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UK Competition law—daily round-up (02/08/2021)
The following Competition news provides comprehensive and up to date legal information on UK Competition law—daily round-up (02/08/2021)
ARCHIVED: This Practice Note has been archived and is not maintained. For further reading on this subject, see: State aid—overview.
The European Union Rules (EU rules) on state aid prohibit member states from granting aid or assistance which distorts or threatens to distort competition and inter-state trade. Therefore whenever a public body or publicly-funded body (such as a quango) provides financial support to an undertaking they need to consider carefully whether such support constitutes state aid, particularly given that the European Commission (the Commission) is obliged to claw back any illegally granted state aid (and relevant interest on such aid).
However the EU also recognises that state aid may be a necessary element of government policy where for example it wants to attract inward investment into underdeveloped regions (often known as 'assisted areas') or to encourage investment in high technology industries.
Article 107(1) of the Treaty on the Functioning of the European Union (TFEU) contains the basic prohibition on the grant of state aid, whereas TFEU, art 7, paras (2), (3) describe the type of state aid that the EU may allow. For a measure to constitute state aid, it must:
be a form of assistance by or through a public body or publicly funded body (such as a quango)
confer an advantage on an undertaking (an undertaking is a commonly used EU term that describes an entity which is engaged in economic activity and where there is a market in comparable goods or services. An undertaking does not have to be profit-making provided that any activity it carries out is one which, in principle, has commercial competitors. Undertakings can include charities, higher education institutions and even public sector bodies where they are engaged in economic activity)
be selective in its nature such as one that targets particular locations, undertakings or types of undertaking only
distort or threaten to distort competition, and
relate to an activity that is tradeable between member states and has the potential to affect trade (so even if an undertaking is not involved in exporting itself there is deemed to be an effect on trade if the relevant goods or services are subject to trade between member states)
The Commission and the European Courts interpret the application of the above tests broadly.
State aid can take many direct and indirect forms. Examples include:
subsidies
grants
loans
guarantees
indemnities
tax exemptions
preferential interest rates, and/or
provisions of goods or services on preferential terms or reduced rates
State aid may also apply where a state's tax revenues are involved even if there is no loss to the state as such. Examples include:
temporary or permanent tax exemptions
reduced tax rates
tax credits
favourable tax rules, and/or
rescheduling of tax repayments
The Commission controls and monitors state aid and member states must (subject to certain exemptions set out in this Practice Note) notify and seek approval from the Commission before granting state aid so that the Commission has the opportunity to either approve or refuse to approve the proposed measure. Notification can be a lengthy process. Even straightforward cases can take between six to nine months to process with complex cases taking even longer. Public authorities typically seek to get around the approval process by relying on exemptions such as those set out in the General Block Exemption Regulation (GBER) (as amended—see below).
Until 30 June 2014, Commission Regulation (EC) 800/2008 of 6 August 2008 (declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty GBER I provided for the automatic approval by the Commission of a specified range of measures which did not need to be notified to the Commission provided that all of the relevant provisions in the GBER I were complied with. Any state aid granted under the GBER I) had to be notified to the Commission within 20 working days of the aid being granted.
From 1 July 2014, a new Commission Regulation has been applied—EU 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of arts 107–108 of the Treaty (GBER II) (subject to any transitional provisions which apply under GBER II, art 58).
The GBER II, art 1(1) authorises state aid in the following areas, including:
regional aid
aid to SMEs in the form of investment aid, operating aid and SMEs' access to finance
aid for environmental protection
aid for research and development and innovation
training aid
recruitment and employment aid for disadvantaged workers and workers with disabilities
aid to make good the damage caused by certain natural disasters
social aid for transport for residents of remote regions
aid for broadband infrastructures
aid for culture and heritage conservation
aid for sport and multifunctional recreational infrastructures, and
aid for local infrastructures
The list of categories has increased in the GBER II in comparison with the GBER I.
There are exceptions to the GBER II such as:
aid to export-related activities
aid contingent upon the use of domestic over imported goods, and
aid to undertakings in difficulty
For more details (including on other exceptions that may apply), see GBER II, arts 1(2)–1(5).
The GBER II also contains detailed provisions that must be complied with on:
maximum aid or ('intensity') rates (which have increased in the GBER II in comparison with the GBER I)
notification thresholds
eligible costs, and
types of activity that can be supported
Commission Regulation (EC) 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimus aid (De minimus Regulation) sets out types of aid where Commission approval is not required. The UK government recommends that other forms of exemption (such as the GBER or a specifically approved scheme) be relied upon in the first instance and the de minimus exemption be used as a 'back-up' for where there are no other options. Typically the total de minimus aid which can be given to a single recipient is €200,000 over a three-year fiscal period (De minimus Regulation, art 3(1)).
