competition disclaimer - european commissionpursuant to article108(3) tfeu. therefore, aid for the...

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EUROPEAN COMMISSION Secretariat-General

REFIT Platform

STAKEHOLDER SUGGESTIONS

V- COMPETITION

DISCLAIMER

This document contains suggestions from stakeholders (for example citizens, NGOs,

companies) or Member State authorities communicated to the Commission and submitted

to the REFIT Platform in a particular policy area.

It is provided by the secretariat to the REFIT Platform members to support their

deliberations on the relevant submissions by stakeholders and Member States authorities.

The Commission services have complemented relevant quotes from each suggestion

with a short factual explanation of the state of play of any recent, relevant ongoing or

planned work by the EU institutions.

The document does not contain any official positions of the European Commission

unless expressly cited.

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Table of Contents

GENERAL BLOCK EXEMPTION REGULATION (GBER) ........................................... 4

Submission V.1.a by the German Chambers of Commerce and Industry

(DIHK) (Closed) ................................................................................................ 4

Policy Context ............................................................................................................. 4

COMMUNICATION ON THE NOTION OF STATE AID ............................................... 7


(DIHK) (Closed) ................................................................................................ 7

Policy Context ............................................................................................................. 7

CONFLICTING DEFINITIONS IN DIFFERENT POLICY AREAS (STATE

AID / REGIONAL POLICY) ...................................................................................... 8

Submission V.3.a by the House of Dutch Provinces for better regulation

(ADOPTED) ...................................................................................................... 8

Policy Context ............................................................................................................. 8

Platform Opinion ....................................................................................................... 10

STATE AID BROADBAND RULES............................................................................... 11

Submission V.4.a by the House of Dutch Provinces for Better Regulation

(ADOPTED) .................................................................................................... 11

Policy Context ........................................................................................................... 12


STATE AID RULES AND ERDF INNOVATION PROJECTS ..................................... 14


(ADOPTED) .................................................................................................... 14

Policy Context ........................................................................................................... 15


STATE AID RULES ON LAND SALE / DEFINITION OF ENTERPRISE .................. 20

Submission V.6.a by the House of Dutch Provinces for Better Regulation .............. 20

Policy Context ........................................................................................................... 21

DE MINIMIS REGULATION .......................................................................................... 24


(DIHK) ............................................................................................................ 24

Policy Context ........................................................................................................... 24

Submission V.7.b by a member of the REFIT Platform Government group ............ 26

Policy Context ........................................................................................................... 26

STATE AID AND ESIF .................................................................................................... 29

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Submission V.8.a by a member of the REFIT Platform Government group ............ 29

Policy Context ........................................................................................................... 29

STATE AID – REGIONAL INVESTMENT AID ........................................................... 33

Submission V.9.a by a member of the REFIT Platform Government group ............ 33

Policy Context ........................................................................................................... 33

SUSTAINABILITY INITIATIVES VERSUS COMPETITION RULES........................ 35

Submission V.10.a by Detailhandel Nederland (LtL 494) (Closed) ......................... 35

Policy Context ........................................................................................................... 35

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GENERAL BLOCK EXEMPTION REGULATION (GBER)

Submission V.1.a by the German Chambers of Commerce and Industry (DIHK)

(Closed)

Amendments are necessary, above all, in terms of the support provided to SMEs. The

limitation on the duration of guarantees for loans to the founders of new businesses

should be abolished. In the case of corporate succession it must be possible for family

members or employees to take over the company. Particularly among medium-sized

companies there are many family businesses where a solution to the problem of

succession has to be found and financing problems might exist.

The assessment of the incentive effect has to be simplified. The burden of proof should be

reviewed, above all for research/development and investment aid.

Regional State aid for large companies should also be granted for new products, services

or innovations. It is positive that the Commission has dropped the originally planned

complete exclusion of ad hoc state aid for large corporations. Nevertheless, the

requirements must not be so strict and difficult to fulfil that approval becomes the

absolute exception. Even if large companies should regularly have fewer problems, their

support can provide important stimuli for the SMEs in the regions. This applies not only

to greenfield investments, but also new products and services or innovations in the case

of operational processes. The field of application should be expanded and more precisely

defined. Approval procedures in each individual case would be inappropriate.

The transparency rules must not result in more administrative burden for companies or

the publication of business secrets causing disadvantages for companies. The raising of

the threshold value for publication is very positive. Nevertheless, business secrets must

not be jeopardised, above all in the case of state aid for research, development and

innovation.

The risk of miscontrol has been significantly reduced as a result of the last changes. In

respect of the “loss of capital”, the absence of a time reference is however problematic.

Overall, in the last revision a few substantial improvements were carried out, in

particular the block exemption for the regional infrastructure and advisory services. Also

the other groups and the increase in the threshold values for re-search, development and

innovation are indeed very positive with respect to the reduction in the administrative

effort. In the details, however, further improvements are required (cf. above).

Policy Context

The GBER simplifies aid granting procedures by authorising Member States to grant aid

without prior notification to the Commission (under Article 108 (3) of the TFEU) through

a range of aid measures fulfilling horizontal common interest objectives. While the

notification allows the Commission to check the compatibility of the aid with the internal

market, the categories of aid exempted from notification under the GBER are presumed

to be compatible with the TFEU.

The GBER was revised in 2014 in the framework of the broad review of State aid rules

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launched by the Communication on State Aid Modernisation (SAM) of 8 May 2012

according to which State aid enforcement should facilitate sustainable, smart and

inclusive growth, focus on cases with the biggest impact on the single market, streamline

the rules and provide for faster, better informed and more robust decisions. The review of

the GBER was at the centre of the SAM reform and contributes to all objectives, with a

particular focus on simplification.

By setting both a maximum amount and a maximum duration concerning aid in the form

of loans to start-ups (Art. 22), the Commission aimed to strike the right balance between

simplification and proper calculation of the aid amount (i.e. ensuring the default interest

rate used to estimate the aid element remains defendable compared to market rates). For

periods above ten years, it is difficult to reliably estimate a market interest rate and

therefore to calculate the amount of aid involved for the purpose of ensuring that the

GBER principles are respected.

As regards corporate succession, the change of ownership through family members and

employees has been treated as not per se creating new value (investment). Therefore, the

revised GBER has not changed the principle according to which these categories of new

owners may not benefit from state aid for the purchase of shares.

The assessment of incentive effect was simplified compared to the previous GBER. Both

for SMEs and large undertakings under schemes, the only current requirement is that an

application for aid is made before the start of works. Additional documentation is only

required for ad hoc aid to large companies, as this type of aid is less likely to be part of a

well-designed aid policy and it is more difficult to establish its incentive effect.

Regional aid may be granted in 'c' regions (more developed assisted areas) for an initial

investment to SMEs, whereas aid to large enterprises may only be granted for initial in-

vestments in favour of new economic activities. A more restrictive approach on aid to

large enterprises in the 'c' areas has been chosen in the light of doubts about the

effectiveness of regional aid to large enterprises in these regions, especially with respect

to "follow-on investments" (as opposed to "greenfield") investments. Large enterprises

are less affected by regional handicaps and there are other aspects than aid, such as

economies of scale that are considered to be more decisive by companies when choosing

a location to invest.

For this reason initial investments in new economic activities are allowed under the

GBER, but "follow-on investments", such as diversification of existing establishments

into new products or new process innovations is subject to the notification obligation

pursuant to Article108(3) TFEU. Therefore, aid for the latter type of investment needs to

be assessed by the Commission on a case-by-case basis and might be found compatible

with the internal market on the basis of the Guidelines on regional state aid for 2014-

2020.

Transparency rules ensure that public authorities and private actors have easy access to

all pertinent information about aid awarded under the GBER. This shall provide for better

accountability of public spending in times of scarce resources and facilitate control and

enforcement by national authorities (e.g. checks of accumulation, treatment of

complaints). In the medium term, transparency will also reduce the need for extensive ex

post monitoring and simplify (and possibly remove) most reporting obligations. In order

to balance the benefits of transparency with the risk of creating additional administrative

burdens, the Commission has only subjected to this requirement aid amounts above a

certain threshold (EUR 500 000), which based on Commission estimates only concerns

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15% of cases. The protection of business secrets is guaranteed by the Commission

communication C(2003) 4582 of 1 December 2003 on professional secrecy in State aid

decisions.

The amended GBER has substantially enlarged block exempted areas by adding new aid

categories and by extending the existing ones (horizontal enlargement), as well as by

increasing notification thresholds for aid intensities in key area linked to the Europe 2020

objectives (such as Research, Development and Innovation activities (RDI) and risk

finance). This extension, as well as the extension of de minimis aid to enterprises in

difficulty excludes more schemes from the notification obligation and reduces

administrative burden at the level of Member States and companies (particularly SMEs). `

Current Situation

The Commission is exploring if further aid categories can be added to the GBER in the

future, in particular as regards ports and airports.

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COMMUNICATION ON THE NOTION OF STATE AID


(Closed)

The rules on business-related infrastructure and state resources have to be reviewed on

the basis of the case-law of the Court of Justice. They have to adopt a pragmatic

approach and refrain from any expansion of the notification obligation.

