Distorted promotion of undistorted competition? Commission decisions after formal investigations in the EU state aid regime

Abstract

This article aims to explain the Commission's decisions after formal investigations in the EU state aid regime. It proceeds from the idea that the Commission is confronted with an enforcement dilemma: it must weigh the benefits of promoting undistorted competition on the internal market against the potential costs of losing member state support. This study explores to what extent characteristics of state aid cases and characteristics of member states influence this dilemma and thereby the Commission's decisions. Based on multilevel logistic regression analysis of a newly created dataset consisting of all formal investigations initiated and decided on by the Commission between 2004 and 2018, we find that aid that has been granted unlawfully and aid consisting of tax measures is more likely to result in a negative decision. Member states characterized by a larger administrative capacity are less likely to face negative decisions.