OREANDA-NEWS. September 14, 2012. The Head of the International Unit, DG Competition, of the European Commission, Mr. Miek Van der Wee, shared European experience of evaluating legitimacy of state aid granted to business. The control over legitimacy of state preferences / state aid was discussed at a special Round Table organized as part of Competition Days in Kazan, reported the press-centre of FAS Russia. 

Mr. Van der Wee paid special attention to the impact of uncontrolled state aid upon competitive environment. “With establishing the European Union, a risk of “subsidy chasing” has emerged, when national companies lobby granting aid so they can gain advantage over competitors from other European countries”, pointed out the representative of the European Commission. Price distortions and disturbances of market development are some adverse consequences of granting state aid.

At the same time, subsidizing business, especially small and medium, has a positive effect upon economic development, and enables to resolve, in particular, some universal problems, such as protecting the environment. State aid also can be used as a tool for correcting market situation and minimizing adverse consequences of low competition.

In Europe state control takes place if state aid meets four criteria: it is granted through state funds; granting the aids puts an economic entity in a more advantageous position on the market; the aid is granted to particular entities or producers of particular goods; granting the aid generates adverse consequences for competition environment. All criteria must be met simultaneously.

A comprehensive, multi-parameter analysis of all possible consequences of granting specific state aid takes place only when considerable sums are granted to business.

Another state aid expert of the European Commission, Eva Valle Lagares, emphasized that governments must observe competitive neutrality. State aid must be granted on an exceptional basis, which will enable companies to compete on the basis of merits and subsequently increase economic efficiency.

“As far back as in mid-1950s, when the European Union was formed, inadmissibility of uncontrolled subsidizing of particular companies by national states became clear, and strict international legal norms in this filed were devised. Since then, the European Commission has accumulated enormous experience in control over state aid. It would be wrong not to use this experience in Russia, where regulation of state preferences became a subject of the antimonopoly law just a few years ago”, said Deputy Head of FAS Andrey Tsyganov.