The European Commission has approved, under the EU state aid rules, a €700 million French scheme to support certain retailers and services affected by the coronavirus pandemic and restrictive measures taken by the French government to limit the spread of the virus.
Executive Vice President Margrethe Vestager (pictured) in charge of competition policy said: “Closures to limit the spread of the pandemic have resulted in very significant losses in turnover for some retailers and services. This €700 million scheme will allow France to partially compensate those companies for the losses incurred. We are continuing to work in close cooperation with member states to find workable solutions to mitigate the economic impact of the coronavirus pandemic, in line with EU rules.”
The French scheme
France notified the Commission of a €700m scheme to compensate certain retailers and services for losses incurred as a result of the French government’s administrative closure measures to limit the spread of the coronavirus.
As a direct result of those restrictive measures, the turnover of the companies concerned declined, whereas their costs, particularly rent and other fixed costs, could not be adjusted downwards.
The scheme will be open to certain retail outlets (furniture, clothing, IT, sports goods, opticians, jewellers) and some services (repair of personal and household goods, hairdressing and beauty care) which were required to close down for periods between February and May 2021.
Eligible beneficiaries under the scheme will be able to obtain compensation in the form of direct grants for an amount not exceeding the amount of rent paid during the closure periods, minus, where applicable, any revenue from an increase in online sales and other forms of compensation, such as amounts paid out by insurance companies.
With a view to avoiding overcompensation for losses incurred, the scheme also provides for a compensation cap for: (i) companies which were already recording losses in 2019; (ii) companies with a high proportion of online sales; and (iii) companies receiving more than €4m in aid per month.
The Commission assessed the measure under Article 107(2)(b) TFEU, which authorises Member States to compensate specific companies or sectors for damage directly caused by exceptional occurrences like the coronavirus pandemic.
The Commission took the view that the French aid scheme will compensate for losses that are directly linked to the coronavirus pandemic. It also found that the measure was proportionate in so far as the compensation envisaged did not exceed the amount necessary to make good the losses, taking into account the cap provided for in the specific cases referred to above.
The Commission therefore concluded that the scheme is in line with the EU State aid rules.
Background
Financial support from EU or national funds granted to health services or other public services to tackle the coronavirus situation falls outside the scope of State aid control. The same applies to any public financial support given directly to citizens. Similarly, public support measures that are available to all companies such as wage subsidies and suspension of payments of corporate and value added taxes or social security contributions do not fall under state aid control and do not require the Commission’s approval under the EU state aid rules. In all these cases, member states can act immediately. When the state aid rules are applicable, member states can design ample aid measures to support specific companies or sectors suffering from the consequences of the coronavirus pandemic in line with the existing EU state aid framework.
On 13 March 2020 the Commission adopted a European co-ordinated response to counter the economic impact of the Coronavirus pandemic setting out these possibilities.
In that connection, for example:
- Member states can compensate specific companies or specific sectors (in the form of schemes) for losses incurred and directly caused by exceptional occurrences, such as those caused by the coronavirus pandemic. Article 107(2)(b) TFEU makes provision to that effect;
- the state aid rules based on Article 107(3)(c) TFEU enable member states to help companies affected by liquidity shortages and needing urgent rescue, and aid;
- this can be complemented by a variety of additional measures, such as under the de minimis Regulation and the General Block Exemption Regulation, which can also be put in place by member states immediately, without the Commission’s involvement.
In the event of particularly severe economic situations, such as the one currently faced by all member states due to the ongoing coronavirus pandemic, the EU State aid rules allow member states to grant aid to remedy a serious disturbance in their economy. Article 107(3)(b) TFEU makes provision to that effect.
On 19 March 2020 the Commission adopted a Temporary Framework for State aid measures on the basis of Article 107(3)(b) TFEU to enable Member States to make full use of the flexibility provided for under the State aid rules to support the economy in the context of the coronavirus pandemic.
The Temporary Framework, as amended on 3 April, 8 May, 29 June, 13 October 2020 and 28 January 2021 provides for the following types of aid to be granted by the member states: i) direct grants, equity injections, selective tax breaks and advance payments; ii) state guarantees for loans taken out by companies; iii) subsidised public loans to companies, including subordinated loans; iv) safeguards for banks that channel state aid to the real economy; v) public short-term export credit insurance; vi) support for coronavirus-related research and development (R&D); vii) support for the construction and upscaling of testing facilities; viii) support for the production of products relevant to tackling the coronavirus pandemic; ix) targeted support in the form of deferral of tax payments and/or suspension of social security contributions; x) targeted support in the form of wage subsidies for employees; xi) targeted support in the form of equity and/or hybrid capital instruments; xii) support for uncovered fixed costs for companies facing a decline in turnover in the context of the coronavirus pandemic.
The Temporary Framework will be in place until the end of December 2021. With a view to ensuring legal certainty, the Commission will assess before that date whether it needs to be extended.
The non-confidential version of the decision will be made available under case number SA.62625 in the state aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News.
More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.
