Skip to main content
SpringerLink
Log in

Determinants of the European Commission’s State Aid Decisions

  • Published:
Journal of Industry, Competition and Trade Aims and scope Submit manuscript

Abstract

We study whether the European Commission’s State aid decisions are in line with the goals of the State Aid Action Plan (2005–2009). Next, we explore the determinants of these decisions using data for 2007 on 600 cases. We find by means of logit and probit regressions that authorization is more likely when notification took place recently. Furthermore, ad hoc aid measures have a higher risk to end up in a negative decision, whereas schemes are more positively evaluated. Being in the objective category of firms or sectors in difficulties can reduce the probability of a positive outcome. Our results indicate that most of the Commission decisions are, on average, in line with the Action Plan.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4

Similar content being viewed by others

Notes

  1. European Commission 2008f.

  2. European Union, 2008.

  3. European Commission, 2005.

  4. European Commission, 2005.

  5. European Commission 2008f.

  6. European Commission 2008c.

  7. This exception to the State aid prohibition is most frequently used.

  8. European Commission 2010a.

  9. Council of the European Union, 1999.

  10. On application by a Member State, the Council of the EU may also, as long as the Commission has not decided, declare that a State aid plan is compatible with the internal market. Such decision must be justified by exceptional circumstances (see article 108(2), third and fourth paragraphs of the Treaty). The Member States make seldom use of this possibility.

  11. See also European Commission 2009c, for the added value of pre-notification contacts.

  12. European Commission 2008a.

  13. European Commission 2006a.

  14. For the agricultural sector, see also European Commission 2006b; for the fisheries sector, see also European Commission 2008g.

  15. European Commission, 2005.

  16. For the sectors of primary production of agricultural products, fisheries and aquaculture, separate de minimis regulations apply; see European Commission 2007b, and European Commission 2007a.

  17. European Commission, 2004.

  18. For the form for the submission of complaints concerning alleged unlawful State aid, see http://ec.europa.eu/competition/forms/download_en.html (last consulted September 15, 2010).

  19. The stand-still obligation has direct effect, meaning that one can call upon the respect of this obligation before a national court.

  20. This rule follows from the judgment of the Court of Justice of the EU in Francovich vs the Italian Government (joined cases) ECR I-5357 (1991). The Court ruled that Member States may be held responsible for any damage caused by breaching EU rules.

  21. European Commission 2009a.

  22. Are also existing schemes: schemes approved by the Council; schemes in effect in a State before and after its accession to the EU; schemes which are deemed to be existing schemes because it can be established at the time they were put into effect that they did not constitute State aid, and subsequently became State aid due to the evolution of the internal market and without having been altered by the Member State concerned.

  23. Or not compatible (see previous footnote (second and third example of existing State aid schemes)).

  24. European Commission 2009b. This procedure also applies to certain other types of new State aid. See also European Commission 2009c for the Code of Best Practice for the conduct of State aid control procedures. This code, which principal aim is to provide guidance on the day-to-day conduct of State aid procedures, thereby fostering a spirit of better co-operation and mutual understanding between the Commission services, Member State authorities and the legal and business community, is the final part of a simplification package, adopted under the State Aid Action Plan—comprising also the Notice from the Commission on a simplified procedure for treatment of certain types of State aid (European Commission 2009b) and the Commission Notice on the enforcement of State aid law by national courts (European Commission 2009a)—, which contributes to more predictable and transparent procedures.

  25. European Commission, 2004.

  26. According to article 263 of the Treaty, European Commission decisions are subject to review by the Court of Justice of the EU.

  27. Council of the European Union, 1998.

  28. European Commission 2006a.

  29. European Commission 2008a.

  30. Regional investment and employment aid, aid for newly created small companies, SME investment and employment aid, aid for female entrepreneurship, aid for environmental protection, aid in the form of risk capital, aid for research and development and innovation, training aid, aid for disadvantaged and disabled workers, …

  31. European Commission, 2005.

  32. The following questions need to be answered: is the aid an appropriate policy instrument?; is there an incentive effect?; and is the aid measure proportionate to the problem tackled?

