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Lecture Notes 6
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Notes from the sixth interactive session in the European Competition law master's subject.
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Lecture 6I. General
1. Competition law – rules applicable to MS
→ State aid rule mostly concern Member States behaviour
doctrine of combined application of Protocol 27 annexed to the Treaties, Article 4(3) TEU and Articles
101-102 TFEU
State aid (Articles 107-109 TFEU): State aid is a part of competition law in the view of the Commission
and Devroe, but not in the view of most competition law books. This is especially true today : the
modernisation of state aid has just been finished. This modernisation happened much along the line of
the modernisation of Art. 101- 102 TFEU.
Public undertakings (Art. 106(1) TFEU) Undertakings to which MS grant special or exclusive rights (Art.
106(1) TFEU)
o Undertakings entrusted with operation of services of general interest (SGEI) or having the
character of revenue-producing monopoly (Art. 106(2) TFEU)
2. State aid – what we know
Part of competition law sensu lato
cf. position in TFEU
now more than ever? (Same modernazition in 101/102 also in state aid but in a different way)
Why? organisation of common self-discipline: we don't want undertakings to threaten a State to leave in order
to get favourable treatment that they will then ask to other States. Therefore, state aid rules are called «
mutual disarmament » rules.
Specific for EU competition law not US. Why? Because the EU has almost no budget compared to Member
States, so it is the Member States that are likely to grant aid to some companies. Moreover, in Europe, we are
not so much against state intervention.
Growing relevance
3. Comparison with other branches of competition law
No prohibition, no nullity but incompatibility in TFEU
Exemptions possible
Duty to notify new aid (// concentration)
Limited direct effect
Mo fines under public enforcement + no true private enforcement yet (↔ 101-102)
No parallel application of EU-nat’l law (Conc; ↔ 101-102): this is because there is no national state aid law.
The EU does not trust Member States sufficiently for them to apply state aid law rules. So national competition
authorities cannot deal with state aid cases. But we still want to decentralize but how do we do that then? We
cannot do this by the techniques used in 101/102. So we have to use another technique.
We do have modernisation: 2012-2016 State Aid Modernisation SAM ( 101-102 ?)
more economic thinking but not in terms of market share. We reach this through a ‘refined econ
approach’ - sometimes so refined that it is difficult to apply.
, How can we have decentralization if we don’t have national state aid law?
We reach that result through BER. – enables EC to focus on more important cases (but not same
decentralisation as under 101-102) –
4. Structure of Articles 107-109 TFEU
107 TFEU = substance
107(1): principle of incompatibility with the internal market
107(2): automatic exemptions: if you fulfil the conditions to these exemptions, you are entitled to
them, the Commission has no discretion
107(3): facultative exemptions (discretion for EC): the playground of the Commission (in fact, much
more important): that were the Commission really makes policy: enormous discretion which the
Commission uses to engage in policy
108 TFEU = procedure: if the aid is incompatible but you followed the wrong procedure then It may still be
illegal and for that reason the aid may be recovered
108(1): existing aid: aid that already existed before the entry into force of the Treaty: the Commission
is lenient: we will never ask you retroactively to recover they will just tell you it is not compatible and
that you have to do this in the future
108(2): formal procedure: it goes for both existing and new aid: if the Commission has doubts (second
stage procedure just like in merger control)
108(3): new aid: the Commission is very strict (//merger control): obligatory notification, standstill, if
you do not respect the rules of notification then you will have to recorver the aif
108(4): EC block exemption Regs
109 TFEU = Council block exemption enabling Regs
II. Field of application (‘2nd line’) after SAM Article
107(1) TFEU
"Save as otherwise provided in the Treaties, any aid granted by a Member State or through Member State
resources in any form whatsoever which distorts or threatens to distort competition by favouring certain
undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be
incompatible with the internal market."
1. Field of application of Art 107 TFEU
if ... All the conditions are cumulative!
(behaviour :) granting aid: is this aid or not?
(parties :)
o grant by MS or through State resources
o favouring undertakings (see above) or production of goods
(object or effect :)
o (threat of) distortion of competition ...
o ... by favouring certain undertakings or production of certain goods = selectivity requirement
(EU dimension :)
o trade between MS is affected (see above)
o may be affected” but ECJ does not differentiate
... then → incompatible with the internal market
Unless: "otherwise provided in the Treaties" = Art 106(2), 107(2)-(3), 346 TFEU
, 2. ‘Aid’
1. What is relevant?
(financial) transfer from a MS to an undertaking
MS resources transferred to undertakings or productions
charges normally born by undertakings transferred to MS
This transfers consists in an artificial advantage when compared to market: something that you cannot obtain
on the market in normal conditions
beneficiaries could not have obtained the advantage on the market, or not at similar conditions
(Ex: the undertaking needs a Parliament act to get the aid.)
private investor would not have acted like State ('market investor criterion'): we will compare the
behavior of the MS to a normal private investor, would a private market investor be willing to pay the
same amount of money for the shares in that company at that moment. But that comparison can be
criticized: in fact, we do not want the State to behave like a private investor and we should not
compare those behaviors. We often want State to step in when private actors have long gone, for
example to save banks overnight. So, the criteria is not really suitable, but we do not have any other.
We need this criterion as otherwise it would create a loop hole for MS to provide state aid and just call
it an investment. We have to realize that sometimes MS have to act different than private actors.
Member States have been ever more creative in State aid by trying to disguise it in normal market behaviour
like investing in a company. Ex: investing in a company, buying shares. If the State buys shares in a company
almost broke, it is not really normal market behaviour. But couldn't we argue that a private actor could invest
in a broke company when it thinks it can go back on track?
2. What is irrelevant?
"Any form whatsoever"
e.g. gift, subsidy, loan, acquittal or non-recovery of debt, preferential tax treatment, capital injection,
guarantee, reduction of labour costs, installation of infrastructure, preferential pricing (tariff
reduction) by State, sale below the market price, purchase above market price, preferential treatment
in case of public procurement, research and development aid, publicity, 'dowry' in case of privatisation,
privatisation by way of a non-public procedure, extension of payment, ... can all constitute aid if other
conditions are fulfilled
'Causes or aims'
“[Art 107 TFEU] does not distinguish between the measures of State intervention ... by reference to
their causes or aims but defines them in relation to their effects“
o Aid with social character (e.g. measure to safeguard employment in company, sector or
region) is still aid!
o Aid to compensate for (e.g. regional) handicap is still aid!
Why you are granting aid is irrelevant, you can grant it with the best of intentions but it is still aid.
→ It’s irrelevant at this stage: we care about at this stage of exemptions! This is the EU way of doing things: we
want a large field of application and will make exceptions of noble goals
Cause does matter to some extent?
"[Art 107(1)] does not apply to a duty to pay or repay sums which are caused by the fact that those
sums were not payable by the person who paid them“ + idem for damages to which MS is condemned
charge resting upon undertaking and transferred to State artificial advantage aid 'granted' ? 'cause' to be read
as 'rationale' ?
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