European Competition Law provides a wide-ranging review of the European rules relating to competition: restrictive agreements, abuse of a dominant position, impact of intellectual property rights, procedure, merger control, State aid.

European Competition Law

1° Services of general economic interest (SGEI)
The undertaking receiving the compensation must be entrusted with a public service and its obligations be clearly defined. The public service corresponds to a service of general economic interest as set out in Article 106 TFEU. That concept, which is not defined in the legislation, refers to “services of an economic nature which the Member States or  …

Conditions

1° Services of general economic interest (SGEI)

The undertaking receiving the compensation must be entrusted with a public service and its obligations be clearly defined. The public service corresponds to a service of general economic interest as set out in Article 106 TFEU. That concept, which is not defined in the legislation, refers to “services of an economic nature which the Member States or the EU subject to specific public service obligations by virtue of a general interest criterion” . More specifically it covers certain services provided by the big network industries such as transport, postal services, energy and communications. The classification as an SGEI does not have to include the technology through which the service is provided . Moreover, the EU court has stated that even if the revenues from the secondary activity are closely linked to the general interest mission of a main activity and are intended to cover part of the costs thereof, this does not lead to the conclusion that they are necessary for the operation of the SGEI or that they are of general economic interest . 

Although the Member States enjoy a broad discretion in determining a service of general economic interest (SGEI), this discretion may be limited by the existence of specific rules of the law of the Union . In any case, the Member State must demonstrate that the scope of the SGEI is necessary and proportionate to a genuine need for public services. Where an objective of territorial continuity can be achieved at the same time by means of market forces and by the public service, the creation of a SGEI is only justified to the extent that it addresses the corresponding market failure . 

A State which relies on the existence and the necessity of a service of general economic interest must show that the minimum criteria common to every public service mission are satisfied, notably by the existence of an instrument from the public authority entrusting the operators in question with such a mission and evidence of the universal and compulsory nature of that task . The universal nature of the service is not dependent upon the extent of the territorial or material application or the number of users . The compulsory nature of a mission does not preclude a certain freedom of operators in relation to the content and pricing of the services and is not dependent on a reciprocal obligation for users to contract . In addition, the fact that a service is designated as being of general interest under national law does not mean that any operator carrying it out is entrusted with the discharging of public service obligations within the meaning of the Altmark ruling . According to the General Court, the assessment of the existence of a market failure is a prerequisite to the classification of an activity as a SGEI, and, consequently, to the finding of no State aid . The assessment of the possible market failure is carried out at the time where the SGEI is established and must include a prospective analysis of the market situation for the duration of application of the SIEG, during which market failure must also be reviewed . There is market failure liable to give rise to the establishment of an SGEI where it can be demonstrated that private investors are not in a position to provide in the near future, i.e. at the end of a period of three years, adequate broadband coverage to all citizens or users, thus leaving a significant part of the population unconnected .

2° Calculation of the compensation in advance and in an objective and transparent manner

The compensation must take place according to parameters established in advance in an objective and transparent manner  but which do not have to ensure that the public service is run efficiently .  This is the case for a measure providing payment, in compensation for the provision of the public service of assisting taxpayers with the filling out and filing of tax declarations, of a sum of approximately fourteen EUR for each declaration completed and filed . On the other hand, one-off support measures granted a posteriori in order to address an unforeseen situation  do not satisfy the condition of precedence expressly set forth in the Altmark decision. When the choice of the company to be entrusted with the execution of public service obligations, in a specific case, is not carried out in the context of a public procurement procedure to select the candidate capable of providing those services at the least cost to the community, the level of compensation needed must be determined on the basis of an analysis of the costs which a typical undertaking which is well run and adequately equipped to be able to meet the requirements of the public service required, would have incurred to discharge those obligations, taking into account the revenues relating thereto as well as a reasonable profit for their discharge . 

Lastly, the compensation must not go beyond what is necessary to cover all or part of the costs resulting from the discharge of public service obligations , by taking into account the relevant receipts and a reasonable profit for discharging those obligations. In certain sectors, the mandatory application of a tender procedure is regarded as sufficient to rule out the possibility that the Member State is seeking to grant an advantage to an undertaking .

There is no State aid where the price charged covers all the additional, variable costs incurred in providing the service, an appropriate contribution to the resulting fixed costs, and an adequate return on the equity capital insofar as it is used for the subsidiary's competitive activity, and where there is nothing to suggest that those elements have been underestimated or fixed in an arbitrary fashion . By contrast, measures which are not purely compensatory or additional costs due to an aggressive rebate policy not imposed by the law but resulting from a will to preserve oneself on a competitive market  constitute State aid subject to the prior notification obligation.

The fact that State resources granted are disproportionate is not assumed . It must be shown that the subsidies in question do not exceed the costs resulting from public service obligations imposed on the recipient.

Compensation must be calculated on the basis of elements which are specific, clearly identifiable and capable of being controlled . Where there is no alternative, more accurate method of calculation, additional costs of public service may be calculated on the basis of all activities of the public undertaking where its analytical accounts do not make it possible to establish a distinction between charges and expenditure relating to public service activities and those relating to competitive activities .

