Joined Cases T‑115/09 and T‑116/09

Electrolux AB and
Whirlpool Europe BV

v

European Commission

(State aid – Restructuring aid for a manufacturer of large home appliances notified by the French Republic — Decision declaring the aid compatible with the common market subject to conditions — Manifest errors of assessment — Guidelines on State aid for rescuing and restructuring firms in difficulty)

Summary of the Judgment

1.      State aid — Prohibition — Exceptions — Discretion of the Commission — Possibility of adopting Guidelines — Judicial review — Limits

(Art. 87(3)(c) EC)

2.      State aid — Prohibition — Exceptions — Aid which may be considered compatible with the common market — Aid for restructuring firms in difficulty — Conditions — Compensatory measures for the avoidance of undue distortions of competition — Taking account of the sale of a subsidiary of the undertaking mainly after the aid — Manifest error of assessment

(Art. 87(3) EC; Commission Notice 2004/C 244/02)

3.      State aid — Prohibition — Exceptions — Aid which may be considered compatible with the common market — Aid for restructuring firms in difficulty — Conditions — Cumulative effect of old and new aid not taken into account — Manifest error of assessment

(Art. 87(3) EC; Commission Notice 2004/C 244/02)

1.      In the application of Article 87(3)(c) EC, the Commission has a wide discretion the exercise of which involves complex economic and social assessments which must be made in a Community context. Furthermore, the Commission may lay down for itself guidance for the exercise of its discretion by adopting acts such as the guidelines on undertakings in difficulty inasmuch as those acts contain indications as to the direction to be followed by that institution and do not depart from the Treaty rules.

Judicial review of the manner in which the Commission’s discretion is exercised in the application of Article 87(3)(c) EC is confined to establishing that the rules of procedure and the rules relating to the duty to give reasons have been complied with, and to verifying the accuracy of the facts relied on and that there has been no error of law, manifest error of assessment of the facts or misuse of powers. Furthermore, the Court must also verify whether the requirements which the Commission has laid down in the Guidelines have been observed. However, it is not for the European Union judicature to replace the Commission by carrying out in its stead an examination it never carried out and drawing the conclusions which it would have drawn.

(see paras 37, 38, 40‑42)

2.      As regards the adoption of compensatory measures in the context of the grant of restructuring aid, that points 38 to 40 of the Guidelines relate to the ‘avoidance of undue distortions of competition’. Pursuant to those provisions, in the first place, compensatory measures must be adopted in order to limit the negative effects of the grant of restructuring aid on competition and trade (point 38 of the Guidelines). In the second place, those measures must be ‘appropriate’ in that they must not lead to a deterioration in the structure of the market (point 39 of the Guidelines). In the third place, they must be ‘in proportion’ to the distortive effects of the aid. In that connection, first, they must take place in particular in the market(s) where the firm will have a significant market position after restructuring. Second, while those measures may take place before or after the grant of the aid, they must in any event be an integral part of the restructuring plan. Third, they must not consist simply of write-offs and the closure of loss‑making activities where they would not lead to a reduction of capacity or market presence of the relevant firm (point 40 of the Guidelines).

The Commission committed a manifest error of assessment by holding that the sale of a subsidiary of the company constituted a compensatory measure within the meaning of points 38 to 40 of the Guidelines, where the notification of restructuring aid is made nearly three and a half years after that sale which was not intended to reduce, and could not have had the effect of reducing, even minimally, the distortions of competition to which the grant of the planned aid gave rise and that, furthermore the sale had no ‘real effect’ on the main market in which the recipient of the aid was active.

(see paras 44, 51, 53, 55)

3.      It follows from the judgment in Case C‑355/95 P Deggendorf [1997] ECR I‑2549 and from point 23 of the Guidelines, that, in its examination of the compatibility with the common market of rescue aid and restructuring aid for firms in difficulty, the Commission must in principle examine the cumulative effect of that aid with any earlier aid which has not yet been recovered. Such an examination is justified on account of the fact that the advantages conferred by the grant of earlier incompatible aid which has not yet been recovered continue to produce effects on competition.

If the Commission makes the grant of the planned aid subject to the prior recovery of earlier aid, it is not obliged to examine the cumulative effect of the aid on competition. The imposition of such a condition prevents the advantage conferred by the planned aid from combining with that conferred by the earlier aid, the negative effects on competition resulting from the grant of the earlier aid having been eliminated by recovery of the amount of that aid plus interest. The recovery of aid with interest removes the undue advantage consisting in the non-payment of the interest which the recipient would have paid on the amount in question of compatible aid, had it had to borrow that amount on the market pending the Commission’s decision, and in the improvement of its competitive position as against the other operators in the market while the unlawfulness lasts.

However, if the Commission does not make the grant of the aid at issue conditional on the recovery of the incompatible aid, it should examine the cumulative effect of the two types of aid. It commits a manifest error of assessment in its examination of the distortion of competition if it fails to do so.

(see paras 66, 67, 71, 72)