor possible courses of action by [EU] institutions are clearly defined.’1 Nowadays, the lack of practical importance can in addition be explained by the availability of other legal bases that allow for the adoption of harmonization measures with qualified majority voting in the Council.

B. (p.1259) Conditions for recourse to Article 116 TFEU

1. Differences between MS’ rules or administrative actions

3 Article 116 TFEU requires existing differences in the laws, regulations, or administrative provisions of MS. Article 116 TFEU thus intends to remove distortions of competition resulting from MS’ existing rules, while Article 117 TFEU aims at pre-empting distortions that could result from rules that MS intend to adopt.

2. The distortion of competition

4 The Commission has interpreted the concept ‘distortion of competition’ restrictively. It has taken the view that Article 116 TFEU can only be invoked where there are so-called ‘specific distortions’ of competition. For there to be specific distortion, a number of companies or an industrial sector must be at an advantage or disadvantage compared with other economic operators in the same country and there must be no comparable difference in treatment in the other MS.2

5 The Commission considers that specific distortions occur where:

  1. (a) an industry or part of an industry bears an additional burden—or enjoys an extra advantage—as compared with the burden carried by the remainder of the economy of the state to which it belongs; or

  2. (b) no similar burden or advantage occurs in a similar industry or part of an industry in one or more of the other MS.3

6 Article 116 thus applies in a context where specific sectors of the economy or individual operators are competitively disadvantaged. In contrast, in order to address distortions of competition resulting from an unequal burden to which national economies are exposed, e.g. due to a higher level of taxation or consumer protection, Articles 114 and 115 TFEU are the pertinent legal bases.

C. The consultation process provided for in Article 116(1) TFEU

7 Where the Commission considers that MS’ laws, regulations, or administrative actions distort the conditions of competition in the internal market and that ‘the resultant distortion needs to be eliminated’, it will consult the MS concerned pursuant to Article 116(1) TFEU. The wording in Article 116(1) TFEU indicates that the Commission is afforded discretion in deciding whether or not to commence the consultation process and that it may refrain from doing so if it considers that the distortion at stake is of insufficient importance.

8 The consultation process is intended to eliminate distortions of competition resulting from differences in national legislation without initiating a time-consuming legislative procedure. In the absence of procedural rules regarding this consultation in Article 116(1) TFEU, it is for the Commission to decide on its precise scope and time-frame.

D. (p.1260) The legal basis of Article 116(2) TFEU

9 Article 116(2) TFEU provides for a legal basis for the adoption of further measures in the event that the consultation of the MS concerned did not result in an agreement to remedy the distortion of competition at stake. The provision solely allows for the adoption of directives.

10 Pursuant to Article 116(2) TFEU, the ordinary legislative procedure as defined in Articles 289(1) and 294 TFEU applies. Hence, the Council decides by qualified majority (Article 16(3)–(5) TEU) unless it amends the Commission proposal (see Article 293(1) TFEU).

Notes:

(1) Pierre Peschatore, ‘Public and Private Aspects of European Community Competition Law’ [1986] Fordham International Law Journal 402. The author was judge at the ECJ.

(2) Commission, answer given in response to written question No 360/80 by Mr Hemmo Muntingh, [1980] OJ C283/1.

(3) Commission, supplementary answer given in response to written question No 2226/80 by Mr Hemmo Muntingh [1983] OJ C257/1.