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Puzzles of the State Aid Rules on RDI journal article

Caroline Buts, Phedon Nicolaides, Hans Pirlet

European State Aid Law Quarterly, Volume 18 (2019), Issue 4, Page 489 - 509

Despite the improvement of the State aid rules on Research, Development and Innovation (RDI) during the past decade, stakeholders have claimed that the current rules are at points ambiguous, which results in a negative impact on innovation. By means of an exploratory case study and participatory action research, this article aims to identify the ambiguities in the RDI rules. While the rules are detailed and overall well explained, we detect three themes where ambiguities arise, ie non-economic activities, price calculation of goods or services provided by research organisations, and ancillary activities of research organisations together with the 20% threshold. For each of these categories, we discuss what constitutes a ‘safe’ interpretation of the concepts involved. This entails an interpretation that is in line with the case law as well as with the spirit of State aid control. Where appropriate and possible, we provide examples as well as suggestions for their practical implementation. Next to providing guidance regarding the detected ambiguities, this article aspires a contribution to the forthcoming revision of the State aid rules for RDI. Keywords: State aid policy; Research, Development and Innovation; GBER; RDI Framework.

Comparing China’s Fair Competition Review System to EU State Aid Control journal article

Shuping Lyu, Caroline Buts, Marc Jegers

European State Aid Law Quarterly, Volume 18 (2019), Issue 1, Page 37 - 60

The promulgation of the Opinions of the State Council on Establishing a Fair Competition Review System During the Development of Market-oriented Systems in 2016 marked the creation of China’s Fair Competition Review System. Interestingly, a remarkable resemblance is found with the EU’s State aid control. The competition authorities of both sides also stress the importance of cooperation in this area. In June 2017 they signed a Memorandum of Understanding creating a dialogue, linking State aid control and the Fair Competition Review System. By means of a comparative analysis and expert interviews, this article focuses on two questions: i) What are the similarities and differences between the EU’s State aid control and China’s Fair Competition Review System regarding objectives, basic provisions and procedures? and ii) What are the reasons for these commonalities and differences? Keywords: China’s Fair Competition Review System; Comparative analysis; International cooperation.

The Effectiveness of R&D&I Subsidies to Young Innovative Companies in Belgium journal article

Diego Andres Olaya Lasso, Caroline Buts

European State Aid Law Quarterly, Volume 17 (2018), Issue 2, Page 177 - 191

Innovation is of crucial importance in modern knowledge and information driven economies. Small and medium-sized enterprises (SMEs) are relatively dynamic and thus essential in the generation of inventions. However, SMEs’ innovative performance is not uniform and a particularly interesting subgroup has been identified: Young Innovative Companies (YICs). While YICs’ favourably influence also the macroeconomic competitiveness of a country, little research has been carried out regarding the effects of diverse support policies. This article hence aims to contribute to the literature by examining the role of subsidies on the innovative performance of YICs. We build a dataset of all Belgian companies and monitor firm level microdata from 2010 until 2015. The empirical analysis aims, in a first stage, to identify the population of YICs in Belgium and the main industries where they operate. In a second phase, we then evaluate whether YICs have a superior innovative performance relative to other types of businesses and especially whether support policies have been effective in stimulating their innovations. From the negative binomial model, we conclude that subsidies prove to be an essential policy instrument favouring the creation of inventions by YICs. It is important for policy to promote and support YICs’ entrepreneurship before as well as during their way towards innovation. Keywords: Innovation; Subsidy; R&D; Young Innovative Company; Count Models.

Manufacturing in Small Peripheral Island States: Where is the Level Playing Field? journal article

Caroline Buts, Phedon Nicolaides

European State Aid Law Quarterly, Volume 16 (2017), Issue 2, Page 272 - 275

While many islands can be attractive tourist destinations, other parts of the economy often face serious challenges that are the direct result of natural and permanent handicaps. Small islands encounter difficulties in attracting and maintaining manufacturing activities. Additional transport costs as well as the absence of economies of scale and low connectivity can result in investment decisions on the mainland, rather than the island. Multiple policies exist to help islands balance out the disadvantage of being remote, small or sparsely populated. Nevertheless, the State aid rules treat small and remote islands differently, depending on whether they are a region or a Member State. After briefly reviewing the main difficulties encountered by islands, we study the case of Malta. Next, the relevant State aid rules are evaluated, revealing inconsistencies and the need for revisions with important consequences for Malta and Cyprus. Keywords: Regional State Aid; Peripheral Islands; Island States; Transport Costs; Industrial Base.

Is There a Role for Economic Analysis When Deciding on State Aid to Public Broadcasters? journal article

Caroline Buts, Mychal Langenus, Karen Donders

European State Aid Law Quarterly, Volume 16 (2017), Issue 4, Page 537 - 558

By means of text analysis, this article examines the use of economic concepts and tools in State aid decisions regarding public broadcasters. We find that broad and general concepts are most frequently used and that more specific economic terms that can be found in the Broadcasting Communication surface rather seldomly in the public version of decision texts. Furthermore, we do not observe a substantial difference between the use of these terms before and after the adoption of the v2009 Broadcasting Communication suggesting that economic concepts are not more frequently used in recent years. We believe that economic analysis could bring additional clarity and support in several of the studied decisions, especially in cases where, for example, it is quite debatable which tasks fall under a public service obligation and which do not. Economic analysis would foster the evolution to a stricter and more rational State aid control in this exceptional sector preventing potential spillover-effects of aid into new activities. Keywords: State Aid; Media; Public Service Broadcasting; Economic Analysis.

Evaluating Restructuring Aid: a Case Study Approach journal article

Caroline Buts, Jean-François Romainville, Valentijn Bilsen

European State Aid Law Quarterly, Volume 15 (2016), Issue 3, Page 338 - 356

When a firm in difficulty has no remaining market options to attempt restructuring and regaining viability, there is the possibility that a government chooses to intervene by means of a rescue and/or a restructuring aid. While this is clearly considered to constitute one of the most distortive types of State aid, rescue and restructuring aid can be allowed in very specific circumstances. At EU level, those circumstances are set out in guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty. Building upon, among others, insights and results gained throughout the conduct of a study for the European Commission (DG Competition), this article evaluates restructuring aid decisions (excluding the financial sector) from 2003 until 2012 by means of a case study approach. The contribution of this study is twofold. First, the results of the article shed light on the effectiveness and efficiency of restructuring aid procedures and outcomes. Second, we report on the advantages and limitations of the qualitative methodology used, which constitutes a crucial complement to econometric analyses and forms an essential part of any proper ex-post aid evaluation. Keywords: Restructuring Aid; Ex-post Evaluation; Case Studies.

On the Longer-Term Effects of State Aid on Market Shares journal article

Patricia Coppens, Katharina Hilken, Caroline Buts

European State Aid Law Quarterly, Volume 14 (2015), Issue 2, Page 271 - 279

This article discusses the effect of State aid on competition covering a 6-year horizon. Subsidies have a positive effect on market shares within a 2-year time frame, as documented earlier by Buts and Jegers. While one would suppose the effect to diminish over time, we find that the opposite is true. Even after six years, subsidies still have a positive influence on market shares. Taking total subsidies over 6 years into account, market shares are significantly impacted which suggests that competition might be distorted. Up until recently, European State aid control focused on the ex ante evaluation of proposed measures. This article emphasizes the importance of ex post evaluations, studying multiple indicators (positive as well as negative effects of the aid) and especially covering a longer term horizon. Although first effects show after 2 years, the changes in market shares increase and therefore additional evaluations regarding the distortion of competition are useful at different points in time. Keywords: subsidies; competition; market shares