Archive for the ‘Everything Competition Lawyers should know about State Aids’ Category
-The talk of the town these days –as reflected in our most recent posts- is about “Lux leaks” and the uncomfortable position in which it places President Juncker, State aids and our victory in Court last week. But there’s a paradox regarding these cases that has surprisingly not received much attention: do people realize that if Luxembourg’s rulings were declared to constitute illegal State aid the result would be that Luxembourg would receive several thousands of millions of euros??
– This blog is intended not only for us to get things off our chest, but also to foster some debate. In this context, I would suggest you to read the most recent comments on this and this post. You won’t find that sort of discussions in many other places and this is what makes this blog different; we’re very fortunate to have such active and sapient readers and we probably don’t emphasize that enough.
– The comments I just referred to reveal that there are still a few open issues regarding, in particular, the concept of restrictions by object and on how they can avail themselves to objective justifications. For those interested in clarifications, we remind you about the forthcoming ERA event on the subject (Restrictions by Object after Cartes Bancaires and the Commission’s initiatives); for more info click here.
– Btw, for those needing clarification on a wider set of issues, we will soon be announcing the program of the 18TH edition of the Competition Law Course that Luis Ortiz Blanco and myself direct in Madrid from January to March, with the participation of, among many others, my former and my current blogging partners. If you are interested in attending or know of someone who might be, you can drop me a line (email@example.com). This course is, by the way, where I first met Nicolas, interestingly through the intermediation of his subsequent replacement on this blog, Pablo.
– Thanks to Competition Policy International we have found this piece at the intersection of competition law and religion titled Is there a Vatican School for Competition Policy? For the record, we were pioneers in writing on the link between religion and antitrust: see my (2010!) post on An Antitrust Challenge to God
– Our friend Stephen Ryan, now at the Hong Kong Competition Commission, has informed us about a new media campaign initiated by the authority to inform the general public about the benefits of competition (see here and here). We’ll add these to our list of candidates for the Antitrust Oscars. The authority is also active on other fronts, having just released draft guidelines on the interpretation of the Competition Ordinance for public consultation.
On selectivity and alleged fiscal State aid (today’s Judgments in Cases T-290/10 Autogrill /Commission and T-399/11, Banco Santander/Commission)
I’m writing under the influence of a few bottles of Champagne opened to celebrate two landmark Judgments rendered this morning by the General Court annulling the Commission’s decision that ruled the Spanish tax regime allowing for the deduction of shareholdings in foreign companies to be incompatible with the internal market (click here for the Court’s Press Release).
A very convenient disclosure/explanation: my firm represented all successful applicants.
The Judgments are important not only because of their economic significance (we’re talking of hundreds of affected companies and of billions of euros) but also because they are a welcome clarification on how to interpret the selectivity criterion in cases concerning alleged fiscal State aid. You may in fact recall that already 3 years ago my then colleague and still very good friend Napoleón (now on the dark side, at the European Commission) discussed the issues raised by the case on this blog (see here).
A few comments on the news:
- Whereas it’s remarkable that appeals by alleged beneficiaries were successful in a case in which the State didn’t appeal the decision, the truth is that the Judgments do not constitute any major overhaul on the system. On the contrary, these Judgments only reinstate the obvious, that in order for a measure to be selective it shall offer an advantage to a certain category of companies. Measures which, like the one at issue, are open to any company operating within the system of reference (in this case the national tax system) are not to be considered selective. Rather than being new, this is actually one of the things that is taught on the very first session of any State aid course; the fact that many people forget about it may be explained either because they arrived late to class or because their memory follows a FIFO pattern ;)
- The Judgments come at a moment when fiscal State aid –that we’ve been doing for a decade- is in the spotlight (the Lux leaks news broke only yesterday) so the first reaction of many will be to think about the impact this may have on other cases in which the Commission has also embraced an arguably excessively wide notion of selectivity (this includes my 25 fiscal State aid appeals currently pending before the General Court as well as the more recent investigations into tax rulings).
- The Judgments expose an unusual behavior on the part of the Commission, which only last week adopted another decision building on the one that has now been quashed without waiting for the Court’s Judgment, which they knew was coming. This, which was probably intended to show that Almunia also targeted Spain, doesn’t seem to have played out so well.
On the tax-related State aid investigations. Many newspapers opened this week with big headlines on the alleged news that the Commission had adopted a “preliminary decision” regarding the State aid probe into Apple (see e.g. here). I’m a bit intrigued by what’s behind this press campaign; the only news is that the Commission has published in the Official Journal decisions that had already been adopted before the summer. This sort of publication is never news, so why the fuss about it now is beyond me.
[It is, by the way, interesting to observe how some developments are “sold” twice, whilst others –including the closure of infringement proceedings against luxury watch manufacturers- go under the radar (disclaimer/advertising: my firm represented one of the main companies subject to that investigation)].
