Finally it must distort or threaten to distort competition

The Court of first instance of the European Communities (CFIEC) issued on 22 February a judgment which will have a significant impact on the law of State aid (CFI, February 22, 2006, aff.) T-34/02, the Levant 001). In principle, the Treaty (article 87-1) fixed four cumulative conditions to prohibit State aid. First of all, it must be an intervention from the State or through State resources. Then, this intervention must be liable to affect trade between Member States. Moreover, it must provide a selective advantage to its recipient by favouring certain undertakings or certain productions. Finally, it must distort or threaten to distort competition.

This fourth condition, to assess the impact of the aid on competition, should be the central criterion for analysis of the Commission. But this test has always been ignored, both by the Commission and by the Community judicature. From the time when the selectivity and trade allocation criteria were met, the competition was viewed as being automatically flawed, without the analysis at the bottom.

"Oblivion" competition test has shaped a right to the aid of widely disconnected state of the economic realities. Where the other branches of the competition law (control of concentrations, right agreements and abuses of dominant position) prefer an economic approach centered on the welfare of consumers, innovation and economic efficiency of enterprises, the law of the State aid remained a legal approach to the protection of the interests of competitors than consumers.

The control of State aid policy thus continued objectives to reverse those pursued by the other branches of the competition law. The Commission, aware of these contradictions, launched in June a plan of action aimed at modernising State aid law. But even if this plan proposes to strengthen, "where appropriate", the economic approach to state aid, it has plans to resurrect the criteria for allocation of the competition, enshrined in the Treaty but remained dead letter.

An economic approach

"Le Levant" decision marks a turning point that will change the practice of State aid control in proportions without common measure with the adaptations envisaged by the "action plan" conservative of the Commission.

First, the CFI recalled that the Treaty sets although four separate cumulative criteria to prohibit State aid, which is the criterion for allocation of the competition. The criteria for allocation of the competition are now clearly distinguished from the other three criteria, it becomes difficult to continue to ignore it.

The tribunal draws the immediate consequence of this discovery of the autonomy of the criterion for allocation of the competition. In the case of "Le Levant", the Commission, in accordance with its constant practice, had not defined the market may be affected by the assistance and had even less examined the effects of the aid on competition within this market. The Tribunal concluded that the decision is not motivated and cancels it accordingly.

"Le Levant" judgment will change in depth how aid records are reviewed by the Commission. A legal approach and often political will substitute a more economic approach, similar to the approach taken in other branches of the competition law. The Commission will have to identify the result by using market and assess its effects on competition.

As in other branches of the law of competition, the protection of competition is not confused with the protection of competitors, the Commission shall assess the impact of assistance on consumers, and not be limited as too often today to protect competitors. However, at least in the short or medium term, it is not always easy to demonstrate that State aid affects consumers. The Commission will have to design a new analysis framework, consistent with the rest of the competition law, but adapted to the specific issues of State aid. The control of concentrations, which focuses on efficiency gains, who enjoy both the competitiveness of the European economy that European consumers, can be a source of inspiration to develop this new framework.

Ultimately, putting the competition at the heart of the control of State aid, the CFI will perhaps managed to reconcile the supporters of industrial policy and the supporters of "free and undistorted competition."