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The European Commission publishes Oxera’s study on assessing the impact of state aid on competition

The study puts forward a tailored set of economic tools that can be applied in competition assessments relating to state aid. These tools are then applied in four case studies highlighting the possible impact of aid on competition, and providing key insights from carrying out these assessments.

Brussels: For certain state aid measures, the European Commission increasingly requires an ex post assessment to be carried out, which, among other aspects, will consider whether the aid is likely to have distorted competition. To this end, the Commission asked Oxera to develop an analytical framework, building on those for merger and antitrust assessments, but tailored to the specificities of state aid.

The framework, developed by Oxera, consists of:

  1. describing the granting of the state aid and setting out its characteristics
  2. explaining how this might have affected the market. To do this, potential distortions of competition due to the aid must be identified, including examining what would have been likely to occur if the aid had not been granted and setting out the hypotheses to test.
  3. assessing the magnitude of the impact on the market—e.g. measuring the impact of the aid on competition.

While the framework focuses on ex post impact assessments of state aid, most elements can also be applied for ex ante evaluation of aid measures. 

Oxera subsequently applied this framework to four cases where the Commission authorised the granting of aid to individual companies. The case studies were chosen as they covered a diverse range of aid objectives, economic sectors, and amount of aid: 

  • R&D&I aid to a French substrates manufacturer;
  • regional aid to an airport in the UK;
  • SGEI (Service of General Economic Interest) aid to an Italian postal operator;
  • environmental aid to a French starch producer.

The study concluded that the impact of aid on competition is likely to differ depending on both the magnitude and the relative amount of the aid, its breadth, frequency and design. They showed that, under certain circumstances, state aid may potentially distort competition in directly and/or indirectly affected markets.
Oxera’s study also highlighted the importance of the availability of data to carry out a competition assessment. In some instances, useful insights can be drawn from publicly available data and information. The authorities granting the aid can help to ensure that the necessary data and information will be available to carry out an ex-post competition assessment—for example, by including specific requirements in the evaluation plan.

You can read the full report here