Given that I’ve lately been working on loads of tax-related State aid cases before the General Court I’ve developed a particular interesting in these matters. We might comment more in-depth on them in the future; for the moment, I’ll simply point out that by questioning not national taxation systems or tax rulings in general but rather APAs (advance price agreements) the Commission might be opening Pandora’s box (how many multinationals –including many EU ones- have similar arrangements?; could all of those now be challenged under State aid rules? ) For my previous comments on these issues, see here.
On the Google search investigation. The Google case has been on the news again, which, paradoxically, is no news. It’s been a while since we last commented on this investigation (partly because there wasn’t anything substantial on which to comment, and partly because the susceptibility around these issues is quite acute). One of the main contributors to this blog –Pablo Ibañez Colomo- gave his views to Global Competition Review a few days ago; Pablo explained that “[i]t is very controversial to argue that, as a rule, article 102 [prohibiting abuse of dominant position] requires all dominant companies to give access to their facilities – including operating systems or search engines – on non-discriminatory terms and conditions (…) I do not believe there is case law supporting this understanding of the provision.” According to Pablo, “there is the expectation that remedies are justified even if it is not clear why Google’s conduct is illegal”.
Last time I wrote about the case I made some comments on the politicization of competition law enforcement (see here). Since then, Vice-President Almunia has explained that politics are being left aside of the case (here, ehem). So, politics aside, let me focus on a purely legal point without discussing who’s right or wrong:
The complainant’s interesting main legal argument now seems to be that Google’s proposed commitments do not address the concerns set out in the Commission’s preliminary assessment (see, e.g. here). This a most interesting claim, and one on which many –including myself- can’t really comment because we haven’t read the preliminary assessment. In fact, no one other than Google was supposed to have seen it (according to the Manual of Procedure, “the complainant has no right to a hearing or to receive a (non-confidential) copy of the Preliminary Assessment or to have access to information”). In this case, however, the Hearing Officer granted a request for access on the part of some of the complainants (see the previous hyperlink for a source).
Now, consider the future implications of this move: in the past the Commission could overdo a bit its concerns in its preliminary assessments because, after all, they are not subject to the same requirements as the SO, would not be subject to any rebuttal on the part of its addressee, unlike SOs do not need the approval of the Commission’s President and, at most, could give the Commission a stronger hand in commitment negotiations (which, regardless of what Alrosa says, obviously exist). Now that the Commission is aware of the fact that preliminary assessments will/could be accessed by complainants, will it have to show more self-restraint? Will this have an impact on future commitment negotiations? Would these problems be avoided if the Commission was required to adopt a proper SO prior to entering into commitment negotiations?
On Android. I also saw some headlines this week anticipating, once more, the initiation of a formal investigation into Android. As frequent readers will recall, I’ve already written quite extensively about this (see here). On October 15th (the same day in which, by the way, the Commission will be making public an avalanche of decisions…) I’ll be speaking about it at a conference in Brussels, so in case anyone has thoughts about the case feel free to send them my way.
On the Euribor probe and the role of the Ombudsman. Last week, the fact that Crédit Agricole had resorted to the Ombudsman to complain about a possible bias on the part of the Commission also hit the news. CA’s claim has to do with the Commission having adopted a settlement decision finding a cartel infringement in relation to the Euribor prior to concluding the infringement proceedings against those who chose not to settle (see Gaspard Sebag’s piece for Bloomberg here). This obviously raises most interesting procedural questions, which I’d nevertheless tend to think pertain more to the realm of judicial review than to the Ombudsman. The piece includes a quote of mine which is a candidate for the prize of ‘dullest comment of the year in the press’: “It’s always uncomfortable to have to deal with the Ombudsman”. A deep thought that is… ;)
The European Commission has in recent years been very active applying State aid rules to tax provisions and regimes. The first paper I ever wrote back in 2004 (don’t read it, it was initially done for a tax course and I was a 20 year old student…) dealt with those issues; now, ten years later, I’ve taken interest again on this subject and am currently involved in a handful of cases dealing with the taxation/State aid interface before the General Court.
The fact is that the Commission has recently undertaken a more proactive and prominent role in resorting to State aid rules to public initiatives that, in its view, facilitate aggressive tax planning. Those of you attending the 2014 Competition Forum back in February will recall that the Commission held a panel on “Taxation and Competition Policy”, in which it inquired about the role of State aid investigations in tackling tax evasion, tax fraud and aggressive tax planning (a video recording of the discussion as well as the transcripts of the speeches are available here).
Against a background of lack of political consensus on how to deal with harmful tax competition and what is seen as tax avoidance, the Commission is keen on being regarded as a proactive authority (it’s not the first time that competition policy is used to achieve results that couldn’t be attained by governments and legislators).
