The definition of the concept a “service of general economic interest” (SGEI) known from Article 106(2) treaty of the functioning of the European Union is clarified. When a service is determined to be an SGEI, Member States may enact measures and undertakings entrusted with the provision of the SGEI may engage in behaviour which would otherwise be contrary to the rules of the Treaties, notably the competition rules. Member States retain a wide discretion to define, provide and finance SGEIs; i.e. to use the entrustment of an SGEI as a tool to intervene in the market. This discretion is subject only to a test for manifest error of assessment by the Commission. To increase legal certainty, ensure effective intervention in markets and prevent their use in industrial policy, it is highly relevant to clarify what SGEIs are. The various definitions published by the Commission and in the literature are examined, and a new definition of an SGEI based on economic theory (networks and network effects) is formed. This definition is consistent with the case law of the Court of Justice of the European Union and the General Court. On the basis of the definition, implications for efficiency in dealing with SGEIs are made.
- Competition law
- Manifest error of assessment
- Market failure
- Network effects
- Service of general economic interest