Policy Context

According to Article 107 (1) of the Treaty on the Functioning of the European Union

(TFEU), "save as otherwise provided in the Treaties, any aid granted by a Member State

or through 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."

The European Commission is in charge of assessing the compatibility of the aid with the

common market, in the light of Article 107(1) TFEU.

Measures that qualify as State aid under article 107 (1) TFEU are therefore to be notified

to the European Commission (according to Article 108(3) of the TFEU) which is in

charge of assessing its compatibility with the common market.

The Commission is working on a Communication on the notion of State aid, explaining

the concept of State aid as defined in Article 107(1) TFEU. The objective of the

Communication is to provide greater clarity on the notion of State aid pursuant to Article

107(1) TFEU, particularly as regards infrastructure financing. This should provide legal

certainty in relation to investment projects and is in line with the Commission’s

investment plan and the overarching objective of enhancing investment in support of

jobs, growth and competitiveness.

A number of respondents called upon the Commission to clarify further the applicability

of State aid rules to the financing of (business-related) infrastructure in a public

consultation organised in 2014 on a draft of the Communication.

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CONFLICTING DEFINITIONS IN DIFFERENT POLICY AREAS (STATE AID /

REGIONAL POLICY)

Submission V.3.a by the House of Dutch Provinces for better regulation

(ADOPTED)

Legislation:

Non-allignment of definitions used in legal acts of different policy fields, notably State

aid rules and regional policy (definition of innovation).

Problem descirption/burden on citizens and business:

The definition of 'Innovation’ used by DG Competition is different from the definition

used by DG Regional policy. The Dutch provinces ‘commute’ between these two

Directorates General whenever wishing to spend funds from the ERDF. The programme

they draw up for that spending must be approved by DG Regional and Urban Policy, but

whenever a province wishes to award government aid, DG Competition is required to

give permission. It has happened that the permission came so late that the money could

no longer be spent; the deadline from DG Regional and Urban Policy had expired.

The phenomenon of ‘visiting Brussels twice’ recurs in several areas. Provinces

participating in a grant application or supervising parties in drawing up a grant

application may for example request a grant from DG Environment or DG Regional and

Urban Policy, at which point they then have to report the application for government aid

to DG Competition. If the issue involves farming, they may even have to ‘travel to

Brussels’ on three occasions, because they then also have to report to DG Agriculture.

Simplification measure/suggestion:

The European Commission is attempting to make the rules clearer, above all for

industry, but often works on a directive by directive basis. The problems however, are in

the interaction between different directives.

Make it Work is an example of a purely practical, integrated approach. On the initiative

of the Netherlands (the Ministry of Infrastructure and the Environment), about ten

countries are working to improve the rules, rather than constantly coming up with new

rules. The countries then call upon the Commission, whenever changes are made to

existing regulations, to simultaneously eradicate the incompatibilities with other

directives. For example, if the Bird and Habitat Directives are altered, the contradictory

rules in other directives (for example the Framework Directive on Water) must at the

same time be taken into account.

The Juncker Investment Plan for Europe is another example of how things can work: in

the plan, approval for government aid is included in the same procedure as the grant

application. In this plan, the Commission has undertaken to apply a simplified

government assessment in the case of requests from Member States for a loan from this

fund on condition the project meets a number of requirements.

Policy Context

Policy context

State aid control is essential to protect the integrity of the internal market. A strict control

of State aid is critical for the achievement of economic and social cohesion. In the

absence of State aid control, there would be a serious risk that regions and Member States

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would engage in subsidy races to attract mobile investments or support local companies.

This would be to the detriment of Member States that do not have the budgetary capacity

to match the resources available to Member States with larger budgetary capacities. It is

therefore in everyone's interest that the Commission takes a strict approach to the

granting of State aid by Member States.

At the same time, it is acknowledged that regional disparities in economic development

and well-being are very wide in the EU and that the granting of State aid to promote

regional development in disadvantaged regions can therefore be justified. European

Structural and Investment Funds (European Structural and Investment funds (ESI) are

therefore, along national or regional/local budgets, co-financing many measures to

support economic activities. Given that it's the Member States who are responsible for

allocating the EU funds (including European Structural and Investment funds (ESI) and

that the aim of State aid control is to avoid disparities between Member States, these

projects are also subject to State aid control. This implies that, besides the rules set out in

the European Structural and Investment funds (ESI) -related legislation, these projects

also need to comply with State aid rules.

State aid policy is an important component of the EU Cohesion policy under which the

Member States are responsible for allocating EU funds. These co-financed projects are

subject to State aid control. In the 2007-2013 programming period, around 40% of

structural funds involved State aid. The 2014-2020 period marks a clear shift of cohesion

policy towards smart growth investments resulting in a higher number of projects where

State aid is potentially involved.

Legal framework and current practice

ESI Funds are managed and allocated by Member States, who can decide how to allocate

funds. Given this discretion and in order to avoid disparities among Member States,

projects also fall under State aid control and need thus to be notified to the European

Commission.

Article 107(3)(a) of the Treaty on the Functioning of the European Union (TFEU) allows

Member States to grant State aid to promote the economic development of areas where

the standard of living is abnormally low or where there is serious underemployment.

Article 107(3)(c) TFEU allows regional State aid to facilitate the development of certain

economic activities or of certain economic areas where such aid does not adversely affect

trading conditions to an extent contrary to the common interest.

The basic principles underlying the State Aid framework can be summarised as follows:

To be effective, aid must be focussed on the regions that need it most. Regional

aid maps are used to show the areas in which companies may receive regional

State aid, and at what intensity.

Aid should promote activities that provide a basis for long-term regional growth.

This puts the focus on aid for initial investment, and only in exceptional

circumstances allows for the granting of operating aid.

The rules are set out in:

Regional aid guidelines for 2014-2020 (adopted in June 2013), which set the basic

framework for the granting of regional aid between 01/07/2014 and 31/12/2020.

They contain:

o Criteria for designation of areas eligible for regional aid between 2014 and

2020. As of 16/09/2014, all regional aid maps have been adopted.

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o Conditions under which regional aid can be granted (eligible types of

projects, maximum levels of aid and other conditions to be respected).

The General Block Exemption Regulation (GBER), which defines the criteria

necessary to gain exemption from advance Commission approval for regional aid.

The new GBER entered into force on 1 July 2014.

Between 2007 and 2012 almost 40% (EUR 30 billion) of all regional aid was spent under

the general block exemption regulation. The use of the block exemption has increased

over the period, with almost 47% of all regional aid in 2012 being granted under this

instrument. Some Member States chose to provide regional aid only under block

exempted measures (e.g. UK).

While the new regional aid guidelines establish rules to assess the bigger cases of

regional aid, the new general block exemption regulation has been extended. Both the

categories of measures and the aid amounts have increased. This allows the Commission

to focus on cases involving large amounts of aid with a significant potential impact on the

internal market.

The list of aid types which the Member States may grant without a notification obligation

has been extended, e.g. ad hoc aid below the notification threshold, operating aid schemes

for outermost regions, transport aid schemes for outermost regions and sparsely populated

areas.

Background information

In the past the implication was that all co-financed ESI Funds measures constituting State

aid had to be notified to and approved by the Commission before they could be

implemented. In some cases this resulted in delays in the implementation of ESI Funds

programmes. To remedy this problem, the Commission already started in the beginning

of the previous decade exempting unproblematic State aid measures from the ex-ante

notification requirement under the so-called block exemption regulations (these

regulations set out clear conditions for different types of aid; provided an aid scheme was

in line with those conditions, it could be implemented by the Member State concerned

without the need to notify and await approval by the Commission). Over the years, the

Commission has extended the scope of these block exemption regulations. As a result, the

vast majority of measures co-financed by ESI Funds can be implemented directly by the

Member States without the need to notify.

One of the cornerstones of the State aid modernisation exercise started by the

Commission in May 2012 is the establishment of a new General Block Exemption

Regulation (GBER) which entered into force on 1 July 2014 and which simplifies aid

granting procedures for Member States even further. The GBER has been extended both

in scope, by covering new categories and forms of aid, and in the amount of aid that can

be granted, with higher notification thresholds and larger aid intensities. Increasing the

use of the GBER will have a strong impact on aid beneficiaries and on granting

authorities, leading to faster access to the aid (through avoidance of the notification

process) and reduction of administrative burdens (thanks to simpler conditions, e.g. for

demonstrating the incentive effect). The Commission is currently working on the

possibility of further extending the scope of the GBER by including aid for airports and

ports.

Platform Opinion

Adopted on 27 June 2016

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STATE AID BROADBAND RULES


(ADOPTED)

Legislation:

State aid rules relating to broadband

Problem description/burden on citizens and business:

In the same way as several regions in other Member States, a number of Dutch provinces

wish to encourage the construction of a broadband infrastructure in rural areas.