  33. European Commission 2008f; European Commission (DG COMP), 2009. Friederiszick et al. (2006) explore how an increased reliance on economic insights in State aid control can contribute towards the objective of enhancing the effectiveness of State aid control; see also Neven and Albaek (2007), Neven and Verouden (2008).

  34. European Commission 2008d.

  35. European Commission 2008e. For an overwiew of national measures adopted as a response to the financial/economic crisis, see European Commission 2010b (last consulted September 15, 2010).

  36. More on cross border externalities of State aid can be found, a.o., in Besley and Seabright (1999), Brander and Spencer (1985, 1987) and Collie (2000, 2002, 2005).

  37. More on government commitment problems can be found in Kornai et al. (2003).

  38. Bergman et al. (2005), Williams et al. (2003) and Martinez et al. (2008)

  39. European Commission 2008b. Data were retrieved from the website of DG Competition of the European Commission in 2008.

  40. European Commission 2008c.

  41. Not yet under the General Block Exemption Regulation (see above).

  42. In 2007, there were cases for only 17 different decision types.

  43. See Appendix 1 for more details.

  44. In the empirical analysis, except for the descriptives, we will continue with only positive and negative decisions as the number of conditional decisions is too small.

  45. See Appendix 2 for more details on all independent variables.

  46. When the Commission considered a measure to be ‘no State aid’ (in the sense of article 107(1) of the Treaty), we assigned a value of 0% for intensity.

  47. The variable ‘instrument’ explains how the aid is granted, for example: a debt-write off, a direct grant or a guarantee.

  48. More information can be found in Appendix 2.

  49. See Appendix 3 for a classification of the instrument codes as well as for a frequency graph.

  50. See Appendix 2 for more information on sector classification as well as for a frequency graph.

  51. European Commission 2008c.

  52. European Commission 2008c.

  53. European Commission 2008c.

  54. When a measure is not considered to be a State aid measure, it is logical that it is allowed.

  55. Because of large variations for the variable ‘amount’, we also made the analysis with the log of this variable. This does not alter our results. Also, for the variable duration we find some outliers. To make sure this does not influence our results, we tested with and without these observations.

  56. By going one step back, Slovakia and OD become significant at the 10% level., respectively for the regression ≥1 and ≥10.

  57. Original results (coefficients) can be found in Appendix 4.

  58. For the whole reform package, see http://ec.europa.eu/competition/state_aid/reform/reform.html (last consulted September 15, 2010).

References

  • Ahlborn C, Berg C (2004) Can state aid control learn from antitrust? The need for a greater role for competition analysis under the State aid rules. In: Biondi A, Eeckhout P, Flynn J (eds) The law of state aid in the European union. Oxford University Press, Oxford

    Google Scholar 

  • Bergman MA, Jakobsson M, Razo C (2005) An econometric analysis of the European Commission’s merger decisions. Int J Ind Organiz 23:717–737

    Article  Google Scholar 

  • Besley T, Seabright P (1999) The effects and policy implications of State aid to industry: an economic analysis. Econ Policy 28:15–53

    Google Scholar 

  • Bianchi P, Labory S (2006) Empirical evidence on industrial policy using state aid data. Int Rev Appl Econ 20:603–621

    Article  Google Scholar 

  • Brander JA, Spencer BJ (1985) Export subsidies and international market share rivalry. J Int Econ 18:83–100

    Article  Google Scholar 

  • Brander JA, Spencer BJ (1987) Foreign direct investment with unemployment and endogenous taxes and tariffs. J Int Econ 22:257–279

    Article  Google Scholar 

  • Buigues P-A, Sekkat K (2009) Industrial policy in Europe, Japan and the USA. Amounts, mechanisms and effectiveness. Palgrave Macmillan, Hampshire

    Book  Google Scholar 

  • Collie DR (2000) State aid in the European Union: the prohibition of subsidies in an integrated market. Int J Ind Organiz 18:867–884

    Article  Google Scholar 

  • Collie DR (2002) Prohibiting State aid in an integrated market. J Ind Competition Trade 2:215–231

