Rapporteur: Antonio MAZZEO (IT/PES), President and Member of the Regional Council of Tuscany Reference documents: Report on Competition Policy 2022 and Commission Staff Working Document

POLICY RECOMMENDATIONS

THE EUROPEAN COMMITTEE OF THE REGIONS (CoR),

Introduction

1.

recognises that European competition policy, is key for protecting the functioning of the single market and consumer rights and for implementing the European Union’s objectives enshrined in Article 3 TEU as well as the goals of the European Green Deal and the Digital Compass. At the same time, the CoR acknowledges that with the gradual enlargement of the internal market, the economic, financial, political and public health crises, and the development of innovative technologies and industrial processes, the European Commission (‘the Commission’) has to continuously adapt its competition rules as the EU’s needs have evolved, without compromising their integrity;

2.

notes that the Commission chose to use the competition rules, and specifically the State aid regime, to deal first with the crisis caused by the COVID-19 pandemic, and then the crisis resulting from the war in Ukraine and the energy shock, adopting two temporary State aid frameworks (1) that allowed Member States, including subnational public authorities, to support businesses in an urgent and unpredictable context;

3.

welcomes the NextGenerationEU (NGEU) programme (2) and, in particular, the Recovery and Resilience Facility (3), both for its financing mechanism using EU own resources, and because it organises the economic and industrial policy priorities for each state in line with common European objectives, especially the twin green and digital transitions;

4.

welcomes the fact that the Commission is revising and adapting its State aid guidelines (4) in light of ongoing climate change and corresponding legislation to ensure that the European Green Deal can be implemented while distorting competition as little as possible;

5.

draws attention to the CoR’s opinions on the Recovery and Resilience Facility, in particular the one on the review report (5) and regrets once again the almost complete lack of involvement of local and regional authorities. This centralisation means that the levels of administration that are closest to the public are not involved in allocating funds;

6.

highlights that in order to address the consequences of the prolongation of the war in Ukraine, in October 2022, the Commission amended the Temporary Crisis Framework for State aid, setting out the principles for the recapitalisation of companies, especially those operating in the energy sector, and increasing the levels of aid that can be authorised, and the flexibility regarding guarantees granted to these energy companies;

7.

adds that the Commission has adopted a new temporary framework (6) focusing on the energy market, in line with the REPowerEU initiative (7), simplifying the compensation rules in relation to energy costs, introducing new measures to support energy demand reduction and establishing the general principles for recapitalisation, especially that of energy companies;

8.

points to Article 174 TFEU which states that ‘the Union shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions’, and highlights the fact that cohesion policy is a key mechanism for European integration, and a major tool for investment and for the development of Europe’s regions through the structural and investment funds;

9.

calls therefore for the ‘do no harm to cohesion’ principle to apply to all EU policies and initiatives, including the implementation of internal market-related policies, in particular those regarding the State aid rules;

10.

in light of the above, positions itself as the Commission’s intra-institutional interlocutor in cohesion matters. At the same time, also calls on the Commission to improve economic, social and territorial cohesion policies, so that the two policies (competition and cohesion) are not contradictory, but complementary, and necessary for the European integration project and thus for the sustainable growth of European regions, provinces and cities in line with the goals of the European Green Deal;

11.

while acknowledging that EU competition policy as an exclusive competence of the European Union does not fall under the scope of the subsidiarity principle in its legal sense, the CoR calls on the Commission to apply the principles of better regulation in the field of competition policy and involve the CoR at an early stage of the review of competition rules so as to better assess their territorial impact. Moreover, the CoR supports the call for an interinstitutional agreement on competition policy;

Progress of EU competition policy

12.

welcomes the fact that the Commission is addressing the current and evolving challenges and to that end has adopted important tools for the functioning of the single market, such as the Digital Markets Act (8) (DMA), which aims to build a fair and competitive digital environment for core platform services, both for final consumers and business users. The latter are often small and medium-sized businesses (SMEs) across Europe’s regions;

13.

emphasises that the DMA lays down rules for digital ‘gatekeepers’, platforms that connect producers and final consumers. These are therefore often essential, and hold massive market power. The DMA prevents their practices from becoming unfair and anticompetitive, becoming a barrier to competition and having negative economic and social effects, not just at national level but also for the local and regional productive fabric;

14.

adds that the Regulation on Foreign Subsidies (9) fills a legal gap in the screening of subsidies granted by third countries to companies operating in European markets, and that are therefore in direct competition with European companies, which unlike foreign companies, are subject to EU rules on State aid and other kinds of regulations, such as social and environmental rules;

15.

welcomes in that respect the implementation of the Regulation which fosters the protection of European companies in the internal market, and, at the same time, it invites the Commission to enhance protection for European undertakings competing against companies based in third countries, through the use of EU competition policies;

16.

points out that this Regulation authorises the Commission to suspend public procurement procedures, including those launched by local and regional authorities, where there are market distortions owing to foreign funding of companies participating in a tender, and therefore calls on the Commission to work together with local and regional authorities to implement the rules and ensure the coordination of these authorities;

