Tuesday, August 11, 2020
Amsterdam Centre for European Law and Governance Research Paper No. 2020-05
As a result of the global lockdown, countries around the globe are now facing multiple crises at the same time: a health crisis, a financial crisis, and a collapse in commodity prices, which all interact in complex ways. As a reaction governments and policymakers are providing unparalleled support to firms, financial markets, and households. The effectiveness of these policies is considered central to project worse consequences. In order to coordinate the economic response of the Member States and to mitigate the negative repercussions on the EU economy, the European Commission has adopted a Temporary Framework, which enables Member States to use the full flexibility foreseen under EU state aid rules to support the economy in the context of the COVID-19 outbreak.
However, in the current crisis the world economy and national economies are also shuttered in their micro-elements, at the demand side. As a result of the measures taken by governments to contain the virus, consumers have seen retail choices limited with hundreds of thousands of shops being required to close their doors, a situation that has exposed consumers to a floodgate of unfair, misleading or abusive business practices. Price gouging for essential consumer products coupled with unfair commercial practices have amplified forcing governments to take various measures, for example introducing price caps. Nevertheless, besides these unfair practices more indirect forms of consumer harm is taking place as a result of some of the current state aid measures that many policy makers may not have immediately realized and acted upon.
The current flexibility offered in the State Aid law Temporary Framework has been used by some governments also to tolerate non-compliance with consumer protection rules by undertakings. Such exceptions in fact lead to double burden for consumers. Once as consumers and purchasers of, for example, travel or transport services and second, as taxpayers financing the state aid.
Moreover, this may lead to a violation of EU law that lays down the obligation to take consumer protection requirements “into account in defining and implementing other Union policies and activities” (Article 12 TFEU), a principle also laid down in the EU Charter of Fundamental Rights (Article 38). This normative precedent creates a constitutional basis for considering the requirements of consumer protection in the whole body of EU competition law and policy including the Treaty’s state aid provisions.
The main question this article aims to answer is how state aid law and consumer protection rules interact in EU law and what lessons these interactions provide for managing the current economic crisis in a coordinated and balanced way that takes equal account of interests on the supply and demand side. While the interaction between consumer law and competition law has been subject to various legal and economic studies in the past, the relationship between state aid rules and consumer protection has not been studied so far.
This article fills this gap, by making three novel contributions. First, the article sets out the EU law framework that structures the analysis of how state aid rules and consumer protection interact. It analyses the goals of these two legal areas and how these goals complement or conflict. Second, by presenting two case studies (air transport and energy) it explains and illustrates the constituents of the interaction between these two legal fields and offers an illustration why these intersections should be analyzed in-depth. Third, the article offers policy recommendations that can be applied not only in the current crisis but also beyond, on the coordination and enforcement of these two policies and legal fields.