Case C-127/23 P: Appeal brought on 2 March 2023 by FALKE KGaA against the judgment of the General Court (Second Chamber, Extended Composition) delivered on 21 December 2022 in Case T-306/21, Falke KGaA v European Commission
Date: 2023-03-02
Institutions: Court of Justice
Subjects: Germany, State aid, aid to undertakings, control of State aid, coronavirus disease, epidemic, equal treatment, principle of proportionality, restriction on competition, retail trade








C_2023155EN.01004101.xml










2.5.2023   


EN


Official Journal of the European Union


C 155/41






Appeal brought on 2 March 2023 by FALKE KGaA against the judgment of the General Court (Second Chamber, Extended Composition) delivered on 21 December 2022 in Case T-306/21, Falke KGaA v European Commission
(Case C-127/23 P)
(2023/C 155/53)
Language of the case: German

Parties


Appellant: FALKE KGaA (represented by: R. Velte, Rechtsanwalt)

Other parties to the proceedings: European Commission, Federal Republic of Germany

Form of order sought

The appellant claims that the Court should:






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set aside the judgment of the General Court of the European Union of 21 December 2022 in Case T-306/21, Falke v Commission, in so far as the action was dismissed (point 1 of the operative part of the judgment) and FALKE KGaA was ordered to bear its own costs and to pay those incurred by the European Commission (point 2 of the operative part of the judgment);










—


rule on the substance of the case and annul the contested decision; in the alternative, if the Court of Justice does not rule on the matter, refer the case back to the General Court for a ruling in accordance with the judgment of the Court of Justice; and










—


order the European Commission to pay the costs of the proceedings before the General Court and the Court of Justice.





Grounds of appeal and main arguments

In support of the appeal, the appellant relies on four grounds:
First, the appellant submits that the General Court erred in law in its interpretation of Article 107(1) TFEU. In accordance with wording and objective thereof, the assessment of the effects of the contested decision must be based on the competition between brick-and-mortar retail production sectors affected by the lockdown and not on a company-wide approach which includes unaffected production sectors. The appellant argues that the General Court failed to recognise that, by favouring purely brick-and-mortar retailers to the detriment of ‘multi-channel’ retailers such as the appellant, the contested aid scheme significantly distorted competition in both brick-and-mortar and online retail.
Second, according to the appellant, the General Court erred in law in its interpretation of Article 107(3)(b) TFEU. It failed to appreciate that Article 107(3)(b) TFEU is an exception linked to the conditions for the application of Article 101(1) TFEU. As a result of this error of assessment, the General Court failed to recognise that the Commission erred in its assessment by failing to take into account the distorting effects of the aid scheme on competition. Furthermore, the selective nature of the aid resulting from the eligibility criterion of ‘company-wide decrease in turnover’ is in breach of the principle of equal treatment, because it treats the appellant differently despite it being affected by the closures in the production sector of ‘brick-and-mortar retail’ in the same way as the competitors in receipt of aid.
Third, the General Court erred in its interpretation and categorisation of the Commission’s Temporary Framework on which the contested aid scheme was based. The Temporary Framework does not require the viability of the undertakings affected by the lockdown to be threatened. The purpose of the aid is not to support undertakings in need, but rather to grant temporary support to affected undertakings to enable them to continue operating in the production sectors concerned and to avoid cost-intensive and irreversible restructuring. The Temporary Framework, therefore, does not provide for a company-wide assessment, but an assessment of the production sectors affected by closures.
Fourth, the appellant submits that the General Court also erred in law in its interpretation of the principle of proportionality laid down in Article 5(4) TFEU. The appellant submits that the eligibility criterion based on a company-wide assessment is not suitable or necessary to achieve the objective of the aid scheme, which is to enable production sectors affected by Covid-related closures to continue operating by compensating for uncovered fixed costs. Furthermore, the serious distortion of competition resulting from the underlying eligibility criterion is not suitable for achieving the — misdirected — objective of the aid scheme. The proportionality of the contested aid scheme cannot be justified solely on the basis of the requirement to use budgetary resources economically, particularly because the fixed-cost aid is granted to the beneficiary brick-and-mortar retailers irrespective of their productivity and capital resources.