Industrial operators are not willing to carry out this process, because it is commercially

unattractive. The low population density means investments are high for them, with few

clients in return. The European Union is promoting the construction of (superfast)

broadband, and has introduced a series of schemes to which provinces can apply for

(additional) subsidy. There is for example a scheme within the European Structural and

Investment Funds: Connecting Europe Facility. The European Fund for Strategic

Investments (EFSI) also has a potential role. Nonetheless, it is often not possible to bring

the subsidies and established plans together. A province submits a subsidy application for

the construction of new generation access (NGA) or superfast broadband. In principle,

the investment costs for these networks are eligible for the subsidy.

Since 1 July 2014, these projects have no longer been required to pass through the long

and demanding notification procedure for state aid; it is enough for the province to

simply issue an exemption notification. Nonetheless, even this procedure is not an easy

one; the subsidy can only be issued for construction in areas that as yet have both no

infrastructure and where no infrastructure is set to be introduced in the next three years.

Via a public consultation procedure, the province is required to determine whether these

areas are set to remain ‘blank spots’ on the map. Such procedures are often very difficult,

because for reasons of competition, businesses are unwilling to reveal their plans for the

next few years.

According to the rules on state aid, the subsidy must be awarded on the basis of a ‘public,

transparent and non-discriminatory competitive selection procedure’. It is unclear for

provinces when the procedure is sufficiently ‘open and transparent’ for the state aid

rules; they have the feeling that too much emphasis is placed on possible falsification of

competition in the awarding of subsidies, when the request in fact relates to a subsidy

tender to which any number of parties can respond.


It is not sufficient to make the state aid procedure for the construction of broadband less

demanding. The conditions for obtaining an exemption from the notification procedure

are very strict, and not in line with the ‘lighter’ procedure. A more effective method

would be to introduce the lighter test as applicable for the Investment Plan for Europe

(EFSI).

In a previous instance of broadband construction by provinces, the European

Commission issued a so-called comfort letter, making it clear to all parties that a less

stringent procedure would be sufficient.

Finally, it would be extremely useful for the provinces to be able to estimate in advance

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the costs they are expected to incur, in order to comply with the rules on state aid and

public procurement procedures. By way of illustration: for one broadband project a

province was forced to employ one FTE for a whole year, in order to fulfil the

requirements of the procedures. In drawing up the new rules, the European Commission

should prepare an estimate of the costs for subnational authorities via an impact

assessment.

Policy Context

State aid control is essential for protecting the integrity of the internal market. A strict

control of State aid is also critical for the achievement of economic and social cohesion.

In the absence of State aid control, there would be a serious risk that regions and Member

States would engage in subsidy races to attract mobile investments or support local

companies. This would be to the detriment of the weaker Member States that do not have

the budgetary capacity to match the resources available to more prosperous Member

States. It is therefore in everyone's interest that the Commission takes a strict approach to

the granting of State aid by Member States.

At the same time, it is acknowledged that certain activities and regions attract lower

investments as profit prospects are not immediate, although these activities are crucial for

economic development of the relevant areas. Broadband connectivity is of strategic

importance for all sectors of the economy as well as for social and for territorial cohesion.

The European Union’s Europe 2020 Strategy ("EU2020") along with one of its flagship

initiatives, the Digital Agenda for Europe (“DAE”) state the objective of bringing basic

broadband to all Europeans by 2013 and ensuring that, by 2020, (i) all Europeans have

access to much higher Internet speeds of above 30 Mbps and (ii) 50 % or more of

European households subscribe to Internet connections above 100 Mbps.

To roll out the necessary broadband infrastructure, public funding is necessary to

complement private investments in order to ensure coverage of areas insufficiently served

by the market (in particular in order to bridge the 'rural divide') and to improve existing

networks and thus ensure better coverage, speeds, and the necessary support for new and

innovative services (delivering a 'step change' as compared to current infrastructure).

Member States have different needs of broadband network technologies (due to

differences in existing networks, geographical topologies) and different funding abilities

(availability of funds, different levels of revenue). Therefore, when public funding is

involved, it is crucial to have a level playing field for the protection of private investors,

alternative operators and different technologies.

The Commission has continuously supported public financing aimed at supporting

adequate broadband coverage at affordable prices for all European citizens, not least in

rural areas. To this end State aid rules ensure that, where broadband infrastructure has

been publicly funded, technological neutrality and open access to alternative operators are

protected and crowding out of private investments by overbuilding infrastructure is

avoided.

The procedures linked to the granting of state aid for broadband activities have already

been simplified recently: first in 2013 by the EU Guidelines for the application of state

aid rules in relation to the rapid deployment of broadband networks and again in 20414

with the adoption of the General Block Exemption Regulation (GBER). The Broadband

Guidelines which were revised in 2013 take into account these objectives and aim to

support Member States in achieving the Digital Agenda targets. The new General Block

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Exemption Regulation adopted in 2014 is a further means of promoting certain types of

investment aid for broadband projects without requiring notification.

While there was no impact assessment before the elaboration of the GBER, the

Broadband Guidelines were subject to an impact assessment. The general principles of

State aid rules in this field have therefore been tested for impact. The GBER provisions

are further simplifications of these principles.

Platform Opinion

Adopted on 27 June 2016

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STATE AID RULES AND ERDF INNOVATION PROJECTS


(ADOPTED)

Legislation:

State aid rules and public procurement rules create bottleneck for ERDF subsidy

submissions.


State aid rules regularly reveal a somewhat outdated vision on cooperation between

(subnational) authorities and businesses, often backed by knowledge institutions such as

universities. Research and innovation projects for example are characterised by a certain

degree of unpredictability. It is possible that the focus will shift during the course of the

project.

A precondition for the granting of aid by the European Commission is that the

procurement rules must be complied with. However, a tendering procedure sometimes

takes so long that the period within which the money must be spent (mostly one year) has

already expired. For public-private and public partnerships, subnational authorities may

face a variety of different tendering issues. How can a province wishing to implement a

project with a selected partner do so without having to undergo the compulsory tendering

procedure? And how can the 'public partners' in a partnership award orders to other

partners in the partnership?

A project of this kind may well have been started precisely to create the necessary

freedom, and to investigate the boundaries, but state aid and public procurement rules

are no longer suitable. One example is the relatively new concept of living labs:

Businesses and knowledge institutions, including universities, are increasingly joining

forces to establish pilot projects or living labs, where the product or service they wish to

develop together is tried out in a situation that approximates reality as closely as

possible. The initiators also involve the end users, consumers or other businesses and

institutions in the pilot. The feedback from all stakeholders sometimes leads to important

adjustments to the product or service. The advantages of a pilot project or living lab are

that the users end up with products or services that tie in better with their needs and

capabilities, businesses manufacture products that are better matched to demand, and the

knowledge institutions can test their ideas in practice. This approach to working

encourages and indeed accelerates innovative developments. The European Commission

recognises these advantages, and has included the phenomenon of the living lab in

European funds. As a consequence, in principle they are eligible for subsidies, for

example from the European Regional Development Fund (ERDF). However, there are

other European rules that hinder the process, as demonstrated by the following example:

A university wishes to launch a pilot project for entrepreneurs from the small and

medium enterprise sector (SME). Within the pilot project, a product will be tested and

demonstrated. It has reached the final stage before being brought to market. The SMEs

will be able to make free use of the facilities of the university. The university submits an

application for an ERDF subsidy, which comes up against a series of bottlenecks:

• Because the university intends to ‘pass on’ part of the subsidy to the participating

15

SMEs, this is effectively a two-level subsidy. If the rules are strictly interpreted, this

means that the subsidy has to be registered for a procedure that can take between three

and eighteen months; a very long lead time for a project of this kind;

• The amount of the subsidy can be restricted by the rules on state aid. Because the

product is nearly ready for the market, the idea is that the subsidy could result in unfair

competition;

• Because the parties are already working together as unique partners in this pilot

project, it is in many cases not possible for a public procurement procedure to have taken

place for the selection of the cooperation partner. Because in the elaboration of the

cooperation there could be indications of government orders subject to a compulsory

procurement procedure, the subsidy application may end up being rejected on the basis

of tendering objections.


To create more leeway for pilot projects, and as a result to encourage innovation, these

barriers need to be reduced and if possible eradicated. It would be a sound move, for

example, to introduce a new exemption for pilot projects, thereby broadening the

possibilities within the rules for state aid. If the possible ‘passing on’ of the subsidy to the

SMEs then complied with the rules, it should be sufficient to issue notice, rather than

requiring the long-term registration procedure. A simplified test for state aid that is

carried out more rapidly could also work in favour of pilot projects. Within the European

Fund for Strategic Investments (EFSI), this less strict test is already applied.

The cooperation between government and public-private parties must have priority. With

that in mind, just like research institutions, nature conservancy organisations should be

permitted to carry out 15 to 20 percent of their activities on a commercial basis. If they

remain below that limit, they will not be viewed as commercial players. Cooperation

between government, industry and other institutions, and cooperation between individual

government authorities should not be weighed down with unnecessary administrative

burdens.

Policy Context

Public procurement rules aim at creating a level playing field for all businesses across

Europe, EU law sets out minimum harmonized public procurement rules for tenders

whose monetary value exceeds a certain amount. For tenders of lower value, national

rules apply. Nevertheless, these national rules also have to respect the general principles

of EU law in order to avoid disparities between companies.

