Ombudsman probes state-aid procedure

Summer blog: An investigation by the European Ombudsman calls into question some of the main principles underpinning European Commission state-aid investigations.

The European Commission’s practice of refusing to give companies access to state-aid investigation files is coming under scrutiny from Emily O’Reilly, the European Ombudsman, who last week opened a formal investigation into the procedure.

In anti-trust or cartel cases, the Commission allows the companies that it is investigating to review a non-confidential version of its case files. Access to these files allows the companies to examine the Commission’s evidence and extract any evidence that may help their defence (and which the Commission may have missed or ignored).

Given that companies face fines that could run into hundreds of millions of euros, access to the files is considered a procedural right and has been upheld by the European Court of Justice.

Lawyers have long questioned why the same rule does not apply to state-aid cases, where the Commission routinely orders member state governments to recover tens of millions, or even hundreds of millions, of euros of illegal state-aid from companies. In 2012, the Commission ordered Germany to recover €5.6 billion from Deutsche Post.

The difference between the procedural rules for anti-trust cases and for state-aid cases comes down to a delicate balance of power between the Commission and national governments.

In a state-aid case, the Commission is effectively calling into question a policy of an EU member state. The investigation tends to take the form of a dialogue, with the Commission requesting that the member state obtain certain information from the companies and the sectors involved. Since the companies are not directly involved, the Commission refuses to give them access to the files.

By contrast, in an anti-trust or cartel case, the Commission is examining the conduct of a private company or companies, and deals directly with them.

Joaquín Almunia, the European commissioner for competition, has promised to revamp EU state-aid procedure, which is hampered by being deferring too much to member states.

The jury is still out on whether his modernisation has freed the Commission from that relationship. Under Almunia’s watch, the Commission has gained powers to gather market data directly from companies, rather than passing through the member states, and to investigate whole sectors on its own initiative.

The Ombudsman, who is empowered to investigate cases of maladministration, does not have the power to force the Commission to change its procedural rules. But her findings are influential and there is already a precedent: a 1996 investigation found that citizens or companies that complained about a member state’s implementation of EU law had a right to be informed of how the Commission was dealing with the complaint. The Commission subsequently made its conduct of infringement proceedings far more transparent.

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