The Modernization Process of EU State Aid Law: “The Search for the Right Balance Between State Intervention and the Invisible Hand”

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Stefano Grassani, May 28, 2014

One of the distinct and unique features of European antitrust law is (and has always been since its enactment in 1957) that the rules on restraints of trade and monopolization are complemented by a set of provisions, as embedded in the Treaty on the Functioning of the European Union, which, while not strictly related to the pursuit of anticompetitive conducts per se, nevertheless aim at effectively ensuring level playing fields as a pre-condition for fair competition across Europe.

An undertaking that obtains governmental “support,” be it in terms of subsidies or any other form of relief/incentive/contribution, gains an advantage over its competitors. Such an advantage not only distorts competition between companies (often causing less efficient businesses to prevail) but, at the same time, risks affecting the achievement of the fundamental goal of a true market integration. As EU Commissioner Joaquin Almunia recently underlined, “State aid control is an instrument of economic integration that underpins the good functioning of the single market, which is Europe’s best asset in the global economy.”

Articles 107-109 of the TFUE, under the same heading which sets forth “classic” antitrust rules, therefore generally prohibits State aids granted by Members States in the European Union unless they are justified by reasons of general economic development. To ensure that this prohibition is respected, the European Commission-in addition to enforcing antitrust provisions-is also in charge of ensuring that State aids comply with EU rules.

One could certainly question (and many do) whether, 60 years after the signature of the Treaty of Rome, Europe can still afford to be the last strenuous defender of utmost competition or whether living with self-imposed State aid rules-which bring antitrust enforcement to higher standards not witnessed elsewhere in the world-has become an untenable proposition. At times where global competition acknowledges the increasing presence of sovereign funds and State-driven economies, what could have been perceived in the past as a trivial intellectual proposition has now become a serious and extremely realistic problem.