At the same time, State aid control is essential for protecting the integrity of the internal

market and for economic and social cohesion. In the absence of State aid control, there

would be a serious risk that regions and Member States would engage in subsidy races to

attract mobile investments or support local companies. This would be to the detriment of

Member States that do not have the budgetary capacity to match the resources available

to Member States with more budgetary capacities.

On the other hand, it is acknowledged that regional disparities in economic development

and well-being are very wide in the EU and that the granting of State aid to promote

regional development in disadvantaged regions can therefore be justified. Therefore, the

16

EU Cohesion funds co-finance projects together with Member States. This is done for

instance through the European Regional Development Fund (ERDF). Where such

funding is State aid and thus can lead to distortions between Member States, rules on

regional State aid set a level playing field in order to limit the distortions. Furthermore,

there are areas (such as R&D&I) where well-designed State aid has an important role to

play in order to compensate for market failures.

Therefore, given that it is the Member States who are responsible for allocating the EU

funds (including ERDF), both public procurement and state aid rules need to be respected

in the allocation of these funds in order to avoid distortions at company level and among

Member States.


The ERDF is managed and allocated by Member States, who can decide how to allocate

funds. In order to avoid disparities among Member States, this use of the funds – insofar

as they are used to subsidize economic activities –is subject to the EU rules on State aid.

The Treaty on the Functioning of the European Union (TFEU) allows state aid to be

granted for the economic development of areas where the standard of living is abnormally

low or where there is serious underemployment (article 107(3)(a)) as well as for the

development of certain economic activities or of certain economic areas (article 107(3)(c)

TFEU).

ERDF funding that addresses regional cohesion concerns is generally covered by the

State aid rules on regional aid:

Regional aid guidelines for 2014-2020 (adopted in June 2013), which set the basic

framework for the granting of regional aid between 01/07/2014 and 31/12/2020.

They contain:

- Criteria for designation of areas eligible for regional aid between 2014

and 2020. As of 16/09/2014, all regional aid maps have been adopted.

- Conditions under which regional aid can be granted (eligible types of

projects, maximum levels of aid and other conditions to be respected).

The General Block Exemption Regulation (GBER), which defines the criteria

necessary to gain exemption from advance Commission approval for regional aid.

The new GBER entered into force on 1 July 2014.

Public procurement rules - in order to avoid distortions among companies, public

procurement rules must be complied with. The latter are set at national level,

however, in order to achieve minimal harmonisation at EU level, there are EU

Public Procurement rules set out in dedicated Directives, which apply above a

certain threshold. This is due to the fact that projects of a higher economic value

may cause distortions which are more disruptive for the internal market EU Public

Procurement Directives must be transposed into national legislation fully and in a

compliant way, after which compliance with national legislation ensures, at the

same time, compliance with the EU Public Procurement rules without the need to

follow two sets of rules at the same time.

Alternatively, where ERDF funding aims at contributing to R&D&I, the 2014 Framework

for State aid to Research and development and innovation sets the level playing field for

17

such aid.

Both the regional aid and the R&D&I aid rules are complemented by the General Block

Exemption Regulation (GBER), which defines very large categories of State aid which

can be implemented directly by the Member States. The new GBER entered into force on

1 July 2014 and today well over 90% of all State aid measures are covered by the GBER

(and thus implemented without any prior involvement by the Commission). This allows

the Commission to focus on cases involving large amounts of aid with a significant

potential impact on the internal market.

Several aspects should be highlighted in the context of this submission by the Dutch

provinces:

Following the Commission's State Aid Modernisation reform of 2014, the new R&D&I

rules provide greater flexibility, for instance by increasing the allowed aid intensities and

the threshold amounts above which aid need to be notified in advance to the Commission,

so that more measures can be implemented directly under the GBER without prior

clearance by the Commission.

The concept of 'living labs' is a new, very broad and dynamic notion that can cover a

wide range of cooperation situations and eco-systems. There is no definition of such labs

in the ERDF Regulation. Depending on what a particular 'living lab' actually does, it may

benefit from different types of State aid, in the first instance either regional aid or

R&D&I aid.

Under the regional aid rules, aid for an initial investment can be provided in assisted

areas. The level of aid is determined on the basis of the regional aid maps.

Under the R&D&I rules, there are several options, depending on the actual activity

that will be supported:

First, if the project concerns laboratory-scale prototypes and small scale pilot

lines, it would qualify as industrial research, which allows for a relatively high aid

level, since distortions are considered limited because of the remoteness to the

market. This may already cover some of the activities of 'living labs'.

Second, if a project is close to the market, it may qualify as experimental

development, for which aid is also allowed. The definition of experimental

development is broad and goes very close to the market since it includes

prototyping, demonstrating, piloting, testing and validation of new or improved

products, processes or services in environments representative of real life

operating conditions. In certain circumstances, it also covers the development of

commercially usable prototypes or pilots.

Third, State aid for innovation is allowed to SMEs. This covers the costs for

innovation support services, which includes the provision of office space, data

banks, market research, laboratories, quality labelling, testing and certification,

which in many cases closely matches the type of services envisaged by 'living

labs'.

Finally, in case the 'living lab' functions as a type of infrastructure, it could qualify

either as a research infrastructure (if it is used by the scientific community) or as

an innovation cluster (if it is used by an innovation cluster). In the latter case, it

18

could not only obtain investment aid, as aid for running the cluster is also allowed.

There are thus many options to grant aid for 'living labs'. All these options are covered by

the GBER, which means that a Member State normally can implement it directly without

prior notification to the Commission. For aid that would still have to be notified (or

voluntarily pre-notified, for instance where a Member State is uncertain of the coverage

of GBER), it is worth noting that the Commission has so far never had a State aid case

where it refused aid for a 'living lab'.

With regard to public procurement of R&D services, the new R&D&I-Framework (in

its section 2.3) offers some guidance in order to identify situations where tender

procedures ensure that such services are provided at market value and thus fall outside of

State aid rules. It makes a distinction between 'exclusive development' (i.e. where the

public purchaser reserves all results and benefits exclusively for itself), to which the

Public-Procurement Directives apply, and 'pre-commercial' procurement, to which they

do not apply. The procurement qualifies as 'pre-commercial' if the public purchaser does

not reserve all results and benefits exclusively for itself and excludes purchase of

commercial volumes of final product/service. In this case, it is considered that there is no

state aid if the procurement takes place via an open, transparent non-discriminatory

procedure and on certain conditions which ensure dissemination or wide access to the

results. It is important to note however that public procurement rules in this context are

only used to exclude the possibility of State aid in a given situation. In a situation where

funding is recognized to be State aid, there is no requirement of public procurement.

As specifically concerns the allegation that the public procurement rules in general

entail delays which are incompatible with the timelines of the living lab projects, the

Commission would point to the following aspects. To the extent that a certain contract is

subject to public procurement rules in the first place, and when public procurement rules

are in fact applicable to living labs (which depends on the specific features of the

particular lab), the new legal framework set out in the Public Procurement Directives of

2014 enables shorter deadlines, more flexibility and less administrative burden in the

existing procedures, as well as new procedures, such as the innovation partnership

procedure which is specifically designed for innovation, which all makes public

procurement more innovation friendly, and allows faster handling than before. In

addition, there are a number of rules which facilitate the uptake of innovative solutions

from the market, initiating specific innovation for the needs of procurers and facilitating

access of innovative start-ups and SMEs.

Finally, as regards the issue of nature conservation, the Commission has provided

dedicated guidance in its 2016 Notice on the Notion of Aid (OJ C 262, 19.7.2016, p. 1,

see points 33 to 37).

The Notice has, first of all, clarified that nature conservation activities are in many cases

not considered to be economic activities, and thus not covered by State aid rules, unless

they are predominantly financed by visitor fees or other commercial revenue.

Furthermore, the Commission has clarified in the Notice that if a nature conservation

facility is used for both economic and non-economic activities ("mixed use") then State

aid rules apply only to the former. In addition, the Notice makes it clear that if - in a case

of such mixed use - a nature conservation infrastructure is used almost exclusively for

non-economic purposes then the whole activity can be considered as non-economic.

Concretely, this is the case if the economic activities are directly related to and necessary

for the nature conservation operation or intrinsically linked to its main non-economic use.

19

This is considered to be the case where they consume the same inputs as non-economic

activities and allocated capacity is less than 20 % of overall annual capacity On these

conditions, the activity is considered as "ancillary" to the main non-economic activity

and outside State aid rules.

Platform Opinion

Adopted on 21 September 2017

20

STATE AID RULES ON LAND SALE / DEFINITION OF ENTERPRISE


Legislation:

State aid rules on land sale and State aid definition of an enterprise.


There are numerous regional industrial estates throughout the Netherlands that are out

of date and sometimes in poor condition. To encourage the regional economy and

employment opportunities, provinces sometimes have industrial estates thoroughly

redeveloped. For this purpose, the province joins forces with a project developer. In this

form of area development, the province has to deal with a variety of EU rules. If the

province wishes to compensate for the effects on the environment of the increased

economic activities, something that happens quite regularly, yet another set of rules then

applies.

