CJEU distinguishes economic activity from public-authority action
The Gerichtshof der Europäischen Union (EuGH, Court of Justice of the European Union) ruled in its judgment of 10 September 2026 in Case C-11/25 on the interpretation of Art. 102 AEUV (Article 102 TFEU, Treaty on the Functioning of the European Union). The central question was whether a municipality acts as an undertaking when it awards municipal waste management to a company that it partially owns.
The proceedings concerned a legal dispute between the municipality of Jelgava in Latvia and the Latvian Competition Council. In the Competition Council’s view, the municipality had abused a dominant position under national competition law; the municipality challenged this assessment by the authority, and the CJEU ultimately opposed it in its interpretation of Art. 102 AEUV. The main proceedings have not been finally concluded. The starting point was Decision No. 18 of the Competition Council of 22 July 2021 in proceedings No. KL\2.2-5\20\7, which was published in the Latvian Official Gazette on 2 August 2021.
The CJEU clarified that a municipality’s decision to award municipal waste management to a legal person that it partially owns does not constitute the exercise of an economic activity. Accordingly, under the circumstances described in the judgment, such a decision does not fall within the scope of Art. 102 AEUV as the activity of an undertaking.
Background to the Latvian main proceedings
Award of municipal waste management in Jelgava
The company under Latvian law concerned was active in the field of waste collection and waste processing. The municipality of Jelgava held 51% of its share capital; the remaining 49% was held by a private-law company.
The municipality decided to award municipal waste management to this company. On 1 November 2004, both parties concluded a service contract for waste management and for the development and promotion of the waste management system in the municipal area. The term of the contract was intended to run until 31 December 2029.
The award was made without a prior tendering procedure as part of an internal procedure. It was based on an exception provided for under Latvian law for certain contracts awarded to bodies created to perform tasks of the contracting authority.
Decision of the Latvian Competition Council
On 22 July 2021, the Latvian Competition Council issued a decision imposing a fine on the municipality of Jelgava; this fine decision is not final, and the cassation proceedings before the Oberstes Gericht Lettlands (Supreme Court of Latvia) will continue following the CJEU’s preliminary ruling. According to additionally published information, the fine amounted to more than EUR 51,000. The investigation concerned the organisation of household waste management in the urban area of Jelgava and, in addition to the municipality, also the municipal company.
The Competition Council defined the relevant market as the market for the collection and transport of municipal waste in the territory of the municipality of Jelgava. It took the view that the municipality had acted as an undertaking by transferring waste management and by participating in the company’s activities.
According to the Competition Council’s decision, the municipality and the company held a dominant position on the relevant market due to the exclusive right to provide the services in question. The Competition Council considered there to be an abuse in the fact that, in the internal procedure, the municipality had awarded an exclusive right to provide municipal waste management even though it did not exercise full control over the company. In the authority’s view, this displaced other potential service providers from the market concerned.
Proceedings before the Latvian courts
The municipality of Jelgava applied for annulment of the Competition Council’s decision. It argued that, when awarding the waste management contract, it had not acted as an undertaking but as a legal person governed by public law.
The competent regional administrative court dismissed the action on 28 June 2022. It based its decision on the ground that, by concluding the contract with the company of which it was a shareholder, the municipality had acted as an undertaking within the meaning of national competition law.
The municipality filed an appeal on points of law with the Supreme Court of Latvia. The national proceedings bear the Aktenzeichen (case number) Lieta Nr. A43003821, SKA-18/2025; the decision of the Supreme Court of 8 January 2025 is documented under ECLI:LV:AT:2025:0108.A43003821.6.L. The Supreme Court requested an interpretation by the CJEU of Art. 102 AEUV.
Legal framework of the proceedings
Art. 102 AEUV and the concept of an undertaking
Art. 102 AEUV prohibits the abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it, insofar as it may affect trade between Member States. By way of example, Art. 102(2)(b) AEUV refers, among other things, to limiting production, markets or technical development to the prejudice of consumers.