In 2008, the Commission published Community guidelines on state aid for environmental protection. The primary objective of state aid control in this area is to ensure, eg that a higher level of environmental protection occurs than would otherwise be the case had aid been granted. The Commission has set out the types of aid that may under certain circumstances be compatible with state aid law. These are set out in article 1.5 of the Community guidelines.
State aid is often employed to promote the economic development of certain disadvantaged areas ('regional aid'). Under the TFEU, using state aid in this way is considered compatible with the single market. The current map of such areas in the UK for the period 2014–2020 includes areas such as Cornwall, most of Wales, and a number of areas which have been in industrial decline in the Midlands and the North of England (including ex-coal mining areas).
The Commission has also provided specific guidelines and framework documents in the following areas:
Guidelines on state aid for rescuing and restructuring non-financial undertakings in difficulty
Framework for state aid for research and development and innovation, and
Guidelines on state aid to promote risk finance investments (which includes guidance on venture capital funds)
There are a number of specific rules that apply to individual sectors including:
agriculture
audiovisual production
broadband
broadcasting
coal industry
electricity (stranded costs)
financial services (in connection with the global financial crisis)
fisheries
postal services
shipbuilding
steel
synthetic fibres—motor vehicles industry, and
transport (including air transport, maritime transport and rail and road)
For further information on these sectors see the Commission's website here.
The Commission (through Commission Decision of 28 November 2005 on the application of Article 86(2) of the EC Treaty to state aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest) has adopted specific measures on the payment to undertakings that perform services of general economic interest. Examples are postal services and a wide range of health and social services.
Public authorities when granting state aid, typically ask the relevant undertaking for any details of state aid that they are in receipt of and what they have received in the past. This is because an undertaking may have received aid from a variety of sources which are cumulated (added together) to determine the maximum amount of permitted state aid.
A public authority may already have permission to grant state aid in certain circumstances. All relevant cases can be searched by using the specific search portal on the Europa Competition website.
The market economy investor principle (MEIP) is
ARCHIVED: This Practice Note has been archived and is not maintained. For further reading on this subject, see: State aid—overview.
The European Union Rules (EU rules) on state aid prohibit member states from granting aid or assistance which distorts or threatens to distort competition and inter-state trade. Therefore whenever a public body or publicly-funded body (such as a quango) provides financial support to an undertaking they need to consider carefully whether such support constitutes state aid, particularly given that the European Commission (the Commission) is obliged to claw back any illegally granted state aid (and relevant interest on such aid).
However the EU also recognises that state aid may be a necessary element of government policy where for example it wants to attract inward investment into underdeveloped regions (often known as 'assisted areas') or to encourage investment in high technology industries.
Article 107(1) of the Treaty on the Functioning of the European Union (TFEU) contains the basic prohibition on the grant of state aid, whereas TFEU, art 7, paras (2), (3) describe the type of state aid that the EU may allow. For a measure to constitute state aid, it must:
be a form of assistance by or through a public body or publicly funded body (such as a quango)
confer an advantage on an undertaking (an undertaking is a commonly used EU term
ARCHIVED: This Practice Note has been archived and is not maintained. For further reading on this subject, see: State aid—overview.
The European Union Rules (EU rules) on state aid prohibit member states from granting aid or assistance which distorts or threatens to distort competition and inter-state trade. Therefore whenever a public body or publicly-funded body (such as a quango) provides financial support to an undertaking they need to consider carefully whether such support constitutes state aid, particularly given that the European Commission (the Commission) is obliged to claw back any illegally granted state aid (and relevant interest on such aid).
However the EU also recognises that state aid may be a necessary element of government policy where for example it wants to attract inward investment into underdeveloped regions (often known as 'assisted areas') or to encourage investment in high technology industries.
Article 107(1) of the Treaty on the Functioning of the European Union (TFEU) contains the basic prohibition on the grant of state aid, whereas TFEU, art 7, paras (2), (3) describe the type of state aid that the EU may allow. For a measure to constitute state aid, it must:
be a form of assistance by or through a public body or publicly funded body (such as a quango)
confer an advantage on an undertaking (an undertaking is a commonly used EU term
that describes an entity which is engaged in economic activity and where there is a market in comparable goods or services. An undertaking does not have to be profit-making provided that any activity it carries out is one which, in principle, has commercial competitors. Undertakings can include charities, higher education institutions and even public sector bodies where they are engaged in economic activity)
be selective in its nature such as one that targets particular locations, undertakings or types of undertaking only
distort or threaten to distort competition, and
The Commission and the European Courts interpret the application of the above tests broadly.