17.

acknowledges that the Commission has introduced clearer rules (10) to establish in which cases the competition rules do not apply in the case of self-employed workers coming together to bargain collectively, thus reaffirming the fact that competition cannot constitute a barrier to improving the conditions of European workers;

18.

encourages the Commission to continue to foster the enforcement of antitrust laws to enhance competition within the markets, in order to benefit not only producers but ultimately consumers, which have all been facing surging prices, as well as challenging international events which have led to important value chain disruptions;

Specific comments on State aid from a local and regional perspective

19.

reiterates that the European State aid regime has proven to be key in managing the economic, financial and social crises of recent years by allowing Member States to support businesses in difficulty, either through one-off support or through recapitalisation plans; points out that all levels of government aim to cooperate to address emerging crises, and, at the same time, that the Commission should also continue to act quickly and in line with the subsidiarity principle to mitigate the impact of crises through flexibility measures;

20.

highlights the fact that the temporary frameworks have not just sustained Europe’s productive fabric, but have also been used by the Member States to deal with domestic inequalities between regions. According to several studies (11), while regional disparities have decreased overall across the EU, they have however increased within certain Member States, particularly those with low growth such as Mediterranean regions, and those with a low per capita income, for example Eastern European regions;

21.

stresses, however, that the implementation of the two temporary frameworks has resulted in an overall relaxation of the normal State aid rules, competition distortions in the single market and negative effects on trade between states. This is due to an imbalanced geographical distribution of State aid in the EU, as mentioned in the report on competition policy that is the subject of this opinion (12). This report indicates that, in 2022, 53 % of the approved aid had been notified by Germany, 24 % by France and the remaining 23 % by the other 25 Member States; underlines that this imbalanced possibility to give State aid disrupts level playing-field;

22.

notes that, the figures in the abovementioned report indicate the State aid budget authorised for individual Member States and not the total amounts that were ultimately paid by the respective national bodies involved, points out that governments with greater financial capacity can provide more support to companies based in their territory than Member States with less capacity, meaning that there is not a level playing field, which undoubtedly leads to a disadvantage in the single market for companies in these Member States;

23.

alerts the Commission to the fact that prolonging the relaxation of the competition rules could therefore continue to widen the disparity between Europe’s regions, leaving behind those that, because of natural or demographic characteristics, or because they are rural areas or areas experiencing industrial transition, risk missing out on public support, particularly during crises. The CoR also points out that the financial capacity of subnational authorities does not correspond to that of the national level everywhere and that an increase of public spending, may be needed, and it urges the Commission to take measures to mitigate market distortions, both in the short and medium-long term, with the aim of gradually reinstating normal competition rules;

24.

welcomes the publication of certain soft law instruments, in particular the revision of the Guidelines on regional State aid (13), which enable governments to support the most disadvantaged regions as they refer directly to coordination with cohesion policy and boost the level of support for local and regional authorities, especially when it is related to EU Green Deal and EU Digital Strategy objectives. The aim is to strike a balance between the goal of cohesion and raising investment levels, particularly in the context of the green transition;

25.

calls on the Commission to increase provisions of a cross-cutting nature for island regions, including archipelagos, and for remote and outermost regions in legislation on State aid. These regions require a specific and broader legal approach, especially for those areas that are not connected to the European continent;

26.

highlights that the new rules on Important Projects of Common European Interest (14) (IPCEIs) aim to guide Member States in reinforcing strategic cross-border projects such as those already implemented on microelectronics, batteries and hydrogen, bringing European companies closer to the EU’s industrial objectives, with a view to the twin digital and green transitions;

27.

recommends however that the Commission strengthen both the initiative and the coordination of these projects, from the planning to the implementation phase, and build the engagement with local and regional players, given that these transnational industrial projects also need to be anchored regionally to ensure a more effective implementation and less bureaucracy;

28.

welcomes the new rules on aid for research, development and innovation (15), which increase the intensity of the aid and the way it is granted, given that research and development activities facilitate the entry of new products and services into the economy, as well as more advanced production processes that improve technological and industrial development and boost the European economy overall;

29.

welcomes the new Guidelines on State aid for broadband networks (16), which make it easier to implement projects on setting up and reinforcing vital infrastructure for economic growth, such as that needed for fibre-optic network deployment in regions that require it, while also specifying the terms of public-private partnerships through which such infrastructure is often implemented;

30.

finally, points out to the Commission that the path to a structural reform of State aid rules should move in the direction of a simplified legal framework based on the principle of legal certainty, making it quicker to implement State aid rules, with less bureaucracy, both for companies investing and competing in markets, particularly SMEs, and for regional and local authorities who have to assess whether disbursing the funds available to them is compatible with EU rules; this is because certain aid schemes are often administered centrally without necessarily involving the local and regional authorities that, nevertheless, need to make the final payments;

31.

