From the perspective of competition law, the general principle is that local authorities or other public bodies can operate in a competitive market, or in other words, carry on a business in competition with private companies in the market. However, when public bodies engage in such competitive activity in the market, stricter requirements are placed upon them than are generally applied to private companies. This is primarily because public bodies, such as local authorities and government agencies, are generally run on public funds. For example, these public bodies receive revenue from the budget or are allocated specific sources of income by other legislation. For this reason, and due to other circumstances, public bodies may have an advantage in competition over other competitors, who must rely on their own financing and revenue generation to cover all operating costs.
It can be said that the requirements placed on public bodies that operate in a way that is or could be competitive with private entities, alongside the performance of public services, are similar to those placed on undertakings with a so-called dominant position.
Based on Article 14. competition law The Competition Authority may require financial separation between a public entity's competitive operations and those operations of the same entity that benefit from a monopoly or protection, e.g. by receiving public funding for the activity. When financial separation is stipulated in this context, it is for the purpose of ensuring that public funds are not used to subsidise competitive activities.
The Competition Authority may then, on the basis of Article 16. competition law, to take other types of intervention than those described above against the conduct of a public authority that has a detrimental effect on competition. Such conduct may be prohibited if it is not authorised by specific legislation governing it. The Competition Authority has, over the years, made observations regarding the inappropriate and anti-competitive way in which public bodies operate. Recent examples include the leasing of state-owned premises for hotel operations, the running of fitness centres in connection with swimming pool operations, and access to gravel pits.
One problem that arises when, for example, a local authority begins to operate in a field that no one else has in that area is that it becomes more difficult than before for a private party to start operating in the same field. Public sector operation can thus hinder private access to the market.
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