As part of this effort, the Commission has sent information requests to various Member States in order to assess the compliance of tax ruling practices (advanced binding decisions in fiscal matters which may allow for special treatment for some particular companies) and patent box regimes (incentives designed to encourage companies to make profits from their patents) with state aid rules. Yesterday the European Commission went through the trouble of issuing a Press release aimed at naming and shaming Luxembourg for having failed to provide information (specifically, the names of thelargest 100 companies benefitting from the patent box regime) , invoking fiscal secrecy.
I was quoted yesterday in a Bloomberg piece in relation to this news, so I though it’d be interesting to
recycle my thoughts explain my views in a bit more detail here:
This is a highly sensitive area where publicly visible messages (such as yesterday’s press release) may send powerful signals and give rise to concern on the parts of governments and companies, and where playing to the gallery might therefore be considered useful at times. That’s part of the game and shouldn’t surprise anyone.
But if we’re realistic, we should realize that (for as long as fiscal policy remains within the realm of nation States), there’s a limit to what can be achieved with State aid rules, and that it’s doubtful that the current investigation, focused on patent box regimes and tax rulings, will yield any meaningful results:
– Patent box regimes have been authorized in several Member States, and the Commission has consistently accepted that they do not confer the selective advantages that would qualify them as State aid.
– With regard to tax rulings –and whereas I’m not aware of the details of the investigation- even in the event that the Commission were to find incompatible State aids, this would only have the effect of suppressing divergent tax treatment within the Member State at issue (the Commission can only identify as aid deviations from “the system of reference” provided by the State’s standard tax regime ). This would therefore not at all address the main, big picture, concern linked to divergent treatment across, and beyond, different Member States.
It’d nevertheless be interesting to follow developments on this area. The amounts that could be in play for many companies would make any antitrust fine look insignificant. Anyone in need of a lawyer? ;)
Some of you might remember one of ours posts titled State aid conferences: that’s where the fun is! (Michael O’Leary and Kim Jong Il make for a great marketing combination and attracted quite a few readers) [Btw, today’s picture features another “peculiar” character; see below for an explanation].
In reality, and jokes aside, State aid is a field where much is currently happening, and that most antitrust lawyers often fail to follow and even perceive as distant. Let me explain why that may not make much sense:
Off the top of my head, I would say that around 40% of DG Comp’s decisional output and resources are devoted to State aid. In economic terms, State aid issues generally have much greater repercussions than most antitrust cases (to put just one example, the guys at my office are advising Spain on how to use some tenths of billions granted by the European Council to restructure the financial sector). The substantive issues are no less interesting, complex, and challenging as the one’s posed by antitrust law.
On the other hand, to be sure, political interference is much more frequent, intense, and often less camouflaged (politicians, very particularly French and British ones, seem to be the ones realizing about the impact of these rules) than in antitrust. You might have read this morning about the French Industry Minister, Arnaud Montebourg, openly attacking both State aid rules in general and Vice-President Almunia in particular. In the Minister’s words, the Commission lives in a “legal delirium” and “makes up rules that don’t exist in the Treaties in order to perpetuate its powers”. He also referred to the Commissioner an “obsolete liberal integrist” and asserted that he has the backing of 11 Member States to “revise and liberalize State aid”. For once I will be the controversial one here instead of Nico, and I’ll refer to Monsieur Montebourg as the first recipient of the “Thicko of the day” award (pictured above proudly receiving his trophy) :)
Despite all the above (the fun, the legal complexity and the political and economic importance), State aid is not paid the attention it deserves by practicing lawyers. Why? Easy: because those most directly affected often seem to be public authorities (many companies haven’t yet understood the opportunities and the risks associated to these rules), and those don’t pay as high bills as private companies do. (I guess efficiency and profit-maximizing related incentives also give rise to market failures/externalities).
Whereas I agree with the idea that State aid DNA shares more chromosomes with internal market rules than with antitrust law, there are some common feature between the two disciplines. Aside from the fact that they were placed in the same chapter of the Treaty –which led to their enforcement being entrusted to the same body: DG Comp-, State aid law is also always constantly in the making and questioning itself, which is what initially seduced me from antitrust.
An example: on January 17th the European Commission launched a consultation paper on the very the notion of aid. Think about it; no one would dare of doing the same in antitrust, even if very few people (perhaps with the exception of the influential Giuliano Marenco) have a comprehensive theory to explain what a restriction of competition actually is (an idea I also stated here and here).
There’s loads of “low-hanging fruit” in this domain. If you’re interested in an overview of the legal issues involved in determining what an State aid really is, I very strongly encourage you to read Andrea Biondi’s recent piece: State aid is falling down, falling down: An analysis of the case law on the notion of aid (very recently published in Common Market Law Review).
