State aid to undertakings that engage in anti-competitive practices is incompatible with the internal market.
For State aid to be compatible with the internal market, it may not infringe any other provision of the Treaty or secondary legislation. Occasionally, the Commission finds State aid measures to be incompatible with the internal market because they contain clauses that exclude foreign companies or require aid recipients to use domestic products or labour. It is rare for a State aid measure to be incompatible because one or more of the aid recipients are members of a cartel.
On 18 May 2022, the General Court, in case T-601/20, Tirrenia di navigazione v European Commission, examined an Italian aid measure that supported a company that was a member of a cartel. Tirrenia di navigazione sought annulment of Commission Decision 2020/1411 on State aid to shipping companies Adriatica, Caremar, Siremar, Saremar and Toremar [Tirrenia Group].
Decision 2020/1411 was reviewed here on 1 December 2020. It was significant for at least two reasons. First, it found some of the support measures not to constitute State aid on the grounds that they complied with the four Altmark conditions. Second, some other measures that constituted State aid were incompatible with the internal market because they infringed Article 101 TFEU which prohibits restrictive agreements and concerted practices between undertakings.
In particular, the Commission found that Adriatica, one of Tirrenia’s companies, had participated in a cartel aimed at fixing the prices for the transport of commercial vehicles on the Brindisi/Corfu/Igoumenítsa/Patras route, in breach of Article 101 TFEU, even though it received aid for the operation of the same line.
The article that reviewed Decisio 2020/1421 can be accessed at:
Tirrenia argued before the General Court that the Commission had failed to demonstrate how Adriatica’s participation in a cartel made the compensation it received for the extra costs of the public service obligation incompatible with the internal market. According to Tirrenia, there was no automatic connection between the cartel and State aid.
State aid and anti-competitive practices: The reasoning of the Commission
Paragraphs 276-283 of Decision 2020/1411 present the reasoning of the Commission. The section of the Decision containing paragraphs 276-283 is entitled “126.96.36.199. Distortion of competition contrary to the interest of the Union”:
“(276) The procedure under Article 108 TFEU must not produce a result which is contrary to the specific provisions of the Treaty. Therefore, the Commission cannot declare State aid, certain conditions of which contravene other provisions of the Treaty, to be compatible with the internal market. The obligation by the Commission to ensure that Articles 107 and 108 TFEU are applied consistently with other provisions of the Treaty is all the more necessary where those other provisions also pursue, as in the present case, the objective of undistorted competition in the internal market.”
“(277) Compliance with the requirements set out in the 2012 SGEI Framework, as assessed above, is usually sufficient to ensure that the aid does not distort competition in a way that is contrary to the interests of the Union (see paragraph 51 of the 2012 SGEI Framework).”
“(278) However, as regards Adriatica, the Commission notices that, between 30 October 1990 and July 1994, Adriatica was involved in a price fixing cartel for the tariffs for commercial vehicles on the Brindisi/Corfu/Igoumenitsa/Patras route, in contravention of Article 101 TFEU, while it was receiving aid to operate that route. Following adoption of the 2005 Decision the Court confirmed this assessment.” [The Commission refers here to Decision 2005/163, which was partially annulled by the General Court. That partial annulment led the Commission to re-open the case and to conclude its investigation with Decision 2020/1411.]
“(279) The public service compensation paid for the operation of the Brindisi/Corfu/Igoumenitsa/Patras route from January 1992 to July 1994, when the beneficiary was involved in the price fixing cartel prohibited by Article 101 TFEU, cannot be considered compatible with the internal market. While the purpose of the public service compensation was precisely to facilitate the transport of goods and passengers in the Brindisi/Corfu/Igoumenitsa/Patras route, the beneficiary of the aid participated in a price fixing cartel that inhibited the transport of goods in that exact same route. Therefore, Adriatica’s participation in the cartel was in direct contradiction with the purpose of the SGEI aid that was granted to Adriatica in order to facilitate maritime transport in that route.”
“(280) It follows that the finding of incompatible aid and consequently the ordering of recovery of that aid would not constitute a new penalty, as claimed by Italy. Such incompatibility merely results from the aid recipient’s participation in a cartel covering services that the recipient was supposed to make more accessible to consumers rather than cartelise them to the detriment of consumers. Given the type of service provided with public compensation, which simultaneously catered for commercial vehicles, passengers and cargo, the beneficiary’s involvement in a cartel designed to fix prices for transport of commercial vehicles allows conclusions to be drawn for the connection as a whole. The cartel was aimed at the very commercial vehicle traffic that the Italian authorities wished to facilitate through the subsidy.”
“(281) Besides, the cartel heavily distorted competition on the relevant market, i.e. in the Brindisi/Corfu/Igoumenitsa/Patras route, whereas the SGEI aid on that same route should have been granted in a manner that would limit the distortions of competition to the minimum. The participation of the beneficiary in a price fixing cartel on that route amplified the distortive effects of the aid and caused it to have significant adverse effects on other Member States and the functioning of the internal market. Moreover, it is plausible that, absent the public subsidies, Adriatica would not have had the economic strength to participate in the cartel.”
