Why control State aid?
A company which receives government support gains an advantage over its competitors. Therefore, the 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 ensuring that State aid complies with EU rules.
What is State aid?
State aid is defined as an advantage in any form whatsoever conferred on a selective basis to undertakings by national public authorities. Therefore, subsidies granted to individuals or general measures open to all enterprises are not covered by this prohibition and do not constitute State aid (examples include general taxation measures or employment legislation).
To be State aid, a measure needs to have these features:
- 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 providing goods and services on preferential terms, etc.);
- the intervention gives the recipient an advantage on a selective basis. for example to specific companies or industry sectors, or to companies located in specific regions
- competition has been or may be distorted ;
- the intervention is likely to affect trade between Member States .
Despite the general prohibition of State aid, in some circumstances government interventions is necessary for a well-functioning and equitable economy. Therefore, the Treaty leaves room for a number of policy objectives for which State aid can
be considered compatible. The legislation stipulates these exemptions. The laws are regularly reviewed to improve their efficiency and to respond to the European Councils' calls for less but better targeted State aid to boost the European economy. The Commission adopts new legislation is adopted in close cooperation with the Member States.
How is State aid verified?
The European Commission has strong investigative and decision-making powers. At the heart of these powers lies the notification procedure which -except in certain instances- the Member States have to follow.
The 2013 revision of the State aid Procedural Regulation introduced the possibility of conducting State aid sector inquiries, which was previously only possible as part of Antitrust and Merger control. State aid sector inquiries can be launched in situations where State aid measures may distort competition in several Member States, or where existing aid measures are no longer compatible with the regulatory framework.
Aid measures can only be implemented after approval by the Commission. Moreover, the Commission has the power to recover incompatible State aid .
Three Commission Directorates-General carry out State aid control: Fisheries (for the production, processing and marketing of fisheries and aquaculture products), Agriculture (for the production, processing and marketing of agricultural products), and Competition for all other sectors.
Companies and consumers in the European Union are also important players who may trigger investigations by lodging complaints with the Commission. Furthermore, the Commission invites interested parties to submit comments through the Official Journal of the European Union when it has doubts about the compatibility of a proposed aid measure and opens a formal investigation procedure .