Article 107 of the EC Treaty prohibits Member States from granting aid to firms if the aid distorts or hampers competition. However, such measures may be deemed compatible with the Common Market when the economic benefits of an aid package outweigh its potentially anticompetitive effects. The 2005 State Aid Action Plan introduces a balancing test as a conceptual framework to analyze state aid measures.
Economic analysis plays a key role in the implementation of this test, which involves the assessment of whether the aid measure remedies a market failure, whether it generates the correct incentive for the aid recipient to change its behavior, whether it distorts competition and ultimately whether the balance between benefits and anticompetitive effects is positive.
We have vast experience in evaluating the compatibility of state aid. Our most recent work in this area include the preparation of submissions to the European Commission on the economic impact of state aid in the grocery retailing market and in the pay-tv sector on behalf of major market players.
As part of the ongoing fitness check of current State aid rules, the Directorate General for Competition of the European Commission (DG COMP) has appointed a consortium led by Lear and participated by DIW Berlin and Sheppard Mullin, to carry out a study to support its evaluation of the rules regarding airports’ access to operating […] Read more
Lear is assisting a leading regulator in the assessment of costs and benefits arising from open access requirements in the deployment of network infrastructure. In particular, Lear is responsible for designing a methodology for the assessment and for applying this to a sample of cases. The project will serve to inform the design of subsidies […] Read more