As shown in the following case study, the entire situation becomes highly complex:

The province wishes to redevelop and expand an industrial estate to once again make it

attractive for businesses from the region as an establishment location. A project

developer is interested in purchasing the land. The agreed price is below the market

value, but in exchange, the project developer has agreed to prepare the land for

construction and ensure access. When selling the land, the province has to deal with the

European public procurement, state aid and competition rules. The state aid rules

concerning land sale will be tightened up: aspects from the procurement rules will be

included in the land sale rules, according to which the procedure now has to be open and

transparent. The provinces are uncertain as to when the procedure is sufficiently open

and transparent.

As a result of renewed activities, nitrogen emissions rise. EU regulations oblige

government to protect biodiversity and so-called Natura 2000 areas, and offer a series of

possible subsidies in that connection. To comply with the rules, and to compensate for the

emission of nitrogen into the adjacent nature area, the province instructs a nature

conservation organisation to raise the water level, and to clean the nearby peat land. For

this purpose, the province intends to issue a subsidy to the organisation. The province

applies for a European subsidy for the measures in the nature area. However, in line with

recent judgements by the Commission and in accordance with case law, the nature

conservation organisation now has to be viewed as a business, and here too the rules on

state aid apply.


A greater insight is required into the consequences of certain forms of regulations, for

subnational authorities. In the event of the sale of land, three types of rules apply, and

even those rules seem to be in conflict with one another in terms of implementation; this

again results in uncertainty and lack of clarity. An impact assessment could provide the

necessary insight. Nonetheless, it is important that the assessment of the consequences be

carried out after the rules in question have been amended by the European Parliament

and the Council. After all, these institutions often tend to introduce other far-reaching

changes. The rules on state aid should not be applicable to nature conservation

organisations, at least as long as their activities are not economic and are exclusively

aimed at providing support. In certain sectors, such as research, education and

21

innovation, an exemption of this kind already applies, and could be extended.

Policy Context

The three types of rules referred to by the Dutch provinces serve different purposes.

Public procurement rules aim at creating a level playing field for all businesses across

Europe, For tenders whose monetary value exceeds a certain amount and which are

therefore distortive of competition there are harmonized minimum requirements at EU

level while other projects are subject to national legislation but have to respect the general

principles of EU law in order to avoid disparities between companies.

At the same time, State aid control is essential for protecting the integrity of the internal

market as well as economic and social cohesion. In the absence of State aid control, there

would be a serious risk that regions and Member States would engage in subsidy races to

attract mobile investments or support local companies. This would be to the detriment of

the weaker Member States that do not have the budgetary capacity to match the resources

available to more prosperous Member States. In the case of sale of land at prices below

market value to stimulate investments, Member States are in charge of selecting the

buyers who through this transaction become beneficiaries of State aid. State aid control is

therefore necessary to ensure a level playing field both between Member States and

among companies. It is therefore in everyone's interest that the Commission takes a strict

approach to the granting of State aid by Member States. However, the aid granting

procedure has been largely simplified by the adoption of the new General Block

Exemption Regulation (GBER) in 2014.

Finally, environmental subsidies are a way of ensuring a proper burden distribution

among polluters depending on their relative footprint, in a manner limited to what is

needed for the environmental effort only. State aid for environmental protection

objectives can be granted only if it leads to an increased contribution to the Union

environmental objectives without adversely affecting trading conditions to an extent

contrary to the common interest, and the polluter pays principle has to be always

respected i.e. the costs of measures to deal with pollution should be borne by the polluter

who causes the pollution.

Where subsidies by Member States are paid out to undertakings, State aid control applies,

also to nature conservation organisations which also have an economic activity. Not

applying it to economic activities carried out by nature conservation organisations could

lead to discrimination between undertakings carrying out the same economic activity, one

being subject to State aid control the other not.

Therefore, all three sets of rules need to be respected when applicable1, alone or

cumulatively. However, when subsidies are granted for the acquisition of nature land,

public procurement rules do not apply, as article 10 (a) of Directive 2014/24/EU clarifies

that ''the directive does not apply to public service contracts for: the acquisition or rental,

1 Commission Decision of 02.07.2009 in SA 22741 – Germany, Transfer of natural protection areas to new

owners and measures for bio diversity, OJ C 230 of 24.09.2009; Commission Decision of 20.04.2011

in case SA.31494 – Subsidies for nature management, OJ C 12 of 14.01.2012; Commission Decision

of 13.07.2011 in case SA.31243 – Subsidieregeling grondaankoop EHS, OJ C 303 of 14.10.2011.

22

by whatever financial means, of land, existing buildings or other immovable property or

concerning rights thereon''2.


The notion of State is defined in Article 107(1) TFEU. It is an objective notion which the

Commission has no power to redefine. What the Commission can do, however, is to

assess when aid is compatible with the Internal Market, and also provide practical

guidance on how to apply the case law and the Commission's decisional practice in

concrete cases.

State aid rules apply only to undertakings, i.e.to legal and natural persons which offer

goods or services on the market. Non-economic activities fall outside the scope of EU

competition rules. In this respect, the Court of Justice has clarified that the core activity

of nature conservation organizations is non-economic, but that it may be that such

organizations also, in parallel with their non-economic functions, perform secondary

activities which are economic in nature3. To the extent that they do so, they are in

competition with other undertakings and state aid rules will therefore apply to that part of

the organization's activities (but not to the nature conservation proper). It is therefore not

entirely correct that nature conservation organisations have to be viewed as businesses.

Assuming that the buyer is indeed an undertaking competing on the markets, it is settled

case law that the sale by public authorities of land or buildings to an undertaking

constitutes State aid if the sale is not taking place at market value (i.e. at the price which a

private investor, operating in normal competitive conditions, would be likely to have

accepted). Indeed, the undertaking could otherwise receive an asset at reduced price

which it could use to undercut its competitors. By contrast, if land is sold to an entity not

engaged in any economic activity (e.g. a nature conservation organization with no side

activities), the State aid rules do not apply.

It may indeed not be obvious in all cases how the market value of land should best be

assessed. This is why the Commission, in the communication concerning aid elements in

land sales by public authorities, has provided a set of practical guidelines to help the

authorities of the Member to ensure that the sale of public land and buildings to

undertakings is free of State aid by verifying that the price of sale reflects the market

value. The Communication is expected to be replaced by the Communication on the

Notion of Aid4, soon to be adopted, which will also apply to sales of land by public

authorities. However, this is purely a matter of consolidating the presentation of the

Commission's guidance, and no substantive changes to the guidance principles are

intended. It is therefore not correct that the "aid rules concerning land sales will be

tightened up".

As specifically regards the revitalisation of industrial sites, the Commission has also

provided further practical guidance to the national authorities by clarifying that public

financing of the development and revitalization of public land can fall outside the State

aid rules. In its decision of 27 March 2014 (SA.36346), the Commission found that

making a terrain ready for building and ensuring that it is connected to utilities (water,

gas, sewage and electricity) and transport networks (rail and roads) is not an economic

2 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public

procurement and repealing Directive 2004/18/EC Text with EEA relevance, OJ L 94, 28.3.2014, p.

65–242. 3 Commission Decision of 2 September 2015 in case SA.27301- ;Judgment of 12 September 2013,

Germany vs Commission (T-347/09), ECLI:EU:T:2013:418, OJ C313, of 26.10.2013. 4 http://ec.europa.eu/competition/consultations/2014_state_aid_notion/draft_guidance_en.pdf

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31997Y0710(01):EN:NOT

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31997Y0710(01):EN:NOT

23

activity, but part of the public tasks of the State, namely the provision and supervision of

land in line with local urban and spatial development plans (provided certain conditions

are met).

Finally, even if the contribution of the authorities in a revitalization project should

involve State aid, Article 56 of the GBER on aid to local infrastructure offers possibilities

to provide this assistance without the need of prior notification to the Commission.

As further regards incentives and subsidies for the purpose of nature improvement,

carbon emission reduction and environmental measures, public support can be given for

several different purposes. The Commission has adopted Guidelines on environmental

aid5 that set out the conditions on which subsidies to promote environmental protection

6

can be granted. This includes for instance aid for renewable energy, energy savings,

investments that increase the level of protection beyond Union standards or the

remediation of contaminated sites. The GBER also includes possibilities to grant such

subsidies without prior notification to the Commission.

To further simplify matters, the compatibility of investment subsidies for the remediation

of contaminated sites was, under the State Aid Modernization plan, moved from the

Guidelines for environmental aid, and aid for such projects can now be granted under the

GBER provisions (i.e. without prior notification to the Commission. The GBER allows

for aid intensities up to 100% of the costs.

Measures to promote biodiversity are not covered by the Guidelines on environmental aid

but can be authorised on the basis of the rules that apply to Services of General Economic

Interest (SGEI) rules7. Provided that the conditions in the SGEI Decision

8 are complied

with, this aid could be implemented without prior notification to the Commission.

