STATE AID MONITORING & INVENTORY CASE STUDY The Romanian Story on State Aid Kyiv February 25 th, 2016 Stefan S ă b ă u Competition & State Aid Attache

State aid – a dynamic process EX-ANTE pre-notification notification issuing decision EX-POST reporting inventorying monitoring STATE AID ACTIVITIES At the level of the Competition Council before accession 2

State aid monitoring – legal framework State Aid Law Regulation on the procedures of State aid reporting and monitoring Regulation on the investigation procedure in the field of State aid Guidelines on the interest rate applicable for the recovery or reimbursement of the illegal and incompatible State aid RELEVANT DOMESTIC LEGISLATION 3

State aid monitoring – “guardian” of the internal market The monitoring activity aims at surveilling and controlling state aid measures. WHAT IS THE PURPOSE OF THE STATE AID MONITORING ? Im order to preserve a normal competition environment on markets 4

State aid monitoring – procedural know-how The monitoring activity supposes: surveillance of the ways through which grantors and beneficiaries are assessing the conditions imposed by the State aid regulations; monitoring the concrete enforcement of the Competition Council’s decisions (authorization decisions, etc.). HOW WAS STATE AID MONITORED? Competition Council 5

State aid monitoring – analysis in practice  existence of an authorization decision for every State aid put in place;  observance of the decision’s provisions: State aid objective; State aid nature (grant, subsidy, tax exception, guarantee, soft loan etc.); type of beneficiaries; State aid intensity; eligible costs; restructuring measures etc. WHAT DID THE COMPETITION COUNCIL CONTROL IN A MONITORING ACTION ? I Check and Assess 6

State aid monitoring – analysis in practice  beneficiaries (name, location, sector of activity);  value of the aid granted;  value of the investment made;  cumulation of the aid measures that concern the same eligible costs;  number of new employees;  effects of the state aid measures etc. WHAT DID THE COMPETITION COUNCIL CONTROL IN A MONITORING ACTION ? II Checks on 7

State aid monitoring – analysis in practice  existence of a State aid Unit in the grantor’s organizational chart;  existence of detailed data regarding the State aid granted / received in the evidences of each grantor and beneficiary. WHAT DID THE COMPETITION COUNCIL CONTROL IN A MONITORING ACTION ? III Checks on 8

State aid monitoring – finality with different outcomes  monitoring reports [regional aid (deprived areas, free areas, industrial parks), aid for shipyards or steel sector, restructuring aid, SGEI etc.];  investigations opened in cases of illegal aid or misuse of aid;  recovery decisions for the illegal and incompatible aid. WHAT WERE THE RESULTS OF THE MONITORING ACTION ? See case study, see inventory of State aid & see the Report

Case Study Loteria Român ă (Romanian Lotery)

Case Study - Loteria Român ă  organization and operation of gambling is a state monopoly;  gambling operation can be done only under authorization and license issued by the Ministry of Public Finance. GAMBLING REGIME IN ROMANIA 11

Case Study - Loteria Român ă  stock company, owned by the State.  object of activity = gaming and bets.  exclusive nationwide rights to organize and exploit the following games: lotto; express; pronosport; envelope lottery ticket; “instant lottery”.  legal possibility to organize and exploit other games, on the free market (outside exclusivity). THE BENEFICIARY - LOTERIA ROMÂNĂ 12

Case Study - Loteria Român ă  LR organizes and exploits, among other games, Pariloto (number betting games) and Videoloterie (slot machines).  Other companies may organize similar activities (as Pariloto and Videoloterie) if they obtain a license from the Ministry of Public Finances. THE MARKET 13

Case Study - Loteria Român ă  Pariloto and Videoloterie are within the exclusive area;  The market where LR carries on its activity is a closed one. LR’s CLAIMS 14

Case Study - Loteria Român ă 15 Financial support measures Exclusive and non-exclusive rights License granted through legislative enactment Exemption from payment of the social stamp tax Exemption from payment of taxes and contributions of any kind STATE AID ISSUES

Competition Council Possible solutions Compatible state aid Incompatible state aid Recovery STATE AID ISSUES No state aid 16 Case Study - Loteria Român ă

o opening the investigation on the assessment of the support measures granted to LR; o request for information from the Ministry of Public Finances, Loteria Român ă and its main competitors. ACTIONS TAKEN BY THE COMPETITION COUNCIL 17

Case Study - Loteria Român ă Activities/games assessed:  the LR’s organization and exploitation of Pariloto and Videoloterie. Market:  other companies organize and exploit games (licensed by the Ministry of Public Finances) that can be considered substitutable with Pariloto and Videoloterie.  there is an open market for each of these games organized and exploited by LR. ASSESSMENT IN THE INVESTIGATION 18

Case Study - Loteria Român ă Financial support measures:  No licensing procedure (no payment obligations for license tax);  Exemption from payment of social stamp tax;  Exemption from payment of other taxes and contributions. ASSESSMENT IN THE INVESTIGATION 19

Case Study - Loteria Român ă Existence of State Aid in the internal market context – a 4 criteria analysis: 1. transfer of State resources: exemption from payment to the State Budget; 2. selectivity of the measures: exemption is granted only to LR; 3. economic advantage: by not paying taxes, LR had lower costs than in a normal situation; 4. distortion of competition and effect on trade between Member States: the competitors of LR did not receive the same benefits fact for which they were placed at a competitive disadvantage. ASSESSMENT IN THE INVESTIGATION 20

Case Study - Loteria Român ă Stand-still obligations: The grantor did not notify the intention to grant the aid. Compatibility of the measures with the internal market: Taking into consideration (i) the characteristics of the measure (instruments used, the lack of objective, no eligible cost imposed etc.) and (ii) the provisions of the state aid law / regulations, the measures are not compatible with the internal market. ASSESSMENT IN THE INVESTIGATION 21

Case Study - Loteria Român ă Measures granted to LR represent State aid, illegal and incompatible: Obligations of the grantor: to stop the measures; to recover the aid with interest from the date on which it was made available to LR. Recommendations for the grantor: to eliminate the legal provisions establishing a preferential treatment for LR; to define accurately the LR’s exclusive area. DECISION 22

THANK YOU FOR YOUR ATTENTION ROMANIA Kyiv February 25 th, 2016 Stefan S ă b ă u Competition & State aid attache