The Commission has since adopted Communication No 2012/C 8/02 which clarifies the key concepts underlying the application of the State aid rules to public service compensation and consolidates  the decision-making practice of the European authorities in the matter . Of the general provisions relative to the concept of State aid, it reviews the general principles laid down by the case law on the concepts of undertaking and of economic activity fundamental for the application of the State aid rules. It also sets out the conditions under which public service compensation does not constitute State aid as estabished by the Court of Justice in the Altmark judgment: existence of a service of general economic interest, entrustment act, parameters of compensation, avoidance of overcompensation, selection of provider.

White Paper on services of general interest of the European Commission, COM [2004] 374 final, 23.

Joined Cases C-91/17 P and C-92/17 P Cellnex Telecom (SA), Judgment of 26 April 2018, not available in English.

Case T-258-10 Orange v Commission, Judgment of 16 March 2013, not available in English.

Case T-325/10 Iliad and others v Commission Judgment of 16 March 2013, LawLex202000001903JBJ.

See Commission Decision No 2004/339/EC of 15 October 2003, Measures implemented by Italy for RAI SpA, LawLex200500004541JBJ: the tax exemption on the revaluation of assets and the capital injection for an undertaking granted to compensate for the net costs of performing the public service broadcasting task cannot exclude the classification as State aid where the parameters on the basis of which those financial supports are calculated have not been established in advance in an objective and transparent manner.

Case T-674/11 TV2 Danmark A/S, Judgment of 24 September 2015, LawLex201700000250JBJ.

Case C-451/03 Servizi Ausiliari Dottori Commercialisti [2006] ECR I-2941, LawLex200700001475JBJ.

Commission Decision No 2004/838/EC of 10 December 2003, Budgetary grant for France Télévisions, LawLex200500005335JBJ: aid granted to public television broadcasters with public service obligations to discharge does not constitute financing granted on the basis of parameters established in advance in an objective and transparent manner where there are one-off support measures granted a posteriori in order to address an unforeseen situation.

Case T-541/13 Navarra de Servicios y Tecnologías (SA), Judgment of 26 November 2015, not available in English.

Case 240/83 Procureur de la République v ADBHU [1985] ECR 531, LawLex200500004432JBJ: an indemnity granted to undertakings in consideration of obligations of collection and/or disposal of waste imposed by the State, and which does not exceed the actual yearly costs, does not constitute a State aid; Case T-106/95 FFSA and others v Commission [1997] ECR II-229, LawLex200500005155JBJ: tax concessions granted to a public undertaking entrusted with a service of general economic interest do not constitute State aid where they do not exceed what is justified in order to perform public-interest tasks within the meaning of Article 86(2) EC; Commission Decision No 2002/782/EC of 12 March 2002, Aid granted by Italy to Poste Italiane SpA, LawLex200500004611JBJ: financial measures granted by a Member State to a public undertaking entrusted with a general interest task along with an exclusive right do not constitute State aid within the meaning of Article 107 TFEU where they compensate the additional net cost generated by the performance of that task.

Commission Decision No 2005/351/EC of 20 October 2004, Intermediación Aérea SL, LawLex200700001546JBJ: Where a public aid is paid to compensate for public burdens in the aviation sector, the criterion of proportionality of the advantage to the costs of discharging public service obligations cannot be fulfilled if the tender procedure laid down in Article 4 of Regulation No 2408/92 has not been used.

Case C-83/01 P Chronopost v Ufex and others [2003] ECR I-6993, LawLex200500004606JBJ.

Case T-79/16 Vereniging Gelijkberechtiging Grondbezitters, Judgment of 15 October 2018, LawLex201800001528JBJ: the Commission's characterization of the “overall” or “atypical” SGEI of the aid measure in question reveals the existence of a serious difficulty which concerns activities which may be regarded as an integral part of the SGEI, and, in the degree of connectedness between secondary economic activities and the main activity, since the profitability and the accessory nature of those activities are not sufficient to exclude their economic nature of  goods or services offered on a relevant market, nor the existence of competition in that market.

Commission Decision No 2002/753/EC of 19 June 2002, Deutsche Post AG, LawLex200500004610JBJ.

Case T-266/02 Deutsche Post v Commission [2008] ECR II-1233, LawLex200900000065JBJ: the classification as State aid cannot be deduced from the fact that State resources granted to compensate costs resulting from the discharging of a service of general economic interest are allegedly disproportionate, where the information making plausible the absence of additional costs not actually linked to the discharging of those obligations has not been examined.

Case T-289/03 BUPA and others v Commission [2008] ECR II-81, LawLex200800000269JBJ.

Case T-106/95 FFSA and others v Commission [1997] ECR II-229, LawLex200500005155JBJ.

Communication from the Commission on the application of the European Union State aid rules to compensation granted for the provision of services of general economic interest, (No 2012/C 8/02) OJEU, C 8/4 of 11 January 2012. 

Case T-366/13 France v Commission, Judgment of 1 March 2017, not available in English. 

Such is not the case of the additional passenger transport services to Corsica, insofar as the territorial continuity between Corsica and the continent is already provided by the basic service - maritime passengers and freight transport - supplemented by market forces, and therfore the Commission rightly made a distinction in the classification of a service of general economic interest for those two services, Case T-366/13 France v Commission, Judgment of 1 March 2017, not available in English. 

Case T-487/13 Navarra de Servicios y Tecnologías (SA), Judgment of 26 November 2015, not available in English.

Case T-79/10 Colt Télécommunications France, Judgment of 16 September 2013, not available in English.  

European Competition Law

385. Conditions

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385. Conditions

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