To conclude, if State aid is granted, the GBER and the SGEI Decision allow for a

wide range of aid measures to promote environmental objectives which can be

implemented directly without prior authorization by the Commission.

It is current Commission policies to carry out an impact assessment of its proposals which

are likely to have significant economic, environmental or social impact. An inter-

institutional agreement on Better Law-making between the Parliament, Council and the

Commission is currently waiting now for ratification by the Parliament. According to the

agreement, the European Parliament and the Council are called upon carry out impact

assessment on any substantial amendments that they propose during the legislative

process.

However, as explained above, the State aid guidelines on the sale of land are only

Commission guidance to Member States and stakeholders on practical means to establish

the market value of sold property. Whether or not a specific transaction constitutes State

aid depends on the notion of aid as laid down in the Treaty and cannot be changed by the

Commission.

5 Communication from the Commission — Guidelines on State aid for environmental protection and

energy 2014-2020, OJ C 200, 28.6.2014, p. 1–55. 6 Environmental protection is defined as any action designed to remedy or prevent damage to physical

surroundings or natural resources by a beneficiary’s own activities, to reduce the risk of such damage

or to lead to more efficient use of natural resources. 7 See cases SA.31243 and NN8/2009. 8 Decision 2012/21/EU (OJ L 7, 11.1.2012, p. 3).

24

DE MINIMIS REGULATION


The inclusion of de minimis State aid for affiliated companies in the calculation of the

total amount of aid is not justified. The "safe harbour" provisions for certain loans and

guarantees need to be adapted to the standard financial periods, above all with respect

to their maturities.

The approach applied by the European Court of Justice in the case (OJ C 155/10 of 20

June 2008) was justified by the particular circumstances of the specific case. In the

standard case there is no connection between legally affiliated companies with respect to

the specifically supported activities, so that combining de minimis state aid is not

appropriate and also not supported by the European Court of Justice. Such an approach

would significantly restrict the impact of de minimis state aid without any objective

justification.

The guarantee notice and the possibility of the application of computational methods are

important tools to facilitate the application of the de minimis Regulation. More flexible

and practical time periods under the safe harbour rules could further contribute to it.

The aid should be based on the financing needs and time periods which are usual in

practice. In the financing of physical structures, machine purchases, etc. the financing

period is usually over 10 years, sometimes even 20 years, as it always corresponds to the

useful life of facilities or equipment.

Policy Context

Over the past two years, the European Commission has continued its reform and

modernisation of State aid control to simplify procedures and focus on measures that

genuinely affect competition in the Internal Market. As a result, many public support

measures are no longer considered State aid by the Commission and therefore are not

subject to European control.

To achieve this, the Commission has:

reduced the scope for State aid control by clarifying the notion of State aid;

exempted State aid from prior control via its General Block Exemption

Regulation;

focused on measures that genuinely affect trade between Member States, leaving

many local investment projects outside State aid control (see IP/15/4889; IP/16/1341).

The de minimis Regulation was one of the first documents adopted under the State aid

Modernisation Package in 2013. It applies until 31 December 2020. Its objective is to

further simplify the granting of small aid awards, below EUR 200,000. The de minimis

Regulation also allows the granting of de minimis aid (in the form of grants) to

enterprises in difficulty.

The de minimis Regulation simplifies the reference point for the application of the

ceiling. It introduces the notion of 'single undertaking'. 'Single undertaking' is limited to

25

all linked enterprises which form an economic group (de jure control). De facto control is

not to be taken into consideration for the purpose of verifying compliance with the de

minimis ceiling. The concept of 'single undertaking' is thus much simpler to apply than

the notion of 'undertaking' based on the general control principle proposed by the Court

(which also includes, in particular, de facto control) that applied to the previous de

minimis Regulation.

Article 4(3)(b) and Article 4(6)(a) set out a maximum duration of ten years for the safe

harbours for loans and guarantees. This limitation is necessary to ensure the proper

calculation of the cost of the guarantee or of the loan, because the gross grant equivalent

(GGE) of a loan or guarantee depends both on the amount and on the duration. Also, 10

years is the longest period for which a reasonable estimation as regards the GGE could be

made (based on a net default rate of 13%).

However, this does not mean that longer time periods are excluded. It has to be taken into

consideration that Member States also have other possibilities for the calculation of the

GGE of a loan or guarantee:

- For a guarantee, the calculation on the basis of a safe-harbour premium laid down in a

Commission notice (OJ C 155/10 of 20 June 2008) which foresees a specific premium of

3.8% for SME schemes with a guaranteed amount up to EUR 2.5 million per company

without any restriction on duration.

- For a guarantee, a methodology determined by the Member State (several Member

States including Germany have such methodologies in place e.g. as used by guarantee

banks in Germany).

- For a loan, the calculation on the basis of the Reference Rate Communication (OJ C

14/6 of 19 January 2008).

26

Submission V.7.b by a member of the REFIT Platform Government group

The 2013 de minimis Regulation retained the total amount of de minimis aid granted per

Member State to any one undertaking at EUR 200 000 over any period of three fiscal

years. This threshold remained the same as that provided in the 2006 Regulation.

This ceiling should be increased to at least EUR 500 000 so as to reflect the realities

being currently faced by the European Union today. Such an increase would complement

the objective to focus more on cases with the biggest impact on the internal market and

further enhance the initiative to include stronger scrutiny of large and potentially

distortive aid, in line with the Communication on State Aid Modernisation. An increase

to EUR 500 000 would also be in line with the adoption of the SGEI de minimis

Regulation (Commission Regulation (EU) No 360/2012 of 25 April 2012).

An increase in the proposed de minimis threshold should in turn reflect itself in an

increase in the threshold of guarantees which currently stands at EUR 1 500 000, which

ceiling is deemed as not having a gross grant equivalent exceeding the current de

minimis threshold.

Explanation of the relevance and importance of the issue :

An increase to a minimum of EUR 500 000 in the permissible threshold of de minimis aid

would complement the objectives in State Aid Modernisation and would retain the right

balance between simplification on the one hand, and ensuring that competition in the

internal market is not distorted and public spending is focused on efficiency, on the other

hand. Furthermore, an increased threshold would make it possible for Member States to

cover areas and activities that are not catered for or not addressed by other State aid

acquis.

Policy Context

State aid control is essential for protecting the integrity of the internal market. A strict

control of State aid is also critical for the achievement of economic and social cohesion

(in the absence of State aid control, there would be a serious risk that regions and

Member States would engage in subsidy races to attract mobile investments or support

local companies: this would be to the detriment of the weaker Member States that do not

have the budgetary capacity to match the resources available to more prosperous Member

States).


According to article 107 (1) of the Treaty on the functioning of the EU (TFEU), "save as

otherwise provided in the Treaties, any aid granted by a Member State or through 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." State aid

is thus in principle prohibited, with the exceptions set out in Articles 106 and 107 TFEU.

Article 108(3) TFEU requires State aid to be notified to the European Commission which

is in charge of assessing its compatibility with the internal market in the light of Article

107(1) TFEU.

27

However public subsidies to undertakings under a certain amount fall outside the scope

of State aid rules, by virtue of the de minimis rules:

• The de minimis Regulation 1407/2013 ("the de minimis Regulation"), which

applies at present, was one of the first texts to be adopted under the State aid

Modernisation Package. It was not a novel initiative but replaced (with significant

additional simplifications) a previous de minims Regulation from 2008 (which in turn

had been preceded by other sets of de minimis rules). The main objective is to simplify

the granting of small aid awards (in principle below EUR 200.000 over a period of three

years, but lowers ceilings apply in the transport sector). This ceiling remained unchanged

compared to the previous de minimis Regulation.

• There is also a specific de minimis Regulation which applies to State aid granted

as a compensation for the performance of a Service of General Economic Interest ("the

SGEI de minimis Regulation"). For those special cases the ceiling is higher: EUR

500.000.

In addition, separate de minimis rules apply for State aid to agriculture and fisheries.

The de minimis rules aims at striking the right balance between simplifications on the

one hand and avoiding competition distortions in the internal market on the other hand.

In this respect, it should be noted that the amount of de minimis aid should be set at a

level below which it can be assumed that the aid will have no effect on competition or on

trade between Member States.

In the course of the revision leading up to the adoption of the de minimis Regulation, the

appropriate level of the ceiling was thoroughly assessed as part of the impact assessment.

Several options were considered, including a "substantial increase" of the ceiling to at

least EUR 500.000. These options were compared in respect of the impact on economy

and competition against the impact of the "baseline scenario" of keeping the EUR

200.000 limit.

In respect of the option of increasing the ceiling to EUR 500.000, the Commission noted

the following in the in-depth assessment:

• The data gathered through the public consultation and from Member States

showed that amounts spent under de minimis measures are on average rather small and

that the EUR 200.000 ceiling is most probably not exhausted for the vast majority of

beneficiaries. Indeed, a sample including the total amount spent under the de minimis

Regulation for 7 Member States showed that the average amount per beneficiary per year

is below EUR 30 000. There was thus no concrete evidence that a higher ceiling would

be needed.