The CJEU relied on its settled case law on the concept of an undertaking. According to that case law, the concept of an undertaking in EU competition law encompasses every entity engaged in an economic activity, regardless of its legal status and the way in which it is financed.
Under that case law, an economic activity exists where goods or services are offered on a given market. Services are activities that are normally provided for remuneration; the remuneration constitutes the economic consideration for the activity in question.
Public powers as the distinguishing criterion
Activities that, by their nature, the rules to which they are subject and their purpose, have no connection with economic life or are connected with the exercise of public powers must be distinguished from an economic activity. Such activities may be excluded from the application of the competition rules of the Treaties.
A public entity may therefore be regarded as an undertaking only in relation to activities that are to be classified as economic activities. A further requirement is that those activities can be separated from the exercise of public powers.
In this context, the CJEU referred to its earlier case law, for example on Eurocontrol’s activities in the field of airspace control and supervision, on supervisory tasks to combat environmental pollution in an oil port, and on the collection of company data on the basis of statutory reporting obligations.
Municipal waste management under Latvian law
Under Latvian municipal law, the organisation of certain public utility services was among the tasks of municipalities. This also included the management of municipal waste management.
The Latvian Waste Management Act provided that municipalities, provinces and cities organise municipal waste management in their administrative territory. This provision was connected with the implementation of EU requirements under Directive 75/442/EEC on waste.
Under Art. 4(1) of that directive, the Member States were required to take the necessary measures to ensure that waste is recovered or disposed of without endangering human health and without using processes or methods that could harm the environment. Under Art. 6 of the directive, the Member States had to establish or designate the competent authorities responsible for implementing the directive.
Jurisdiction of the CJEU despite a purely domestic situation
The referring Latvian court pointed out that the facts penalised by the Competition Council were purely domestic in nature and did not affect trade between Member States. Nevertheless, the national court considered that clarification was needed regarding the interpretation of Art. 102 AEUV.
The CJEU affirmed its jurisdiction. According to its case law, it may rule on questions of EU law even where the facts do not fall directly within EU law, if national law refers to EU provisions for purely domestic situations.
In the present case, the Latvian court stated that Latvian competition law was designed with a view to harmonisation with EU competition law. In particular, the national provision on limiting production or sales volumes, markets or technical development to the prejudice of consumers corresponded to Art. 102(2)(b) AEUV. The application of national law must therefore not diverge from the application of EU law.
CJEU decision on municipal waste management
Waste management as a service
The CJEU first noted that municipal waste management as such may constitute an economic activity. This also corresponded to the referring court’s presentation and to the view of the parties in the proceedings before the CJEU.
However, the decisive factor was not solely the classification of the service itself. Rather, it had to be assessed whether the municipality acted as an undertaking when deciding on the award of that service or whether it exercised public powers.
Municipality’s decision as exercise of public powers
According to the CJEU’s findings, the municipality’s decision to grant the right to provide the waste management service to a legal person partially owned by it was taken on the basis of the Latvian Waste Management Act. That act required municipalities to organise municipal waste management in their administrative territory.
In those circumstances, a municipality that, under national law, is responsible for determining the modalities of waste management in its territory does not offer goods or services for remuneration on a market. Rather, it acts as the competent authority within the framework of the public powers conferred on it by law.
According to the CJEU’s decision, this also applies where the municipality transfers the task in question to a legal person that it partially owns. The partial shareholding in the contracted undertaking therefore does not, in itself, alter the classification of the award decision as public-authority action.
No different assessment due to possible public procurement issues
The CJEU further clarified that, for the competition-law classification under Art. 102 AEUV, it is irrelevant whether the municipality’s decision may infringe national or EU rules on the award of public contracts.
Even if the requirements of the internal procedure under national procurement law had not been met, such a possible infringement by a public body acting within the framework of public powers could not be assessed as an abuse of a dominant position within the meaning of Art. 102 AEUV.
