Details of the OFT's bid to advise DG Competition on State aid

OFT proposals (97 pages, PDF) on the process for reviewing State aid under Article 87 of the EC Treaty. As previously indicated by the OFT, the document rejects the idea floated by the European Commission in its State aid action plan (19 pages, PDF) that the OFT should carry some responsibility to identify UK State aids that have not been notified or have been granted in breach of the conditions attached to their approval, and/or to monitor recovery of illegal aid.

Instead, the OFT proposes a new approach for the Commission to review whether aid is compatible with the EC Treaty. The OFT's preferred approach would involve two phases. In a first phase, the Commission would determine whether there is State aid within the meaning of Article 87(1), and whether any aid is allowable under a block exemption or under guidelines (to be produced) for aid aimed at specific market failures and subject to low limits on aid intensity. For aid that is not allowable under these conditions, a second phase of analysis would be undertaken against the public interest (which the OFT calls "common interest"). The OFT suggests that aid which has no significant competition effects or where the distortion to competition is "outweighed by the benefits in the European common interest" could be approved.

In the OFT's imaginary world, subsidy providers would be required to include in their State aid notifications a submission on compliance of the aid with the guidelines, and UK providers would be required to engage the OFT to review and advise on that submission. The OFT also offers its services to advise the European Commission. There is no mention of potential conflicts of interest, or of the level of fees that would be charged by the OFT for these services, or of the effects of these offers on competition in economics consultancy markets, or whether any distortion to competition in these markets is outweighed by the benefits in the European common interest.

An annex (13 pages, PDF) discusses some other ideas which were considered and rejected by the OFT. For a critique of the OFT's proposals see OFT and State aid action plan | viewpoint: Franck.

For further information or advice please contact Franck Latrémolière.

Filed under OFT, State aid.

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