Case T-369/06

Holland Malt BV

v

Commission of the European Communities

‛State aid — Malt production — Investment aid — Decision declaring the aid incompatible with the common market — Adverse effect on competition — Effect on trade between Member States — Obligation to state the reasons on which the decision is based — Guidelines for State aid in the agriculture sector’

Judgment of the Court of First Instance (Fourth Chamber), 9 September 2009 II ‐ 3317

Summary of the Judgment

Acts of the institutions — Statement of reasons — Obligation — Scope — Commission decision on State aid — Characterisation of the adverse effect on competition and of the effect on trade between Member States

As regards the classification of a measure as State aid within the meaning of Article 87(1) EC, the Commission is required, not to establish that such aid has a real effect on trade between Member States and that competition is actually being distorted, but only to examine whether that aid is liable to affect such trade and distort competition. When aid granted by a Member State strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade, the latter must be regarded as affected by that aid. An investment subsidy for the modernisation of and increase in the production capacity of an undertaking necessarily strengthens that undertaking’s competitive position compared with its competitors who have to finance such investments from their own resources or forgo them altogether. The reduction in total sales involving intra-Community trade, or the limited proportion of such sales as against an undertaking’s overall production, is irrelevant to the assessment of the effect of that trade, given that there is no threshold or percentage below which it may be considered that trade between Member States is not affected. (see paras 37, 47, 48, 50)

Even where the circumstances in which State aid is granted show that the aid is capable of affecting trade between Member States and of distorting or threatening to distort competition, the Commission must at least set out those circumstances in the statement of reasons for its decision. However, the Commission merely needs to establish that the aid in question is of such a kind as to affect trade between Member States and threatens to distort competition. It does not have to define the market in question or analyse its structure and the ensuing competitive relationships. Furthermore, the strengthening of an undertaking which has not previously participated in intra-Community trade may place it in a position which enables it to penetrate the market of another Member State, and therefore a measure which results in such strengthening may affect such trade. (see paras 59, 63, 64)

The Commission has a wide discretion in applying Article 87(3) EC, the exercise of which involves complex economic and social assessments which must be made in a Community context. The Commission may lay down for itself guidelines for the exercise of its discretionary powers by way of documents, provided that they contain directions on the approach which it intends to follow. The guidelines cannot be understood on the basis of their wording alone. They must be interpreted in the light of Article 87 EC and of the objective sought by that provision, namely undistorted competition in the common market. Likewise, although the Commission is bound by the guidelines and notices that it issues in the field of State aid, that is so only to the extent that those texts do not depart from the proper application of the rules in the Treaty, since the texts cannot be interpreted in a way which reduces the scope of Articles 87 EC and 88 EC or which contravenes the aims of those articles. (see paras 92, 93, 132, 133)

By its very nature, State aid for investment strengthens the competitive position of the recipient compared with that of its competitors, since the amount granted reduces the investment costs to be borne by the recipient and therefore favours it in comparison with other producers in the sector who have completed or intend to complete a similar investment at their own expense. Therefore, owing to the enhanced competitiveness of the recipient by reason of the aid, the aid in itself has the effect of enabling that recipient to find outlets for its products more easily than in the case of production that is unsubsidised. The more substantial the subsidy, the more likely it is that outlets for the recipient’s products can be easily found. It follows from this that, if the assessment for the purposes of point 4.2.5 of the Guidelines for State aid in the agriculture sector — according to which no aid may be granted unless sufficient evidence can be produced that normal market outlets for the products concerned can be found — were essentially to be carried out on the basis of the existence of outlets for the subsidised production of the recipient of the aid in question, rather than by taking into account the situation of the market in general in which the recipient is competing with other producers for the same outlets, that would allow aid to be approved which distorts competition and thereby ensures that there are outlets for the recipient’s products even in a market characterised by overproduction or overcapacity in which unsubsidised competitors have difficulty marketing their products. Such an interpretation of the Guidelines would therefore be contrary to Article 87 EC. Furthermore, the criterion referred to in point 4.2.5 of the Guidelines reflects the condition under Article 87(3)(c) EC that any aid adversely affecting trading conditions to an extent contrary to the common interest cannot be compatible with the common market. (see paras 91, 135, 136, 176)