16.6.2022
EN
Official Journal of the European Union
L 161/115
168.
To enable the Commission to assess the likely negative effects of the measure on competition and trade, the Member State may submit any study or other relevant evidence at its disposal, such as ex-post evaluations carried out for similar schemes, in terms of the eligible undertakings, funding structures, design parameters and geographic area.
169.
At the level of the market for the provision of risk finance, State aid may result in the crowding out of private investors.
This might reduce the incentives for private investors to provide funding to eligible undertakings and encourage them to wait until the State provides aid for such investments.
That risk becomes more relevant, the higher the amount of the total financing provided to the final beneficiaries, the larger the size of those beneficiary undertakings and the more advanced their development stage, as private financing becomes progressively available in those circumstances.
Moreover, State aid should not replace the normal business risk of investments that investors would have undertaken even in the absence of State aid.
However, to the extent that the market failure or the other relevant obstacle has been properly defined, it is less likely that the risk finance measure will result in such crowding out.
170.
At the level of financial intermediaries, aid may have distortive effects in terms of increasing or maintaining an intermediary’s market power, for example in the market of a particular region.
Even where aid does not strengthen the financial intermediary’s market power directly, it may do so indirectly, by discouraging the expansion of existing competitors, inducing their exit or discouraging the entry of new competitors.
171.
Risk finance measures must be targeted at growth-oriented undertakings which are unable to attract an adequate level of financing from private resources but may become viable with risk finance State aid.
However, where a measure provides for the setting up of a public fund, but the investment strategy of that fund does not demonstrate sufficiently the potential viability of the eligible undertakings, the measure is unlikely to meet the balancing test (see Section 3.2.5.3), as in such a case the risk finance investment may amount to a grant.
172.
The conditions relating to commercial management and profit-oriented decision-making set out in Article 21 of the General Block Exemption Regulation are essential to ensure that the selection of the final beneficiary undertakings is based on a commercial logic.
Therefore, the Commission will take those conditions into account when assessing risk finance measures under these Guidelines, including where the measure involves public financial intermediaries.
173.
Investment funds of a small scale, with limited regional focus and without adequate governance arrangements will be analysed with a view to avoiding the risk of maintaining inefficient market structures.
Regional risk finance schemes may not always have sufficient scale and scope due to a lack of diversification linked to the possibly low number of eligible undertakings as investment targets, which could reduce the efficiency of such funds and result in the granting of aid to less viable companies.
In such cases, investments could potentially distort competition and provide undue advantages to certain undertakings.
174.
At the level of the final beneficiaries the measure could have distortive effects on the product markets where those undertakings compete.
For instance, the measure may distort competition if it targets companies in underperforming sectors.
A substantial capacity expansion induced by State aid in an underperforming market might, in particular, unduly distort competition, as the creation or maintenance of overcapacity could lead to a squeeze on profit margins, a reduction of competitors’ investments or even their exit from the market.
It may also prevent companies from entering the market.
This results in inefficient market structures which are also harmful to consumers in the long run.
Where the market in the targeted sectors is growing, there is normally less reason to fear that the aid will negatively affect dynamic incentives or will unduly impede exit or entry.
The Commission considers that the risk of such distortions is substantial when the risk finance measure is sector-specific, or gives preference to certain sectors over others.
In such cases, the Commission will analyse the level of production capacities in the given sector, in the light of the potential demand.
In order to enable the Commission to carry out such an assessment, the Member State must indicate in its notification whether the risk finance measure is sector-specific, or gives preference to certain sectors over others.