clarifies that a reform of the State aid rules must consider the primary objective of maintaining a level of competition among the Member States and a level playing field for actors involved in the single market, striking a balance between the need to raise European investment levels to achieve the twin green and digital transition targets, but also the need to maintain cooperation between all levels of governments and high levels of economic, social and territorial cohesion in order to harmonise economic growth and welfare standards;

32.

suggests raising the de minimis aid threshold in both the general de minimis Regulation (17) and the de minimis Regulation for services of general economic interest (SGEIs) (18), which expires at the end of 2023, to make it proportionate to the inflation rates of the last 10 years in Europe and, above all, to an altered economic context resulting from macroeconomic development, the consequences of the COVID-19 pandemic and the rise in building and energy costs due to Russia’s aggression against Ukraine, thereby going beyond adjustment based solely on inflation;

33.

calls on the Commission to emphasise the key role that services of general economic interest — usually provided by local and regional authorities — played during the COVID-19 pandemic, and continue to play in order to meet citizens’ basic needs. This should be done not just to maintain, but also increase the guarantee of these essential services in all of Europe’s regions; in this regard, highlights the scissor effect caused by falling revenues and rising expenditure that was flagged in the EU Annual Regional and Local Barometer and that continues to affect many municipalities (19);

New developments in competition and industrial policy

34.

highlights the Strategic Technologies for Europe Platform (STEP) (20) proposal, but also notes that it appears to be less ambitious than the Sovereignty Fund which was previously announced, in terms of achieving EU industrial objectives;

35.

points out that, despite its intention to boost the competitiveness of European companies in international markets, STEP risks failing to provide adequate support for the numerous local and regional consequences of the twin green and digital transitions, and also risks relying, to a large extent, on funds already earmarked or on the budgets of the individual Member States;

36.

recommends that the Commission first uses alternative financing mechanisms to reallocate the funds already earmarked for cohesion, given the importance of economic, territorial and social cohesion in maintaining the balance of the single market and achieving a uniform economy and level of welfare in all European regions, and then confirm that there is no centralisation of resources that could undermine the achievement of cohesion objectives;

37.

lastly, calls for competition policy to help manage the green and digital transitions in the EU across all tools.

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(1)  Communication from the Commission ‘Temporary Framework for State Aid measures to support the economy in the current COVID-19 outbreak’ (OJ C 91 I, 20.3.2020, p. 1); Communication from the Commission ‘Temporary Crisis Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia’ (OJ C 131 I, 24.3.2022, p. 1).

(2)  Communication from the Commission ‘Europe’s moment: Repair and Prepare for the Next Generation’, Brussels, 27.5.2020 (COM(2020) 456 final).

(3)  Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17).

(4)  Climate, Environmental Protection and Energy Aid Guidelines (CEEAG — 2022/C 80/01).

(5)  ECON-VII/026: Opinion of the European Committee of the Regions on the Review Report on the implementation of the Recovery and Resilience Facility (OJ C 157, 3.5.2023, p. 12).

(6)  Communication from the Commission — Temporary Crisis and Transition Framework for State Aid measures (OJ C 101, 17.3.2023, p. 3).

(7)  Communication from the Commission ‘REPowerEU: joint European action for more affordable, secure and sustainable energy’, Strasbourg, 8.3.2022 (COM(2022) 108 final).

(8)  Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act) (OJ L 265, 12.10.2022, p. 1).

(9)  Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market (OJ L 330, 23.12.2022 p. 1).

(10)  Communication from the Commission ‘Guidelines on the application of Union competition law to collective agreements regarding the working conditions of solo self-employed persons’ (OJ C 374, 30.9.2022, p. 2).

(11)  European Parliamentary Research Service, ‘Regional inequalities in the EU’ — Briefing — May 2019; ESPON, ‘Inner peripheries in Europe — Possible development strategies to overcome their marginalising effects’ — Policy Brief — October 2018.

(12)  Report from the Commission, ‘Report on Competition Policy 2022’ (COM (2023) 184 final, Brussels 4.4.2023, p. 4).

(13)  Communication from the Commission ‘Guidelines on regional State aid’ (OJ C 153, 29.4.2021, p. 1).

(14)  Communication from the Commission ‘Criteria for the analysis of the compatibility with the internal market of State aid to promote the execution of important projects of common European interest’ (OJ C 528, 30.12.2021, p. 10).

(15)  Communication from the Commission, ‘Framework for State aid for research and development and innovation’ (OJ C 414, 28.10.2022, p. 1).

(16)  Communication From the Commission, ‘Guidelines on State aid for broadband networks’ (OJ C 36, 31.1.2023, p. 1).

(17)  Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid (OJ L 352, 24.12.2013, p. 1).

(18)  Commission Regulation (EU) No 360/2012 of 25 April 2012 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid granted to undertakings providing services of general economic interest (OJ L 114, 26.4.2012, p. 8).

(19)  European Committee of the Regions, EU Annual Regional and Local Barometer, 2021.

(20)  Proposal for a Regulation of the European Parliament and of the Council establishing the Strategic Technologies for Europe Platform (‘STEP’) (COM(2023) 335 final).