The Court also pointed out that such a decision may, where appropriate, be challenged before the bodies competent for public procurement. The CJEU thus separated the question of possible procurement-law review from the application of the prohibition of abuse under Art. 102 AEUV.
Classification as a concession or service contract irrelevant
According to the CJEU, the possible classification of the contract between the municipality and the contracted undertaking as a public service concession or as a public service contract likewise did not alter the assessment.
In the case of a concession, the Court emphasised that Art. 102 AEUV generally does not concern the award of a concession contract by a municipality when it acts as a public authority. In the case of a public service contract, the CJEU noted that purchasing activity cannot be considered in isolation from the subsequent use. However, in the case of a municipality awarding municipal waste management within the framework of public powers, there is no subsequent economic use of that service by the municipality.
Key points of judgment C-11/25
The CJEU’s decision contains several distinctions that are significant for the application of Art. 102 AEUV to public bodies:
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The concept of an undertaking in competition law requires an economic activity.
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Public bodies can be regarded as undertakings only in relation to economic activities.
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Public-authority action must be separated from economic activity.
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The organisation of municipal waste management may constitute public-authority action on the basis of statutory competence.
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The municipality’s partial shareholding in the contracted service provider does not automatically lead to economic activity by the municipality.
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Possible issues of public procurement law do not replace the requirements for an abuse of a dominant position under Art. 102 AEUV.
The CJEU answered the Latvian court’s question to the effect that Art. 102 AEUV must be interpreted as meaning that the decision of a municipality to award municipal waste management to a legal person that it partially owns does not constitute the exercise of an economic activity.
Significance for public bodies and market participants
The judgment clarifies the boundary between the performance of public tasks and economic activity in European competition law. For Art. 102 AEUV, it is not solely decisive whether the transferred service could also be provided on the market by undertakings. What matters instead is whether the public body itself acts as a market participant or whether it organises a public task on a statutory basis.
For companies active in markets involving the performance of public tasks, the precise classification of the respective administrative action remains essential. In the specific case, the CJEU assessed only the municipality’s decision on the organisation and award of municipal waste management; the Supreme Court of Latvia will decide the main proceedings, which to that extent have not been finally concluded. The core statement does not concern a general exemption of municipal shareholding models from procurement-law or other scrutiny.
At the same time, the decision makes clear that competition law and public procurement law have different review standards. According to the decision, a possible error in the award of public contracts does not automatically result in an abuse of a dominant position by the public body.
Frequently asked questions
CJEU C-11/25 Art. 102 AEUV: Is a municipality an undertaking when awarding municipal waste management?
According to the CJEU’s judgment, the decision of a municipality to award municipal waste management to a legal person that it partially owns does not constitute the exercise of an economic activity. Under the circumstances examined by the Court, the municipality acts as the competent authority within the framework of public powers.
Art. 102 AEUV and procurement law: Does a possible procurement error automatically lead to an abuse of a dominant position?
No. The CJEU clarified that a possible infringement of rules on public contracts by a body acting as a public authority cannot be classified as an abuse of a dominant position within the meaning of Art. 102 AEUV.
CJEU C-11/25 practical consequences for companies in municipal waste management?
Companies can infer from the judgment that, in the case of municipal organisational decisions, a distinction must first be made between public-authority action and economic activity. The decision does not preclude review under other applicable regulatory frameworks, but concerns the application of Art. 102 AEUV to the specific award decision examined.
Assessment by MTR Legal Rechtsanwälte
The CJEU’s decision in Case C-11/25 shows how important the precise distinction is between public-authority action, economic activity and public procurement issues. Particularly in the case of municipal shareholdings, public services and market-related organisational decisions, different regulatory areas may converge without their requirements being congruent.
MTR Legal Rechtsanwälte advises companies, investors and high-net-worth individuals on competition-law issues relating to dominant positions, public contracting authorities and regulated markets. Anyone with legal questions regarding the effects of the decision or comparable constellations can find further support in the area of legal advice in competition law.