    Article  Google Scholar 

  • Collie DR (2005) State aid to investment and R&D. Eur Econ Econ Pap 231:1–22

    Google Scholar 

  • Council of the European Union (1998) Council Regulation (EC) No 994/98 of 7 May 1998 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. Off J Eur Union L 142:1–4, 14.05.1998

    Google Scholar 

  • Council of the European Union (1999) Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [108] of the [Treaty on the Functioning of the European Union]. Off J Eur Union L 83:1–9, 27.03.1999 (as amended)

    Google Scholar 

  • Dewatripont M, Seabright P (2006) “Wasteful” public spending and state aid control. J Eur Econ Assoc 4:513–522

    Article  Google Scholar 

  • European Commission (2004) Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article [108] of the [Treaty on the Functioning of the European Union]. Off J Eur Union L 140:1–134, 30.04.2004 (as amended)

    Google Scholar 

  • European Commission (2005) State aid action plan. Less and better targeted State aid: a roadmap for State aid reform 2005–2009, online: http://ec.europa.eu/comm/competition/state_aid/others/action_plan/saap_en.pdf (last consulted November 16, 2006)

  • European Commission (2006a) Commission Regulation (EC) No 1998/2006 of 15 December 2006 on the application of Articles [107 and 108] of the [Treaty on the Functioning of the European Union] to de minimis aid. Official Journal of the European Union, L 379 of 28.12.2006, p 5–10

  • European Commission (2006b) Commission Regulation (EC) No 1857/2006 of 15 December 2006 on the application of Articles [107 and 108] of the Treaty [on the Functioning of the European Union] to State aid to small and medium-sized enterprises active in the production of agricultural products and amending Regulation (EC) No 70/2001. Off J Eur Union L 358:3–21, 16.12.2006

    Google Scholar 

  • European Commission (2007a) Commission Regulation (EC) No 875/2007 of 24 July 2007 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid in the fisheries sector and amending Regulation (EC) No 1860/2004. Off J Eur Union L 193:6–12, 25.07.2007

    Google Scholar 

  • European Commission (2007b) Commission Regulation (EC) No 1535/2007 of 20 December 2007 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid in the sector of agricultural production. Off J Eur Union L 337:35–41, 21.12.2007

    Google Scholar 

  • European Commission (2008a) Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compa tible with the common market in application of articles [107 and 108] of the [Treaty on the Functioning of the European Union] (General Block Exemption Regulation). Off J Eur Union L 214:3–47, 09.08.2008

    Google Scholar 

  • European Commission (2008b) State aid register, online: http://ec.europa.eu/comm/competition/state_aid/register/ (last consulted July 24, 2008)

  • European Commission (2008c) State aid scoreboard. Spring 2008 update, online: http://ec.europa.eu/competition/state_aid/studies_reports/archive/2008_spring_en.pdf (last consulted July 1, 2008)

  • European Commission (2008d) Communication from the Commission—The application of State aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis. Off J Eur Union C 270:8–14, 25.10.2008

    Google Scholar 

  • European Commission (2008e) Communication from the commission—Temporary community framework for state aid measures to support access to finance in the current financial and economic crisis. Off J Eur Union C 16:1–9, 22.01.2009

    Google Scholar 

  • European Commission (2008f) Vademecum community law on state aid (update 30.09.2008), online: http://ec.europa.eu/competition/state_aid/studies_reports/vademecum_on_rules_09_2008_en.pdf (last consulted September 14, 2010)

  • European Commission (2008g) Commission Regulation (EC) No 736/2008 of 22 July 2008 on the application of Articles [107 and 108] of the Treaty [on the Functioning of the European Union] to State aid to small and medium-sized enterprises active in the production, processing and marketing of fisheries products. Off J Eur Union L 201:16–28, 30.07.2008

    Google Scholar 

  • European Commission (2009a) Commission notice on the enforcement of state aid law by national courts. Off J Eur Union C 85:1–22, 09.04.2009

    Google Scholar 

  • European Commission (2009b) Notice from the commission on a simplified procedure for treatment of certain types of state Aid. Off J Eur Union C 136:3–12, 16.06.2009

