State aid provisions
Economics has always played an important role within the field of State aid. The European Commission relies on economic and financial analysis to make its State aid decisions, to assess restructuring plans and to support it in designing remedies. In particular, the Commission relies on the Private Investor Test (PIT) to assess whether a public measure confers an economic advantage to an undertaking that would otherwise not have been achieved.
The European Commission is currently engaged in a new State Aid Modernisation (SAM) initiative, which will involve a comprehensive review of the State aid rules. These include new guidelines on regional aid, environmental and energy aid as well as a revision of the General Block Exemption Regulation (GBER). With respect to the latter, the revision of the de minimis regulation, which simplifies the treatment of small aid measures, has already been adopted.
A company which receives government support obtains an advantage over its competitors. Therefore, the EU Treaty generally prohibits State aid unless it is justified by reasons of general economic development. To ensure that this prohibition is respected and exemptions are applied equally across the European Union, the European Commission is in charge of watching over the compliance of State aid with EU rules.
As a first step, they have to determine whether a company has received State aid, which is the case if the support meets the following criteria:
- there has been an intervention by the State or through State resources, which can take a variety of forms (e.g. grants, interest and tax reliefs, guarantees, government holdings of all or part of a company, or the provision of goods and services on preferential terms, etc.);
- the intervention confers an advantage to the recipient on a selective basis, for example to specific companies or sectors of the industry, or to companies located in specific regions;
- competition has been or may be distorted;
- the intervention is likely to affect trade between Member States.
By contrast, general measures are not regarded as State aid because they are not selective and apply to all companies regardless of their size, location or sector. Examples include general taxation measures or employment legislation.
In accordance with the more economics based approach, the EU reformed its State aid provisions in the recent years. Today, the State aid provisions are fully coherent with the economic principles developed in EU competition law.