In its Judgment of 12 June 2014 in case Sarc v Commission, T-488/11, EU:T:2014:441, the General Court of the EU (GC) has assessed an interesting case concerned with the licensing of software developed at a Dutch university from a State aid perspective.
In the case at hand, staff of the Delft University had developed source code usable in the development of software for ship design and ship loading (a highly commercial application). Those members of staff then left university and created a start-up company 'Delftship' that entered into a licensing agreement with the Delft University. According to competitor Scheepsbouwkundig Advies- en Rekencentrum BV ('Sarc'), the terms of the licensing agreement where too advantageous and implied State aid. Crucially, Sarc claimed that the royalty payable by Delftship to the University was lower than the market price, which allowed it to offer software at a low rate.
However, after a preliminary examination under Article 108(2) TFEU, the Commission decided that the licence agreement for the use of the software source code did not constitute State aid, as the level of the royalties payable to the University had been negotiated intensely and ended up reflecting market prices--so that the licensing agreement did not grant Delftship an advantage within the meaning of Article 107(1) TFEU. Sarc appealed the decision before the GC.
The appeal has been opposed by both the University and the Dutch state on several grounds. Remarkably, the active standing of Sarc to bring proceedings has been challenged. In its analysis of the applicant’s standing to bring proceedings, the GC focussed on the competitive position of the applicant--following the settled case-law under art 263(4) TFEU that an applicant can only challenge a (State aid) Decision addressed to another party if it is of direct and individual concern, which requires proof that its market position is significantly affected, see paras 31-35 [for discussion, see F Pastor Merchante, "On the Rules of Standing to Challenge State Aid Decisions Adopted at the End of the Preliminary Phase" (2012) European State Aid Law Quarterly 3: 601-610].
These considerations are extremely important, as they indicate a very restrictive test and impose a substantial burden of proof on any challengers of State aid decisions not addressed to them. In my view, it is worth stressing that the GC and has found that
43 [...] it should be noted, first, that the applicant has not provided the Court with the main information relating to the structure of the relevant market establishing its competitive position in that market. In particular, the applicant has not provided information about the relevant geographic market, its share of that market and the share of its competitors and any shift in market shares since the measure at issue was granted.
44 It should be pointed out, secondly, that the applicant has not provided the Court with any evidence which could lead to the conclusion that the grant of the measure at issue had significantly affected its competitive position given, in particular, the specific nature of that measure, the length of the period for which it was granted and any circumstances making it impossible to circumvent the adverse effects of that measure.
45 In those circumstances, it is to be found that the applicant has not established that its competitive position was significantly affected within the meaning of the case-law set out in paragraph 33 above.
46 The six arguments which the applicant raises in that regard cannot invalidate the finding set out in paragraph 45 above.
The GC then goes on to discard each of the arguments, which were concerned with: 1) the lack of need to define the relevant market and the sufficiency to focus on competitive constraints, 2) the existence of a very close competitive relationship, given that the beneficiary of the aid and the claimant sell the same products/services to the same clients, 3)the fact that the applicant held 80% of the market share in the Netherlands (and, consequently, was bound to be affected by the entry of a new competitor that could undercut prices), 4) the fact that the value of the measure at issue was between 6 and 12 times above the de minimis threshold, 5) the specific loss of customers to the beneficiary of the aid, which was argued as proof of loss of market share, and 6) a price comparison that showed that the beneficiary was able to offer very low prices due to it not being required to recoup the costs of software development (which had been financed by the University prior to entering into the licensing agreement).
In my view, most of the arguments and information supplied by the applicant and, if nothing else, taking them all into global consideration, should have led the GC to conclude that its competitive position was bound to be significantly affected by the measure at issue. However, adopting such a strict approach and imposing such a high (almost impossible to discharge) burden of proof of significant alteration of its competitive position, the GC only recognises the applicant's standing to protect its procedural rights, which fundamentally limits the possibility for competitors to challenge State aid decisions unless they were involved in the procedure leading to the Commission's Decision.
Hence, this is a decision bound to disincetivise competitors from challenging State aid decisions, unless they were involved in the procedure from the beginning--and always conditional upon any of their procedural rights having been breached. In my view, not a positive interpretation of the rules on active standing under Art 263(4) TFEU and one that is definitely difficult to square with the over-enthusiastic approach of the CJEU to the effectiveness of EU competition law rules in other areas (such as cartels...).