It is important that competitors operate on an equal basis. Faced with free trade between EU Member States and the opening of public services to competition, national authorities sometimes want to use public resources to promote certain economic activities or to protect national industries. The granting of these resources is known as State aid.

State aid can distort fair and effective competition between companies; therefore, the EC Treaty generally prohibits state aid unless it is justified by reasons of general economic development. To ensure that this prohibition is respected and exemptions are applied equally across the European Union, the European Commission is in charge of watching over the compliance of State aid with EU rules.

As a first step, it has to determine if a company has received State aid, which is the case if the support meets the following criteria:

There has been an intervention by the State or through State resources which can take a variety of forms (e.g. grants, interest and tax reliefs, guarantees, government holdings of all or part of a company, or the provision of goods and services on preferential terms), the intervention is likely to affect trade between Member States, the intervention confers an advantage to the recipient on a selective basis, for example to specific companies or sectors of the industry, or to companies located in specific regions, competition has been or may be distorted.

Last updated on February 18, 2010 by Innovations Vouchers