On 15 November 2023, the General Court annulled a decision of the European Commission not to open the formal investigation procedure under Article 108(2) TFEU regarding allegedly unlawful and incompatible aid granted by the prolongation of gambling licences in the Netherlands. The General Court held that the preliminary examination done by the Commission for the purposes of Article 108(3) TFEU did not eliminate all doubts as to the existence of State aid (Case T 167/21).
Background
On 8 March 2016, the European Gambling and Betting Association (“EGBA”) lodged a complaint with the European Commission with regard to allegedly unlawful and incompatible state aid granted by the Netherlands in the gambling sector. The Netherlands had taken two measures by which existing gambling licences were prolonged and renewed (together, the “contested measures”).
According to the EGBA, the licence holders enjoyed State aid because their licences were either renewed or prolonged on an exclusive basis without the Netherlands authorities having requested payment of remuneration at market rate. Furthermore, the EGBA stressed that there had been no open, transparent and non-discriminatory procedure for the award of the licences.
In the contested decision, the Commission found that no advantage had been conferred on the licence holders. It took the view that the extension of the licences in question on an exclusive basis did not involve the transfer of State resources. Therefore, it considered that the contested measure did not constitute State aid within the meaning of Article 107(1) TFEU.
More specifically, the Commission observed that the licences at issue could be granted only if the revenue generated by the gambling activities was paid to organisations acting in the common interest. Moreover, gaming operators holding such licence had to remit at least 50% of the revenue generated by the sale of participation tickets to the beneficiaries indicated in the licences. Since the Netherlands did not allow the holder of an exclusive right to collect more than the minimum return necessary to cover its operational and capital costs resulting from exercising the right, the Commission considered that the contested measures did not confer an advantage on the beneficiary that it could not have obtained under normal market conditions.
With that decision, the Commission closed the proceedings and decided not to launch a formal investigation in the sense of Article 108(2) TFEU.
Annulment by the General Court: the preliminary assessment did not eliminate all reasonable doubt as to the existence of a benefit
The EGBA brought an action for annulment before the General Court, arguing that its procedural rights were infringed by the Commission’s refusal to initiate the formal investigation procedure while the preliminary examination did not eliminate all doubts as to the existence of the aid. Secondly, it argued that the Commission made a manifest error of assessment in finding that no benefit was conferred.
In its analysis, the General Court commences by highlighting that the lawfulness of a decision not to raise objections depends on whether, during the preliminary examination procedure, the Commission had information and evidence available that should objectively have raised doubts as to the compatibility of an aid measure with the internal market. If such doubts exist, they must lead to the initiation of a formal investigation procedure in which the interested parties may participate. The Commission has no discretion in that regard.
The General Court continues by stating that where an applicant seeks the annulment of a decision not to raise objections, it essentially contests the fact that the Commission did not initiate the formal investigation procedure, thereby infringing the applicant’s procedural rights. To that end, the applicant can demonstrate with any plea that certain information or evidence available to the Commission should have raised doubts as to the compatibility of the aid. For instance, it can demonstrate that the examination by the Commission was insufficient or incomplete. The fact that the Commission encountered difficulties in the assessment of the measure can be another indicator that there were doubts and thus should trigger the formal investigation procedure.
The General Court furthermore stresses that not only the information available to the Commission at the time of the decision is relevant, but also the information which could have been available to it. However, this does not entail that the Commission be required to seek all information which might be connected with the case before it, even where such information is in the public domain.
The General Court concludes its general observations by stating that the analysis of whether the Commission unlawfully refused to open a formal investigation goes beyond simple consideration of whether there has been a manifest error of assessment. Such decision may also be annulled on account of the failure to initiate the inter partes and detailed investigation required under Article 108(2) TFEU, even if it is not established that the Commission made an incorrect assessment as to the substance.
In the case at hand, the General Court noted that the Commission incorrectly held that no doubts persisted with regard to the existence of an advantage. In particular, it pointed out that the Commission did not assess whether the gambling licenses conferred an indirect advantage on the organisations acting in the common interest to which the holders of those licenses had to remit part of their revenue generated by gambling activities.
The General Court referred to paragraph 115 of the Commission Notice on the notion of State aid, which specifies that an indirect advantage can be conferred on undertakings other than those to which State resources have been directly transferred. In addition, paragraph 116 of that notice states that the notion of ‘indirect advantage’ covers the situation in which the measure is designed in such a way as to channel its secondary effects towards identifiable undertakings or groups of undertakings. The Commission should therefore have sought to ascertain whether the contested measure conferred an indirect advantage on bodies that serve the common interest.
The General Court established that, despite the fact that the Commission had been informed of that part of the Netherlands legislation on gambling, the contested decision remained silent on that point. Consequently, it could not be ruled out that this aspect would result in the existence of serious difficulties in the classification of the constested measures as State aid, which could be solved solely by a formal investigation procedure. Consequently, the General Court annulled the Contested Decision.
For further information about this case and/or for general legal advice relating to State aid law, please contact Jeroen Dewispelaere or Pierre de Bandt.