European Union: Competition Law And The Cultural Industries: Is There Now A "Social" Exemption?

Last Updated: 11 May 2015
Article by Ellen Gallagher and Stephen Hornsby

Collective agreements between unions and employers setting minimum rates of pay which are intended to improve working conditions of employees generally fall outside the scope of competition law.   So trades unions can agree minimum fees for their members without fear of fines for breaches of the prohibition on cartels. But what about collective agreements entered into for the benefit and protection of the self-employed?  In the recent case of FNV Kunsten Informatie en Media v Staat der Nederlanden (Case C-413/13) the European Court of Justice considered the issue and made some comforting noises, but left many issues unresolved which have particular relevance to the cultural industries.

Legal background

Although EU law established the position for trades unions acting on behalf of employed workers in Albany (C-67/96), in 2004 the Irish Competition Authority investigated an agreement between the Irish Actors' Equity SIPTU (representing actors) and the Institute of Advertising Practitioners in Ireland (Decision No. E/04/002).  It concluded that Equity was an "association of undertakings" when negotiating and concluding contracts on behalf of self-employed actors and was subject to competition law.  Equity and the Institute were therefore not entitled to set minimum fees for the self-employed actors' services as they are considered "undertakings" for the purposes of EU law.  On the other hand, where the actors were employed, they were not "undertakings" and therefore Equity and the Institute were entitled to fix their fees.

Perhaps taking its cue from the Equity case and fearful of professional services cartels springing up, the OFT subsequently made sure that a number of trade associations in the music and photography fields (amongst others) representing self-employed artists removed minimum fee guidelines from their websites.  The "cultural" defence cut no ice at all.

FNV Kunsten Informatie en Media v Staat der Nederlanden

The facts

FNV Kunsten Informatie en Media("FNV") and the Nederlandse tookunstenaarsbon ("Ntb") were associations representing employees and self-employed.  They entered into a collective agreement with Vereniging van Stichtingen Remplacanten Nederlandse Orkesten ("the VSR"), an employers association, which included terms for substituting self-employed musicians ("deputies") for members of an orchestra.  The collective agreement set out minimum fees (in other words, fixed the price) for deputies hired under contracts of employment (employed deputies) and under a contract for services (self-employed deputies).

Taking the same position as the Irish Competition Authority in the Irish Equity case, the Dutch Competition Authority concluded that the collective agreement setting out rates of pay for the deputies was not exempt from the Article 101 provisions and was therefore unlawful. Consequently the agreement was terminated by the Ntb and VSR and they declined to enter into any new agreement with FNV containing provisions relating to self-employed deputies.  FNV brought a claim in the Dutch courts for a declaration that a collective agreement setting minimum fees for self-employed persons was permitted under competition law.

The case was referred to the European Court of Justice ("ECJ") for a preliminary ruling on the following questions:

  1. Does Article 101(1) apply where a collective agreement sets minimum fees for self-employed persons performing the same functions under a contract for services as employed workers; and
  2. If so, will such an agreement be subject to the Article 101(1) regime if the intention was to improve, or the effect was improving (either indirectly or directly), working conditions of the employees?

The decision

The ECJ concluded that:

  1. The deputies/substitutes are, in principle, "undertakings" within the meaning of EU law as they offer their services for remuneration on a given market and perform their activities as independent economic operators in relation to their principal (i.e. the employer);
  2. An organisation representing and negotiating on behalf of its self-employed members does not act as a trade union and therefore a social partner, but acts as an "association of undertakings";
  3. Although the provisions of the TFEU encourage dialogue between "management and labour" with a view to achieving the social policy objectives of the Treaty (for example Articles 151, 153 and 155) for the employed, there are no equivalent provisions applicable to the self-employed;
  4. In these circumstances, a collective agreement concluded by an employees' organisation acting in the name of and on behalf of its self-employed members does not constitute the result of a collective negotiation between employers and employees and therefore cannot be excluded from the Article 101(1) regime; BUT
  5. Where a collective agreement concluded by an employees' organisation acting on behalf of its self-employed members who are "false self-employed" (in other words, carrying on comparable work to employees in that particular case), then the social policy objectives of the Treaty (to improve terms of employment and working conditions) would outweigh the prohibition on price-fixing.

So maybe we have the beginnings of a "social" exemption for competition rules applicable to the self-employed, if not a cultural one.

The "false self-employed"...

The ECJ noted that the classification of a "self-employed" person under national law (often for tax or other administrative reasons) does not prevent that person being classified as an employee (and therefore not an "undertaking") for the purposes of EU law.   However, the ECJ has left it to the national courts to decide on whether a self-employed person is in fact "false self-employed" by carrying out work comparable to the employed thereby disguising an employment relationship.  Factors that will be taken into consideration relate to the degree of control the self-employed worker has over his work, including:

  • Does he have the freedom to choose the time, place and content of the work;
  • Does he share the employer's commercial risks; and
  • Does he form an integral part of the employer's undertaking creating a single economic unit of employer plus self-employed?

Bearing in mind the factors above, the national courts will need to consider the nature of the contractual relationship between the self-employed and the employer; is it one of subordination, or do the self-employed have more flexibility than their employed colleagues performing the same activity in terms of working hours, place and manner of the tasks in hand?

Does the ECJ's test work?

The ECJ has found a middle ground which will benefit a category of self-employed workers in certain factual circumstances.  However, whether or not a person is "false self-employed" is not necessarily easy to determine on a case by case basis, particularly in the arts and entertainment sectors.

The position is clear where the self-employed are truly carrying out comparable work to their colleagues, for example, a deputy covering the principal oboe who has been signed off sick.  But does the category of "false self-employed" extend to situations where the work would never have been carried out by the employed in the first place?

Large-scale orchestral works often require forces additional to an employed orchestra, known as "extras".  It is unlikely that any orchestra would employ, for example, a mandolin player.  So is a self-employed extra engaged to play mandolin able to rely on terms negotiated on his behalf by a union, or is the union, together with the employer, unlawfully fixing his price? What about collective agreements setting out terms outside of the employer/employees' standard contract, for example a recording or performance falling outside of contracted hours?  The ECJ provides no answer to these questions.

Although Dutch orchestral deputies look set to benefit along with their employed orchestral colleagues, the ECJ is bound to be required to address the unresolved issues as the categories of "self-employed" continue to widen in the modern economy.  In the meantime, the self-employed may take some comfort from the ECJ's common sense approach which (at least in some circumstances) enables them to benefit from improved working conditions alongside their employed colleagues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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