State Aid

September 29th, 2017 by James Goudie KC

For a measure to be classified as aid within the meaning of Article 107(1) TFEU, all the conditions set out in that provision must be fulfilled. First, there must be an intervention by the State or through State resources. Secondly, the intervention must be likely to affect trade between Member States. Thirdly, it must confer an advantage on the recipient by favouring certain undertakings or the production of certain goods. Fourthly, it must distort or threaten to distort competition. The application of Article 107(1) TFEU may entail a verification as to whether an entity should have been regarded as an undertaking, within the meaning of EU competition law.

In that regard, it follows from the case-law that, for the purposes of the application of EU competition law, an undertaking is any entity engaged in an economic activity, irrespective of its legal status and the way in which it is financed. Any activity consisting in offering goods or services on a given market is an economic activity. Thus, the State itself or a State entity may act as an undertaking. By contrast, activities connected with the exercise of public powers are not of an economic nature justifying the application of the competition rules laid down in the TFEU Treaty.  In addition, a legal entity, and inter alia a public entity, may be regarded as an undertaking in relation to only part of its activities, if the activities which form that part must be classified as economic activities.  In so far as a public entity exercises an economic activity which can be separated from the exercise of its public powers, that entity, in relation to that activity, acts as an undertaking, while, if that economic activity cannot be separated from the exercise of its public powers, the activities exercised by that entity as a whole remain activities connected with the exercise of those public powers.

In addition, the fact that a product or a service supplied by a public entity and connected to the exercise by it of public powers is provided in return for remuneration laid down by law and not determined, directly or indirectly, by that entity, is not alone sufficient for the activity carried out to be classified as an economic activity and the entity which carries it out as an undertaking. By contrast, services which, without forming part of the exercise of public powers, are carried out in the public interest and without a profit motive and are in competition with those offered by operators pursuing a profit motive have been classified as economic activities.

In order to determine whether activities form part of the exercise of public powers or whether they can be classified as economic activities, it must be verified whether those activities, by their nature, their aim and the rules to which they are subject, are connected with the exercise of public powers or whether they have an economic character which justifies the application of the EU competition rules.

Data collection in relation to undertakings, on the basis of a statutory obligation incumbent on those undertakings to disclose the data and powers of enforcement related thereto, forms part of the exercise of public powers. Consequently, such an activity is not an economic activity. Equally, an activity consisting in the maintenance and making available to the public of the data thus collected, whether by a simple search or by means of the supply of print-outs, in accordance with the applicable national legislation, is not an economic activity either, since the maintenance of a database containing such data and making that data available to the public are activities which cannot be separated from the activity of collecting the data. The collection of the data would be rendered largely useless in the absence of the maintenance of a database which stores the data for the purpose of consultation by the public.  Activities consisting in providing a noticeboard, in order to allow the publication of the tender notices and decisions awarding public contracts that the contracting authorities are required to communicate in accordance with their statutory obligations, are not economic activities.  In Case T-138/15, Judgment of the General Court on 28 September 2017, TenderNed, it was held that services provided by TenderNed could be regarded as non-economic services of general interest.  There was therefore no State Aid constituted by financing measures granted by the State for the creation and introduction of the TenderNed electronic procurement platform.

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