“(282) Finally, at that time Adriatica was fully controlled by a public company. Therefore, that part of the Italian authorities knew about the cartel and its detrimental effects to consumers, while another part of the Italian authorities continued to grant the SGEI aid that was supposed to assist consumers on that same route with as limited distortions to competition as possible.”
“(283) In view of the above considerations, the Commission concludes that the aid in the form of public service compensation to Adriatica for the operation of the Brindisi/Corfu/Igoumenitsa/Patras route between January 1992 and July 1994 is incompatible with the internal market.”
State aid and anti-competitive practices: The assessment of the General Court
The General Court, first, observed that the aid measure did not infringe, through its aims or specific rules, other provisions of the Treaty. [paragraph 118 of the judgment]
The General Court, however, noted that the Commission had not concluded that the measure at issue was incompatible on the sole ground that the detailed rules of that measure were contrary to other provisions of the Treaty. The Commission referred to the impact of Adriatica’s participation in the cartel on the compensation granted to Adriatica for the implementation of the SGEI relating to the operation of the Brindisi/Corfu/Igoumenítsa/Patras line. [para 119]
It is not the mere existence of the infringement of the competition rules which gave rise to the declaration of incompatibility, but the fact that there is a clear contradiction between the objective pursued by the cartel, which is, inter alia, to increase the prices applied to consumers in relation to the market price, and the objective pursued by the public service obligations conferred on Adriatica, which are to maintain prices accessible to users of the public service concerned. [para 120]
Thus, the State aid granted to Adriatica leads to a result manifestly contrary to the objective which it pursues, which is to guarantee accessible and regular public services to its users, even though the objective of the cartel is, on the contrary, to achieve the highest possible profits for its members, by hindering access to free and undistorted competition on the market.”[para 121]
In those circumstances, the Commission could, without committing a manifest error of assessment, conclude that Adriatica’s participation in a price cartel, in breach of Article 101 TFEU, implied the incompatibility of that measure with the internal market, given that that cartel could affect the amount of compensation.”
Then the Court examinee the argument of Tirrenia that there was no evidence concerning the existence of the cartel and the amount of aid.
The General Court pointed out that the procedure laid down in Article 108 TFEU cannot lead to a result which would be contrary to specific rules of the Treaty. [para 124]
The Commission contended that State aid could not be declared compatible with the rules of the Treaty if it were to infringe other provisions, in so far as there must be consistency between the rules on State aid and those relating to the observance of undistorted competition within the European Union. [para 125]
Lastly, the General Court stated that the Commission did give reasons for the causal link between participation in a cartel and the aid scheme set up, by stating, in recitals 279 to 281 of Decision 2020/1411, that Adriatica’s participation in a cartel was in direct contradiction with the objective of the aid, since participation in that cartel had reinforced the effects of the distortion caused by that aid scheme and had had significant negative effects on other Member States and on the functioning of the internal market. In addition, in the absence of that aid scheme, the applicant would not have had the economic power necessary to participate in that cartel. [para 126]
There is no doubt that the aim of a cartel and the aim of a measure that imposes a public service obligation are diametrically opposite. The former intends to harm consumers, while the latter intends to help consumers.
However, the Commission only made a brief statement without referring to any substantive evidence that it was “plausible” that the aid enabled Adriatica to participate in the cartel [see the last sentence of para 281 of Commission Decision 2020/1411 quoted above]. The General Court accepted the statement without asking for any proof or further analysis. It is not obvious how the aid facilitated participation in a cartel. Perhaps the Commission conjectured that the aid made Adriatica’s commitment to the cartel more credible and, therefore, made an otherwise unstable cartel more stable. Even if this is what happened, it was not proved. There is no indication in the Decision of the typical factors that are used to assess the viability of a cartel such as the size of Adriatica on that route, the role it played, how many other companies were involved, whether monitoring the behaviour of the other cartel members was easy or difficult or whether the cartel had credible means of punishing non-conforming members.
In fact, it is not obvious at all why a company that receives State aid that compensates it for its extra costs, including reasonable profit, would want to participate in a cartel. Did it signal to the other cartel members that it could withstand losses from price competition?
More importantly, a company that succeeds to raise the price of its services necessarily has more revenue and, therefore, needs less in terms of compensation. There seems to exist an inverse relationship between the revenue and the amount of State aid in the form of compensation. If indeed such an inverse relationship existed in this case, the compensation itself must have been smaller than otherwise and, therefore, it must have affected intra-EU trade less than otherwise!
Even though this is one of the few judgements that tackle the link between State aid and Article 101 TFEU, the analysis is rather perfunctory.
The judgment also considered whether the aid to Tirrenia’s companies was existing.
The General Court found the following amendments of the aid measures to constitute substantial changes so that the aid became new in the meaning of Regulation 2015/1589. The amendments concerned, first, the mechanism for calculating the amount of compensation for the operation of routes subject to the public service obligation; second, the period during which the compensation could be paid; and third, the budgetary resources that were allocated to the financing of public service links. [para 102]
 The text of the judgment in languages other than English can be accessed at:
 The Commission Decision can be accessed at: