COVID-19 Key EU Developments, Policy & Regulatory Update No. 68

COMPETITION & STATE AID

European Commission adopts Communication on a Competition Policy Fit for New Challenges (see here)

On 18 November 2021, the European Commission adopted a Communication on a Competition Policy Fit for New Challenges, focusing on supporting Europe's recovery, the green and digital transitions, and a resilient Single Market.

The Communication argues that competition policy was key to the EU's crisis response toolbox in swiftly acting against the COVID-19 outbreak, including notably:

• The State Aid Temporary Framework, adopted March 2020 (see here) to support the economy in the context of the pandemic by enabling the rapid adoption of certain aid measures by Member States; and
• The Antitrust Temporary Framework (adopted April 2020, see here), which sought to provide guidance and legal certainty to companies, e.g. when cooperating to sustain supply chains amidst border closures or to tackle shortages of medicines, medical equipment, or bottlenecks in vaccine production. Based on the COVID-19 evolution, the Commission may review the Antitrust Temporary Framework, which will remain applicable until the Commission withdraws it (once it considers that the underlying exceptional circumstances are no longer present).

The Communication addresses, in particular:

1. The progressive phase-out of crisis measures under the above-referred State aid Temporary Framework, as accompanied by new measures to ramp up private investment (see below for further details); and
2. The comprehensive current review of competition policy and enforcement in light of the EU's ambitions to achieve a green and digital transition in a resilient Single Market. This spans over 20 sets of competition rules and guidelines, across all competition instruments (merger, antitrust and State aid control). Among these:
   • The rules on pan-European Important Projects of Common European Interest (IPCEI) seek to enable Member States and industry to jointly invest in ambitious pan-European projects in a transparent and inclusive manner, where the market alone appears unable to deliver and particularly where the risks are deemed as too large for a single Member State or company to assume. The Commission is particularly focusing on projects responding to key green and digital priorities (e.g. hydrogen, cloud, health and microelectronics).
     
     The Commission views the current IPCEI framework as working well, so the rules will maintain their existing scope, while making certain targeted changes. In this respect, the announced IPCEI State aid Communication (expected by end-2021) will aim at, e.g. further facilitating the participation of small and medium-sized enterprises and clarifying criteria to pool national and EU resources.
   • To build resilience in the EU semiconductors sector, State aid rules seek to provide various possibilities to address current acute global shortages, including the following initiatives:
     • Preparing a second IPCEI concerning semiconductors, following the first IPCEI approved by the Commission on 18 December 2018;
     • Streamlining State aid rules under a recent amendment to the GBER (General Block Exemption Regulation), applicable to national funding for projects or financial instruments falling under Horizon Europe (EU's central research and innovation funding programme) and InvestEU (to mobilize public and private investment to meet EUpolicy objectives). The amendment, applicable since 1 August 2021, intends to foster synergies between national and EU-funding policies to enhance the EU's competitiveness, including in the field of semiconductors.
     • Potential support aimed at addressing perceived funding gaps, in view of creating European first-of-a-kind facilities in the semiconductor ecosystem. The forthcoming European Chips Act, expected in the first half of 2022, would aim at strengthening innovation, production capacity, as well as security of supply through a framework for international cooperation and partnership. The proposed Act would also aim at coordinating EU and national investment along the value chain.

   Other measures set out in the Communication also reflect Europe's ambitions for a green and digital transition, e.g. the forthcoming Climate, Environmental Protection and Energy Aid Guidelines; and updating the Commission's 1997 Market Definition Notice (by Q1 2023), taking into account significant developments of the past twenty years, in particular digitalization and new ways of offering goods and services.

   For further details on the Communication, see below Section on Cybersecurity.

European Commission adopts sixth amendment of State aid Temporary Framework (see here)

On 18 November 2021, the Commission adopted the sixth amendment of the State aid Temporary Framework, adopted by the Commission in March 2020 to facilitate targeted support by Member States to businesses during the coronavirus crisis.

This latest amendment has two objectives:

First, the progressive phase-out of crisis measures of the Temporary Framework, with a limited 6-month prolongation of existing measures until 30 June 2022. This extension reflects feedback received from the majority of Member States.

Second, boosting targeted support to companies most impacted by the crisis by adding the following two new measures to the Temporary Framework, which will be of longer duration than the above-referred crisis measures:

• Enabling Member States to create direct incentives for private investments (until 31 December 2022). This seeks to spur companies to start filling the investment gap left by the crisis. Member States can use this tool, in particular, to accelerate the green and digital transitions by enabling support for any investments that Member States consider to be important to accelerate economic recovery (e.g. investments in equipment to improve the circular economy, such as through recycling).
• Introducing a solvency support measure aimed at easing access to equity finance for smaller companies (until 31 December 2023). This measure enables Member States to leverage private funds and make them available for investments in SMEs, including start-ups, and small mid-caps. For example, Member States could provide guarantees to investment funds, in view of reducing risks to attract private investors.

Other targeted adjustments to the Temporary Framework include, e.g. extending the adjusted list of non-marketable risk countries, in the context of the short-term export credit insurance (STEC), for an additional 3 months (from 31 December 2021 to 31 March 2022) (see also Jones Day COVID-19 Update No. 61 of 21 September 2021).

Since the Temporary Framework's inception, the Commission has adopted over 670 decisions and approved over €3.1 trillion of State aid in all 27 Member States. The Communication notes that these decisions were adopted in record time, due to special adoption procedures and close coordination between the Commission and Member States