• There seemed to be no significant simplification from a substantial increase of the

ceiling. The Commission noted that the number of notifications or complaints concerning

aid of up to EUR 500.000 is very small (as most such aid is covered either by the General

Block Exemption Regulation (GBER) or by national aid schemes) and that consequently

the simplification gains for the Commission and Member States alike were likely to be

very modest.

• By contrast, the Commission identified a material risk of increased distortion of

the internal market in the form of a likely shift from aid granted under the GBER or

under approved schemes to de minimis aid if the ceiling were to be substantially

increased. Such a shift would appear undesirable as the GBER (as opposed to de minimis

rules which have no compatibility conditions) is intended to facilitate well-designed aid

28

targeted at market failures and objectives of common European interest. This type of aid,

rather than untargeted and unconditional de minimis aid, is better suited to promote

growth and quality of public finance

• The Commission's experience has shown that there are significant differences

between Member States' expenditure, with some Member States disbursing large

aggregate amounts and others making a highly selective use or not using it at all. The

scope for significant distortions across Member States seems considerable because of

these wide differences as regards available resources. There is a potential risk as regards

regional cohesion. Since Member States having a higher spending capacity can easily

make more use of a high de minimis ceiling, it can distort competition to the detriment of

poorer Member States and is in contrast to the general objective of regional cohesion.

As specifically regards the higher ceilings in the SGEI de minimis Regulation, those

ceilings can be justified by specific reasons which do not apply to other de minimis

measures. For SGEI the specific justification of the higher de minimis ceiling is that at

least some of the advantages granted to those undertakings constitute compensation for

additional costs linked to the provision of the SGEI (i.e. costs the beneficiary would not

have to bear if he had not been entrusted by the State with the provision of this particular

services to the community). To the extent that it only compensates such additional costs

which a fully commercial operator would normally not bear, the aid is not liable to distort

competition on the market.

For all the above reasons, the Commission found, when adopting the de minimis

Regulation in 2013 for entry into force on 1 January 2014, that the aid ceiling or EUR

200.000 over three years struck the right balance between simplification and the

avoidance of undue distortion of competition.

29

STATE AID AND ESIF

Submission V.8.a by a member of the REFIT Platform Government group

It is worth mentioning that, currently, state aid issues are being examined and controlled

systematically, both ex-ante and ex-post, by various authorities and auditors, on the

grounds of different legislation. Indeed, cohesion rules oblige Member States to comply

with state aid regulations whenever they grant State aid with Structural Funds and this

is severely audited. At the same time, state aid rules foresee the possibility for the

European Commission to examine and control aid granted by Member States at any

moment.

This implies a double control for Member States and aid beneficiaries on identical

issues, as the same information has to be provided several times to various authorities

and auditors (e.g. aid instrument, incentive effect, eligible costs, etc. and in general

compliance with state aid rules). This increases administrative burdens and costs and it

is especially damaging to SMEs, which, occasionally, lack enough knowledge and human

resources to properly fulfil with legal requirements.

This problem could be solved either by including a specific regulation for ESIF

cofinanced projects in the General Block Exemption Regulation, with flexible conditions,

or by excluding from the monitoring proceedings those co-financed aid schemes which

have already been audited by ESIF authorities.

Policy Context

Legal framework

The issue relates to the following pieces of EU legislation:

Article 108 TFEU: This provision requires Member States to notify any plan to grant

State aid and to refrain from granting such aid until the Commission has approved it

(notification and standstill requirement). This provision was already part of the

Treaty of Rome.

Council Regulation (EU) 2015/1589 of 13 July 2015 laying down detailed rules for

the application of Article 108 of the Treaty on the Functioning of the European Union

(the so-called "Procedural Regulation"): The Procedural Regulation sets out the

detailed procedures applicable in the area of State aid, including the procedures

applicable to the notifications by Member States of planned State aid measures and

their treatment by the Commission.

Regulation (EU) No 1303/2013 of the European Parliament and of the Council of 17

December 2013 laying down common provisions on the European Regional

Development Fund, the European Social Fund, the Cohesion Fund, the European

Agricultural Fund for Rural Development and the European Maritime and Fisheries

Fund and laying down general provisions on the European Regional Development

Fund, the European Social Fund, the Cohesion Fund and the European Maritime and

Fisheries Fund and repealing Council Regulation (EC) No 1083/2006 (the so-called

Common Provisions Regulation): Article 6 of the ESIF "Common Provisions

30

Regulation provides that "Operations supported by the ESI Funds shall comply

with applicable Union law and the national law relating to its application ('applicable

law')". This also implies that both the ESIF and the national funding of such

operations have to comply with EU State aid rules. The Common Provisions

Regulation also sets out extensive procedures to be followed for the approval by the

Commission of Partnership Agreements, Operational Programmes, Financial

Instruments and Major Projects, as well as for the monitoring and auditing of these

operations.

Council Regulation (EC) No 1588/2015 of 13 July 2015 on the application of Articles

107 and 108 of the Treaty on the Functioning of the European Union to certain

categories of horizontal State aid (which replaces as of 14.10.2015 Council

Regulation (EC) No 994/98 of 7 May 1998 on the application of Articles 92 and 93

(now 87 and 88 respectively) of the Treaty establishing the European Community to

certain categories of horizontal State aid the so-called "Enabling Regulation": The

Enabling Regulation sets out the framework applicable to measures that are exempted

from the notification requirement under Article 108(3) TFEU (type of measures that

can be block-exempted, transparency and monitoring provisions applicable to such

measures etc.). This Regulation enables the Commission to adopt regulations

defining criteria under which aid in these categories can be exempted from the

notification requirement. In particular, this is done via the Commission Regulation

651/2014 of 17 June 2014 (General Block Exemption Regulation, "GBER").

Current state of play

At the outset, it is to be noted that the EU State aid rules and Economic and Social

Cohesion policy constitute distinct but complementary policies, each having specific

objectives and means of action. The application of the State aid rules does not replace or

duplicate the application of the rules of the Structural Funds, but complements the ESIF

structures: whilst ESIF rules are designed to ensure that the funding contributes to

regional and social development, State aid rules ensure that they do so without unduly

distorting competition in the internal market. In designing State aid rules, the

Commission has made a major effort to set up a framework that carefully balances the

positive effects of State aid with the need to avoid potentially negative effects (distortion

of competition, negative spill-over effects).

The assessment of the compatibility of State aid currently performed by the Commission

takes into account the rules of the Structural Funds. For instance, State aid may be

authorised by the Commission if it contributes to the achievement of one or more of the

objectives of common interest identified in article 107(3) TFEU. For regional State aid,

the contribution to a common objective is considered to be the case for ESIF transactions,

since they have been implemented in accordance with regional development strategies

defined in the ESIF rules with a view to contributing to the Europe 2020 strategy.

It has to be noted that at present it is legally not possible to provide an exemption for all

ESIF co-financed projects ("with flexible conditions") as no legal basis exists. Indeed,

there are legal restrictions to what can be block exempted. This is only possible for the

areas laid down in the "Enabling Regulation", i.e. Council Regulation 2015/1588 which

lists the categories of aid (in terms of objectives) which can be block-exempted. There is

no basis in the Enabling Regulation for an exemption along the lines suggested in the

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2015.248.01.0001.01.ENG

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31998R0994:EN:NOT

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31998R0994:EN:NOT

31

Opinion.

Indeed, if a public subsidy to a certain economic activity is block-exempted simply on

the basis of the origin of the public funds, this may lead to situations of distortion of

competition and inequality of treatment within the EU because one situation would be

block-exempted (because funding comes from ESIF), whereas a similar situation would

not (simply because the funding in that case would come exclusively from other,

national, sources), although the impact on the internal market would be the same. This

explains why block-exemption of State aid should be made on the basis of the objective

effects on the internal markets of a given measure, and not on the characteristics of its

public funding.

Moreover, very significant progress have been made by the Commission in simplifying

and clarifying State aid rules in recent years through the State Aid Modernisation (SAM)

reform. In particular, the considerable extension of the scope of GBER has eliminated the

need to notify the vast majority of ESIF co-financed State aid measures. This has

considerably reduced the administrative burden, especially for ESIF stakeholders.

In addition, DG COMP is working closely with DG REGIO to streamline State aid rules

for ESIF operations where there are concrete examples of instances in which State aid

control presented an unjustified obstacle to the implementation of ESIF operations. The

two Commission services have a comprehensive action plan since March 2015 for the

strengthening administrative capacity for the management of Structural Funds in the field

of State aid.

As regards co-financed aid schemes which have already been audited by ESIF

authorities, audit controls under Structural Funds rules cannot replace the Commission's

and the Member States' joint responsibility for ex post monitoring, which is required

under Article 108(1) of the Treaty, according to which "the Commission shall, in

cooperation with Member States, keep under constant review all systems of aid existing

in those States". The Procedural Regulation and the GBER then provide a more specific

basis as regards the documentation to be kept for monitoring purposes. Therefore those

co-financed aid schemes cannot currently be excluded from State aid monitoring

proceedings.

