EU Competition Policy via Controlling State Aid

The European Commission has controlled State aid that would distort competition and affect trade between Member States. The State aid control is, in fact, one of the most important provisions of EU law, aiming at ensuring the process of competition and the integrated internal market. However, its State aid control does not seem very successful, since the current data indicate that the number of unlawful State aid is still significant, although the overall amount of granted aid has not increased considerably despite the current financial crisis in the EU. In particular, it does not give an impression that there are proper guidelines of the State aid exemption to a certain sector, such as R&D. This article discusses about its control of State aid for R&D that can cause incentive loss of the R&D investments due to its comparative advantage. Even though the Commission stresses that State aid for R&D should serve as an incentive for firms to commence R&D activities, it is still difficult to decide which R&D aid can encourage them to carry out R&D efforts effectively. When the Commission lacks the legal techniques to implement an adequate balance test of positive and negative effects of State aid, its State aid policy will fail to contribute to achieving social and pro-competitive goals of the EU.