In the past few weeks I’ve taken a few initiatives to compensate for our State aid deficit. On a personal level, I got heavily involved together with José Luis Buendía in drafting and lodging no less than 12 State aid appeals concerning a particularly controverted and interesting decision (little did I know that I’d have to do that in the course of the Christmas holidays; btw, the experience left me wondering how we could manage in the pre e-Curia days). On a blog-related level, we’ve just asked a couple of the best minds in the field to become regular contributors to Chillin’Competition. We hope to be able to announce their coming on board soon.
Note by Alfonso: As some you may have noticed, I’ve taken an unusually long blogging break from which I’m now back. As every time I’m out of combat, Pablo Ibañez Colomo (who, by the way, has recently been fast-track tenured -major review- at LSE and has just received a major review teaching prize; congrats!) comes up with a replacement post that’s better of what I would’ve written (we have a luxury bench at Chilin’Competition…). A few days ago Pablo sent us this post on France Telecom that we(I)’ve been slow to publish due to the easter holidaus and to to the frenchy’s posting frenzy ;) We leave you with Pablo:
Some readers wll remember that during my short-lived tenure as a substitute blogger a few months ago, I wrote about a pending State aid case involving France Telecom. I guess that at least a fraction on those readers will be interested in knowing that the Court of Justice delivered its Judgment in the case on
Unsurprisingly, the judgment is in line with AG Mengozzi’s (very sensible) opinion. The General court annuled the Commission’s decision on grounds that the Commission had not identified a clear link between the advantage deriving from a shareholder loan offer in favour of France Telecom and the State resources allegedly involved by virtue of the measure. As I argued in my previous post, the Court of Justice takes the view that the General Court’s interpretation of Article 107(1) TFEU would leave outside the scope of the provision measures suh as guarantees departing from market conditions (see paras 107-111). Such measures do not immediately place a burden on the budget of the State, but a ‘sufficiently concrete risk of imposing an additional burden on the State in the future‘. According to the Court, it is sufficient to identfy such a ‘sufficiently concrete risk‘ for State aid rules to come into play.
The broader picture is aguably more interesting than the outcome of this case. As I mentioned in the previous post, the Court of Justice has sided with the Commmission (thereby departing from the analysis of the General Court and the theses advanced y Mmember States) in some key cases revolving around the notion of selectivity. France Telecom, arguably the single most important case of the past years on the notion of State resources, seems to confirm this trend. The old principles of Article 107(1) TFEU case law, if anything, seem more solid following these high-profile disputes
(You’ll understand why we chose this pic if you keep on reading)
The European State Aid Law Institute held its 10th Experts’ Forum on new developments in European State aid law last Thursday and Friday.
I didn’t attend (as a means to reducing my current backlog I’m quitting conferences for a while) but some of my colleagues did. One of my
bosses colleagues, José Luis Buendía, develivered a critical presentation on the State Aid Modernisation Initiative (“SAM”). Hopefully he will be able to turn it into a post for this blog once he manages to take some time off for this (he’s currently a bit busy representing the Spanish Fund for Orderly Bank Reestructuring, which will be borrowing 100.000 million euros from the EU rescue funds; see here or, actually, almost anywhere else).
I hear that there were other excellent sessions (e.g. there seems to be unanimous praise for Marc van der Woude’s presentation), but the session that will perhaps stick for longer in attendees minds was the Opinion Panel featuring Ryanair´s CEO (Michael O´Leary) and the Deputy Director General for State aid (Gert-Jan Koopman). As you may know, O´Leary has a reputation for being somewhat of an histrionic character, and he stood up to it.
The version of O´Leary’s CV included in the materials was already a bit different from the usual stuff (I promise I’m not making any of this up):
“Michael O´Leary has served as Ryanair CEO since 1993. Born in a stable in 1961, he was a boy genius, who excelled both academically and at sports. Having represented Ireland internationally at bog snorkelling and flower arranging, he graduated from Trinity College in Dublin as soon as they could get rid of him. He then became another boring KPMG accountant until divine inspiration sentenced him to a life of penal servitude in the airline business. Despite his best efforts, Ryanair is the World´s favorite airline, with 1,5000+ low fare routes accross 28 countries. (…) It is widely known that women find him irresistible“.
Some of the points he made in his speech that were most warmly received by the Commission were that (i) DG COMP has hired North-Korean economists to draft the guidelines on regional airports ; (ii) that no Commission official has ever set foot in Charleroi because they only fly on expensive tickets ; (iii) that he had woken up to fly at 6 a.m, something that the Deputy Director General does not even conceive has humanly possible; and (iv) that there are only two sorts of people that like the guidelines: flag carriers and Kim Jong Il. His last slide was actually of Kim Jong Il saying “These guidelines are fab!”.
I’m so sorry I missed it…