State aid can take many direct and indirect forms. Examples include:
subsidies
grants
loans
guarantees
indemnities
tax exemptions
preferential interest rates, and/or
provisions of goods or services on preferential terms or reduced rates
State aid may also apply where a state's tax revenues are involved even if there is no loss to the state as such. Examples include:
temporary or permanent tax exemptions
reduced tax rates
tax credits
favourable tax rules, and/or
The Commission controls and monitors state aid and member states must (subject to certain exemptions set out in this Practice Note) notify and seek approval from the Commission before granting state aid so that the Commission has the opportunity to either approve or refuse to approve the proposed measure. Notification can be a lengthy process. Even straightforward cases can take between six to nine months to process with complex cases taking even longer. Public authorities typically seek to get around the approval process by relying on exemptions such as those set out in the General Block Exemption Regulation (GBER) (as amended—see below).
Until 30 June 2014, Commission Regulation (EC) 800/2008 of 6 August 2008 (declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty GBER I provided for the automatic approval by the Commission of a specified range of measures which did not need to be notified to the Commission provided that all of the relevant provisions in the GBER I were complied with. Any state aid granted under the GBER I) had to be notified to the Commission within 20 working days of the aid being granted.
From 1 July 2014, a new Commission Regulation has been applied—EU 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of arts 107–108 of the Treaty (GBER II) (subject to any transitional provisions which apply under GBER II, art 58).
The GBER II, art 1(1) authorises state aid in the following areas, including:
regional aid
aid to SMEs in the form of investment aid, operating aid and SMEs' access to finance
aid for environmental protection
aid for research and development and innovation
training aid
recruitment and employment aid for disadvantaged workers and workers with disabilities
aid to make good the damage caused by certain natural disasters
social aid for transport for residents of remote regions
aid for broadband infrastructures
aid for culture and heritage conservation
aid for sport and multifunctional recreational infrastructures, and
aid for local infrastructures
The list of categories has increased in the GBER II in comparison with the GBER I.
There are exceptions to the GBER II such as:
aid to export-related activities
aid contingent upon the use of domestic over imported goods, and
aid to undertakings in difficulty
For more details (including on other exceptions that may apply), see GBER II, arts 1(2)–1(5).
The GBER II also contains detailed provisions that must be complied with on:
maximum aid or ('intensity') rates (which have increased in the GBER II in comparison with the GBER I)
notification thresholds
eligible costs, and
types of activity that can be supported
Commission Regulation (EC) 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimus aid (De minimus Regulation) sets out types of aid where Commission approval is not required. The UK government recommends that other forms of exemption (such as the GBER or a specifically approved scheme) be relied upon in the first instance and the de minimus exemption be used as a 'back-up' for where there are no other options. Typically the total de minimus aid which can be given to a single recipient is €200,000 over a three-year fiscal period (De minimus Regulation, art 3(1)).
In 2008, the Commission published Community guidelines on state aid for environmental protection. The primary objective of state aid control in this area is to ensure, eg that a higher level of environmental protection occurs than would otherwise be the case had aid been granted. The Commission has set out the types of aid that may under certain circumstances be compatible with state aid law. These are set out in article 1.5 of the Community guidelines.
State aid is often employed to promote the economic development of certain disadvantaged areas ('regional aid'). Under the TFEU, using state aid in this way is considered compatible with the single market. The current map of such areas in the UK for the period 2014–2020 includes areas such as Cornwall, most of Wales, and a number of areas which have been in industrial decline in the Midlands and the North of England (including ex-coal mining areas).
The Commission has also provided specific guidelines and framework documents in the following areas:
Guidelines on state aid for rescuing and restructuring non-financial undertakings in difficulty
Framework for state aid for research and development and innovation, and
Guidelines on state aid to promote risk finance investments (which includes guidance on venture capital funds)
There are a number of specific rules that apply to individual sectors including:
agriculture
audiovisual production
broadband
broadcasting
coal industry
electricity (stranded costs)
financial services (in connection with the global financial crisis)
fisheries
postal services
shipbuilding
steel
synthetic fibres—motor vehicles industry, and
transport (including air transport, maritime transport and rail and road)
For further information on these sectors see the Commission's website here.
The Commission (through Commission Decision of 28 November 2005 on the application of Article 86(2) of the EC Treaty to state aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest) has adopted specific measures on the payment to undertakings that perform services of general economic interest. Examples are postal services and a wide range of health and social services.
Public authorities when granting state aid, typically ask the relevant undertaking for any details of state aid that they are in receipt of and what they have received in the past. This is because an undertaking may have received aid from a variety of sources which are cumulated (added together) to determine the maximum amount of permitted state aid.
A public authority may already have permission to grant state aid in certain circumstances. All relevant cases can be searched by using the specific search portal on the Europa Competition website.
The market economy investor principle (MEIP)
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