    Google Scholar 

  • European Commission (2009c) Code of best practice for the conduct of state aid control procedures. Off J Eur Union C 136:13–020, 16.06.2009

    Google Scholar 

  • European Commission (2010a) EU competition law—rules applicable to state aid, online: http://ec.europa.eu/competition/state_aid/legislation/compilation/state_aid_21_01_10_en.pdf (last consulted September 14, 2010)

  • European Commission (2010b) State aid: overview of national measures adopted as a response to the financial/economic crisis, online: http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/10/411&format=HTML&aged=0&language=EN&guiLanguage=en (last consulted September 15, 2009)

  • European Commission (DG COMP) (2009) Common principles for an economic assessment of the compatibility of State aid under article 87.3, online: http://ec.europa.eu/competition/state_aid/reform/economic_assessment_es.pdf (last consulted November 16, 2006)

  • European Union (2008) Consolidated version of the treaty on the functioning of the European union. Off J Eur Union C 83:47–199, 30.03.2010

    Google Scholar 

  • Friederiszick HW, Röller LH, Verouden V (2006) European State aid control: an economic framework. In: Buccirossi A (ed) 2008, Handbook of antitrust economics. MIT Press, Cambridge, Working Paper version September 30, 2006

    Google Scholar 

  • Kornai J, Maskin E, Roland G (2003) Understanding the soft budget constraint. J Econ Lit XLI:1095–1236

    Article  Google Scholar 

  • Martinez FB, Hashi I, Jegers M (2008) The implementation of the European Commission’s merger regulation 2004: an empirical analysis. J Competition Law Econ 3:791–810

    Google Scholar 

  • Neven D, Albaek S (2007) Economics at DG competition 2006–2007. Rev Ind Organ 31:139–153

    Article  Google Scholar 

  • Neven D, Verouden V (2008) Towards a more refined economic approach in State aid control. In: Mederer W et al (eds) 2008, EU competition law—Volume IV: state aid. Claeys & Casteels, Leuven

    Google Scholar 

  • Whislade F et al (2006) EU state aid control. In: Clarke R, en Morgan E (eds) New developments in UK and EU competition policy. Edward Elgar, Cheltenham

    Google Scholar 

  • Williams G, Lindsay A, Lecchi E (2003) Econometrics study into European Commission merger decisions since 2000. Eur Competition Law Rev 12:673–682

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Vrije Universiteit Brussel, Microeconomics of the profit and nonprofit sectors, Pleinlaan 2, 1050, Brussels, Belgium

    Caroline Buts & Marc Jegers

  2. Vrije Universiteit Brussel, Centre for European Law, Pleinlaan 2, 1050, Brussels, Belgium

    Tony Joris

Authors
  1. Caroline Buts
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Marc Jegers
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Tony Joris
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Caroline Buts.

Additional information

Suggestions made by Hannes Öhler at the European Public Choice conference in Izmir (2010) and the anonymous referee are gratefully acknowledged.

Caroline Buts is a Ph.D. fellow of the Research Foundation Flanders. Marc Jegers is professor at the department of Microeconomics of the profit and nonprofit sectors and Tony Joris is Jean Monnet professor of European Law. All authors are at the Vrije Universiteit Brussel.

Appendices

Appendix 1: Dependent variable

 

Table 8 Regrouping of the dependent variable, decision type (only final decisions), into three categories
Full size table

Appendix 2: Independent variables

 

Table 9 Independent variables
Full size table

Appendix 3: Regrouping of variables objective and instrument

 

Table 10 Regrouping of the independent variables objective and instrument
Full size table

Appendix 4: Logit results

 

Table 11 Logit regression results
Full size table

Rights and permissions

Reprints and permissions

About this article

Cite this article

Buts, C., Jegers, M. & Joris, T. Determinants of the European Commission’s State Aid Decisions. J Ind Compet Trade 11, 399–426 (2011). https://doi.org/10.1007/s10842-010-0091-0

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10842-010-0091-0

Keywords

JEL classification

Search

Navigation