Finally, State aid monitoring is not general but always targeted at a small sample of

subsidies and is therefore unlikely to represent a disproportionate administrative burden

for the companies (SMEs or large companies) which are aid beneficiaries. For instance,

in 2015, there were approximately 4,500 aid schemes operating in the EU Member States

and DG COMP annual monitoring cycle covered 96 of them.

In a normal State aid monitoring case the Commission typically checks the legal basis

and the national implementing rules and a limited sample of 3-4 individual aid

beneficiaries. This means that only a very limited number of aid beneficiaries will be

concerned. In addition, the Commission only asks for information that should already

have been available to Member States' authorities when they granted the funding, and

therefore there should not be any additional burden for companies to provide any further

information.

Furthermore, also in respect of ex-post controls, significant efforts are being made to

ensure that the administrative burden is kept to a minimum. The Commission services

(DG COMP, DG REGIO and DG EMPL) have agreed to coordinate and better align their

audit and ex-post monitoring activities with a view to avoid duplication of ex-post

32

monitoring and audit activities.

For instance, DG COMP shares its experience in ex-post monitoring of State aid schemes

with DG REGIO and DG EMPL, by sharing the outcome of the annual monitoring cycles

with these services.

Moreover, the Commission services have shared with the audit and coordination bodies

of the Member States "GBER Checklists" enabling them to check in advance whether all

compatibility conditions are fulfilled or to improve audits in this area. Typology of

problems detected, good and bad practices and lessons learned from monitoring are also

shared with Member States in many different ways (working groups, country

coordination network, multilateral or bilateral audit coordination meetings, etc.).

33

STATE AID – REGIONAL INVESTMENT AID

Submission V.9.a by a member of the REFIT Platform Government group

With respect to regional investment aid - Guidelines on regional State aid for 2014-

2020 and, in particular, to aid granted to large companies in areas c), it would be

important to have minimum thresholds for lower eligible investment projects, with a view

to simplify procedures and thus reduce administrative burdens. The reason for this

suggestion is the fact that not every large company’s investment is an investment on a

major project.

If the amount of investments is small, the consequent production will be in line, upper

limits of the subsidies in areas c) are very low, therefore these projects altogether could

hardly have impacts on commercial transactions and on competence in the internal

market.

The obligation to notify every project undertaken by companies in areas c), regardless of

the amount of investment generates really high administrative burdens. It should remain

valid the obligation as included in the previous periods, in particular 2007-2013, when

Member States (MS) were required to notify any aid to be awarded to investment projects

if the aid were above a certain percentage. If the aid were below that limit, Member State

only had to provide an ex post report (paragraphs 64 – 67 in

GUIDELINES ON NATIONAL REGIONAL AID FOR 2007-2013).

For instance, a MS has just notified an investment project of 2,100,000 € and a proposed

aid of 105,000 €. Even there were an accumulation of aids, these could not exceed

210,000 € due to taking place in area C) with a maximum aid intensity of 10% in ESB for

large companies.

Policy Context

Article 108 of the Treaty provides that Member States are under an obligation to notify

any plan to grant State aid. To reduce the administrative burden created by this

obligation, the Commission adopted Block Exemption Regulations, which set out clear

conditions for different types of aid; provided an aid measure was in line with those

conditions, it could be implemented by the Member State concerned without the need to

notify and await approval by the Commission. In 2014 the General Block Exemption

Regulation (GBER) became extended both in scope, by covering new categories and

forms of aid, and in the amount of aid that can be granted, with higher notification

thresholds and larger aid intensities. As a result, the vast majority of State aid measures

currently granted in the EU (some 90%) is now implemented on the basis of the GBER.

That means that those aid measures can be implemented by MS without any need to

notify them to the Commission.

The provision to which Spain refers is the requirement in the Guidelines on Regional

State Aid for 2014-2020 (RAG) to notify individual regional aid to support investment

related to new process innovation and to diversification into new product in existing

establishments of large companies in so-called ‘c’ areas (less disadvantaged regions).

Spain would welcome to include aid for such investments up to a certain threshold under

34

the GBER, i.e. to implement such aid measures up to a certain aid amount without the

need to notify those to the Commission.

The RAG limit aid to large enterprises in 'c' areas (such as those referred to by Spain).

During the review of regional aid rules DG COMP relied on several studies and on

experience from its case practise when it proposed to limit aid for large enterprises in 'c'

areas. These suggested that aid to large enterprises is more likely to distort trade and

competition in the internal market in ‘c’ areas because the aid is often not a necessary

condition for the company in question to invest or to locate an investment in these areas

(i.e. aid then amounts to "free money" for the company in question). Therefore, the rules

introduced in 2014 allow regional aid to large enterprises in ‘c’ areas, where available

evidence indicated that the aid could be necessary to actually attract an investment in ’c’

areas that would otherwise not have taken place. This was the case for greenfield

investments and for the development of a genuinely new activity. Having listened to

Member States and other stakeholders it was decided to also allow aid for two other

exceptions, i.e. investments related to new process innovations and to diversification into

new products.

These rules have now been in place for almost 3 years. The Commission received 7

notified new product and new process innovation cases involving large companies in c-

regions in these three years. One of them has been approved. The six other cases have all

been withdrawn, in most cases because it became very clear that it was very difficult to

claim that the cases involved new product or process innovations and/or that the aid had

an incentive effect. We have no indication that any of the investments did not go ahead,

in spite of the fact that no regional investment aid was granted to them.

Regional investment aid is not the only possibility for supporting such investments. The

submission by Spain refers to a case of €105,000 of aid for a €2.1 million investment.

Such a case can clearly be implemented under the De Minimis Regulation. In certain

other situations also aid under the environmental protection aid or RDI aid rules could be

considered.

As explained above aid to support investments related to new process innovations or to

diversification into new products are exceptional investments for which large enterprises

may receive regional aid in ‘c’ areas. Therefore, introducing a threshold under which

such aid would not need to be notified would further complicate the regional aid rules, as

the Commission would introduce another exception to an exception.

35

SUSTAINABILITY INITIATIVES VERSUS COMPETITION RULES

Submission V.10.a by Detailhandel Nederland (LtL 494) (Closed)

Sustainability initiatives versus competition rules

Competition rules ensure freedom on the market and prevent cartel agreements, which

limit this freedom and result in unfair trading practices and disadvantages for consumers

and other market participants. If this task is interpreted and performed in too strict a way,

situations negative for society can be brought about or maintained. It can become

difficult or even impossible to raise minimum standards of sustainability/health/animal

welfare by means of the market if no collective agreements are permitted on the matter.

In the view of the Dutch retail sector, it needs to be possible to reach agreements on the

quality, health features or sustainability of products, and thus to respond to the

government’s wish for sustainability initiatives. Competition authorities must not make

this impossible.

Policy Context

Article 101 TFEU ('EU competition rules') prohibits agreements between undertakings

which restrict competition. This provision covers both horizontal agreements (between

actual or potential competitors operating at the same level of the supply chain, e.g.

between retailers) and vertical agreements (between firms operating at different levels,

i.e. agreement between a manufacturer and a retailer). The general prohibition also

provides for certain exceptions. Sustainability objectives (such as public health,

protection of the environment and animal welfare) can possibly be taken into account in

two ways when dealing with agreements between competitors:

a. At the stage of applying Article 101(3) TFEU: an agreement restricting competition

may still be allowed if the benefits for consumers outweigh the harmful effects of the

agreement. Thus, consumer benefits and harm are compared on a case by case basis.

b. At the stage of applying Article 101(1) TFEU: EU Courts have confirmed that in

exceptional circumstances an agreement that restricts competition may fall outside

the scope of Article 101 as long as it is proportionate to the goal it intends to further.

For example anti-doping schemes for sports associations fall within this category.

However, as the EU Courts have not yet dealt with any cases concerning private

initiatives to foster sustainability and, consequently, have not accepted sustainability

as a legitimate objective, it remains uncertain whether and under which conditions

sustainability agreements between competitors could benefit from this exception.

However, EU competition rules do not empower the Commission, or the national

competition authorities, to enter into delicate balancing between sometimes contradictory

public interests when assessing such business initiatives. If certain policy objectives are

considered valuable for society as a whole, while not by the consumers of the product or

service, regulation is the right tool to safeguard these objectives and not competition law.

In other words, competition law does not stand in the way of regulation to achieve these

goals, but cannot be a substitute for such regulation.

Competition and sustainability initiatives in the Netherlands

The Dutch Government (at the request of the Dutch Parliament) issued a 'Policy Rule' for

the Dutch NCA on the application of the Dutch equivalent of Article 101 TFEU to

private sustainability initiatives (i.e. how sustainability can be taken into account under

36

101(3) TFEU). In parallel, the Dutch NCA (Autoriteit Consument en Markt, 'ACM')

published a 'Vision Document' (Visiedocument Mededinging en Duurzaamheid, May

2014) on how it intends to implement these directions in practice. The overall aim is to

promote private sustainability initiatives and provide business with more legal certainty.

competition disclaimer - european commissionpursuant to article108(3) tfeu. therefore, aid for the...

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