Brussels, 30/09/2005 (Agence Europe) - “Is Community state aid policy a competition policy?”, asks Stanislas Martin, from the French Permanent Representation to the European Union, and Christophe Strassel, advisor to the Court of Auditors and formerly of the Representation. Presenting the ideas which they develop in an article in the French magazine Concurrences on Wednesday at a conference organised by the law firm Lovells in Brussels, the authors stressed the gap which exists in the interpretation of the concept of competition of different branches of Community law. Their demonstration suggests that Community state aid policy , which is not focussed on the benefit from it to the consumer, is not really a true competition policy and is not based on sufficiently clear objectives. This concept of benefit to the consumer should be used as a measuring instrument for market competitiveness, allowing consistency of Community competition law to be reconciled with economic effectiveness.
Some of the (deliberately extreme) responses suggested by the authors are worthy of kick-starting a debate, the importance of which lawyers agree on. “In terms of state aid, the concept of competition does not mean the same thing as it does in terms of cartels”, says Mr Strassel, who provides a historical explanation for this. Whereas the rules on mergers and antitrust have (ever since the beginning in the case of cartels and gradually in the case of merger controls) contained the criterion of benefit to the consumer, policy on state aid has remained impervious to this development, actors observe, pointing out that this logic is now also being pursued in assessing abuse of dominant position. Neelie Kroes thus confirmed at a conference in New York on 23 September that “the objective of article 82 is the protection of competition on the market as a means of improving consumer welfare and ensuring efficient allocation of resources". Admitting the equivalence between competition and “benefit to the consumer", the authors state that this link is in fact lacking in the state aid control policy. This policy is therefore not a competition policy, they say. They also contest the fact that it clearly serves other objectives, such as delivering the internal market, compensation of competitors, reducing public spending or making it more effective. According to Alain Alexis, responsible for state aid policy at DG Competition, the concept of benefit to the consumer is not transferable to legislation on state aid. Concepts other than consumer interests must be taken into account, he explains, stressing that there is a need to preserve the structure of the market and long-term competition. According to Vincent Verouden from the office of the chief economist in the Commission competition services a balance must also be struck between the concepts of distortion of competition and beneficial effects.
The legitimacy of compensation of competitors, through whichever means, is no guarantee from the point of view of protecting competition, the authors insist, noting that the effect of these measures could in fact be anti-competitive. Imposing disposal of assets or reduction of capacities to authorise certain rescue or restructuring aid can reduce competition pressure and lead to price increases, they say.
The Commission taking account of the concept of market failure, in spite of the incertitude which persists over its implementation, seems “appropriate” from an economic point of view (aid would be compatible as long as it is effective), but this approach is more contestable from a legal point of view, stresses Mr Martin. Following the logic of the article in Concurrences, this would make the Commission “the referee in the industrial policies of the Member States”, when they should in fact be “the judges of the economic appropriateness of the policies they implement and of the effective use of the public funds for which they are responsible”. According to Mr Verouden, on the other hand, compensation can serve to make competition more dynamic.
The authors also judge that making state aid policy into a competition policy which is exclusively focussed on the consumer is risky. They believe that “an approach which is limited to declaring aid which does not harm consumer surplus to be compatible would risk voiding article 87 of a large part of its scope, which was probably not the aim of the Treaty”. They instead suggest that the same approach should be adopted as for mergers, and that the logic of “efficiency gains” should be followed. In order to be compatible, the aid should therefore have a positive impact for the consumer which would not exist in its absence. Although the positions expressed in the article do not reflect France's position, the authors hope that the response from the Member States in the Commission's consultations on its state aid action plan might draw inspiration from some of these positions.