Russian Federation: EU Emergency Response Update – Key Policy & Regulatory Developments No. 102

COMPETITION & STATE AID

On 20 April 2023, the Commission adopted a package of three measures in view of further simplifying procedures for reviewing concentrations under the EU Merger Regulation: (1) a revised Merger Implementing Regulation (Implementing Regulation); (2) a Notice on Simplified Procedure (Notice); and (3) a Communication on the transmission of documents (Communication).

In announcing the package, Executive Vice-President and Competition Commissioner Margrethe Vestager stated:

The primary changes of the 2023 merger simplification package aimed at streamlining merger review include, among others:

For the simplified procedure:

• Broadening and/or clarifying cases that can be reviewed under the simplified procedure, e.g.:
  • The Notice identifies two new categories of cases that can benefit from simplified treatment. These comprise cases where under all plausible market definitions:
    • The individual or combined upstream market share of the merging parties is below 30% and their combined purchasing share is below 30%; and
    • The individual or combined upstream and downstream market shares of the merging parties are below 50%, the market concentration index (HHI delta) is below 150, and the company with the smallest market share is the same in the upstream and downstream markets.
• Facilitating the review of simplified cases. The Implementing Regulation introduces a new notification form (so-called "tick-the-box" Short Form CO) for simplified cases, which includes primarily multiple-choice questions/tables and streamlined questions on the jurisdictional and substantive assessment of cases.

For the non-simplified procedure:

• The Implementing Regulation reduces and clarifies the information requirements in the notification form for these cases (Form CO, Annex I of Implementing Regulation), such as by:
  • Clarifying information on possibilities for waivers from certain information requirements, which codifies existing practice;
  • Eliminating certain previous information requirements concerning "Cooperative Agreements", "Trade between Member States and imports from outside the EEA", and "Trade associations".

On transmitting documents to the Commission, the new Communication introduces electronic notifications by default, and notably:

• Following exceptional measures taken due to the COVID-19 pandemic, the Commission has been temporarily accepting, and in fact encouraging, notifications in digital format since May 2020. Based on this experience and to promote the Commission's digital transformation, it is appropriate to establish permanent rules on digital transmissions of documents in the context of EU merger control.
  
  
• Technical specifications are provided for the signature of documents submitted electronically (where a signature is required). In this respect, documents submitted electronically must be signed using at least one Qualified Electronic Signature (QES) complying with the requirements set out in the eIDAS Regulation (Regulation (EU) No 910/2014).
  
  
• A fall-back mechanism allows for transmitting documents to the Commission's Directorate General for Competition by post or by hand delivery (e.g., in exceptional circumstances, for example, where transmissions exceed 10 gigabytes in size; or where required electronic delivery or signing is technically not possible).

Further details on the main changes are provided in an Explanatory Note accompanying the revised rules and Q&A.

The new rules under the merger simplification package will be applicable as of 1 September 2023.

State Aid

On 24 April 2023, the Commission released the State aid Scoreboard 2022.* The Scoreboard is the Commission's benchmarking instrument for State aid, launched in July 2001 in view of providing a transparent and publicly accessible source of information on the Commission's State aid control activities and the overall State aid situation in the Member States.

Timeframe covered. The 2022 Scoreboard is based on State aid expenditure made by Member States in 2021 and provides updates of State aid expenditure in the previous years. Thus, the 2022 Scoreboard does not cover State aid expenditure under the Temporary Crisis Framework to support the economy in the context of Russia's invasion of Ukraine, adopted on 23 March 2022 (as replaced by the Temporary Crisis and Transition Framework for State Aid on 9 March 2023).

Sustained impact of pandemic. The Scoreboard highlights that Member States continued to disburse "massive amounts" of State aid to mitigate the COVID-19 pandemic's profound economic effects. In 2021, the 27 Member States spent approximately ?335 billion under State aid measures for all objectives (or some 2.3% of their combined 2021 GDP), excluding aid to railways and Services of General Economic Interest (SGEI).

The Scoreboard further observes that in 2021, Member States appeared to reduce their spending capacity for non-COVID crisis objectives. Compared to 2020, State aid expenditure in 2021 by Member States decreased by - 1.9% (i.e. ?6.17 billion) after adjusting for inflation. However, the expenditure related to the COVID-19 crisis increased by 4.7% in constant prices (i.e. ?8.6 billion), and support for other measures decreased by 1.7% (i.e. ?2.43 billion). More specifically:

• Total expenditure for COVID-19 measures in 2021 amounted to ?190.65 billion (approx.. 57% of total spending). In this respect, notably:
  
  
  • Member States with the largest share of COVID-19 related State aid expenditure relative to their 2021 national GDP were Malta (2.48%) and Greece (2.46%), followed by Austria (2.1%), Slovenia (2%), Latvia and Slovakia (each around 1.9% of GDP), and by Germany (1.8%).
    
    
  • Member States with the smallest share of COVID-19 related State aid in relative terms were Sweden (0.21%) and Belgium (0.22%), followed by Estonia and Ireland (0.4% each).
    
    
  • Despite significant spending dispersion across Member States, the Commission's view is that temporary State aid measures adopted in the COVID-19 crisis were proportionate and necessary to the economic damage suffered during the crisis. The Commission also found no evidence of Member States granting an excessively larger amount compared to the others.
    
    
• Total non-COVID related public support measures in 2021 amounted to ?143.89 billion (approx. 43% of total spending), and in this respect:
  
  
  • In line with previous years, in 2021, Member States spent by far the most on environmental protection and energy savings (non-crisis-related) policy objectives (?69 billion). Research and development, including innovation, became the second objective in 2021 on which Member States spent the most (?18.77 billion, an increase of ?6.48 billion compared to 2020), overtaking regional development (?14.21 billion, a decrease of ?2.19 billion compared to 2020).
    
    
  • In an ongoing trend, Member States are increasingly using the General Block Exemption Regulation (GBER), which provides scope for implementing, without prior approval by the Commission, certain measures deemed as having limited impact on the internal market, as well as other sectoral block exemptions (i.e. Agricultural Block Exemption Regulation (ABER) and Fishery Block Exemption Regulation (FIBER)). In 2021, Member States implemented 2,365 new GBER, 296 new ABER, and 29 new FIBER measures, together representing 83% of all new State aid measures in 2021.

State aid expenditure data gathered by DG Competition is available on its data repository webpage hosted by EUROSTAT (see here).

* For the State aid Scoreboard 2021, see Jones Day COVID-19 Update No. 86 of 8 September 2022.