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The new frontier in state aid control

An economic assessment of measures that compensate enterprises

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  • Competition Policy
  • Published:
Intereconomics

Abstract

State aid is in principle prohibited in the European Union, with a few exceptions provided for in the Treaty. Recently, a judgement by the European Court of Justice has weakened that prohibition by narrowing the concept of state aid. Criticism of this judgement so far has been based solely on legal grounds. This paper carries out an economic assessment of the judgement and argues that it is based on faulty economic premises. The author proposes an alternative method for dealing with compensatory measures so as to close the loophole opened up by the judgement.

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References

  1. See the case “Steenkolenmijnen Limburg v High Authority”, C-30/59.

  2. See Commission Directive 80/723 on the transparency of financial relations with public enterprises, OJ L195, 29/7/80; amended by Directives 85/413, 93/84 & 00/52; see also the Commission Communication, OJ C307, 3/11/93.

  3. Commission Decision 2002/204, OJ L68/18, 12/3/2002.

  4. Phedon Nicolaides: The Distortive Effects of Compensatory Aid Measures: The Economics of the “Ferring” Judgement, in: European Competition Law Review, 2002, Vol. 23, No. 6, pp. 313–319.

  5. Advocate-General's Opinion on Case C-280/00, “Altmark Trans”, paragraphs 93–94, delivered on 19 March 2002.

  6. See the two main Commission Communications on services of general interest, 1996/C 282/3 and 2001/C 17/4 and the report submitted to the Laeken European Council, COM(2001) 598 final.

  7. Advocate-General's Opinion on Case C-126/01, “GEMO”, delivered on 30 April 2002.

  8. See the reasoning in the landmark case “Philip Morris v. Commission”, C-730/79.

  9. See Phedon Nicolaides, op. cit. The Distortive Effects of Compensatory Aid Measures: The Economics of the “Ferring” Judgement, in: European Competition Law Review, 2002, Vol. 23, No. 6, pp. 313–319.

  10. See P. Klemperer: Auction Theory: A Guide to the Literature, in: Journal of Economic Surveys, 1999, Vol. 13, No. 3, and the references therein.

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Authors and Affiliations

  1. European Institute of Public Administration, Maastricht, The Netherlands

    Phedon Nicolaides

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  1. Phedon Nicolaides
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Additional information

The author is grateful to Jean-Paul Keppenne for comments on an earlier draft, to Kirtikumar Mehta for stimulating discussions on the issue of compensation and to Anne-Mieke den Teuling for research assistance. The author is solely responsible for the views expressed in this paper.

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Nicolaides, P. The new frontier in state aid control. Intereconomics 37, 190–197 (2002). https://doi.org/10.1007/BF02930212

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  • DOI: https://doi.org/10.1007/BF02930212

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