• The new EU’s State Aid rules risk to benefit large and dominant companies and elbow small businesses aside

• Strict safeguards are required to ensure that the new State Aid rules support the green transition without increasing market concentration

The European DIGITAL SME Alliance, along with the Open Markets Institute and the Balanced Economy Project, has sent a letter to the President of the European Commission Ursula von der Leyen, Executive Vice-President of the European Commission Margrethe Vestager, and Commissioner Thierry Breton.

The letter expresses concerns over the potential threat to fair competition posed by the Commission’s reforms to State Aid rules through the Temporary Crisis and Transition Framework (TCTF) and accompanying amendment to the General Block Exemption Regulation.

DIGITAL SME warns the European Commission that a more permissive state aid framework risks to disproportionately benefit large and dominant companies and elbow SMEs aside. The use of public investment to accelerate the green transition is welcomed, but strict safeguards are needed to ensure that the TCTF does not exacerbate market concentration both within and across EU Member States.

Channelling investments towards SMEs rather than large multinationals would enhance a more diverse and resilient Single Market, strengthening competition and innovation, spreading prosperity across Member States and regions.

Therefore, in order for the TCTF to support the green transition without increasing market concentration, DIGITAL SME and co-signatories urge the European Commission to:

• Promote a diverse economy: Member States should ensure that green subsidies don’t exacerbate market concentration by requiring that a specific amount of public funding is allocated to start-ups and SMEs
• Use the right tools: The Commission should encourage Member States to channel aid through accessible mechanisms, such as grants and tax credits for early-stage R&D and purchases of clean technology by SMEs
• Ensure positive impact and accountability: Companies that receive state aid through the TCTF should be required to demonstrate that public funding is being used to further expand EU’s social and environmental objectives. In addition, conditionality should be lighter for SMEs to reflect their limited administrative capacity
• Maximize transparency: A high degree of transparency is needed on the destination of State Aid, including the proportion of public funding allocated to large enterprises versus SMEs in each Member State. Any lobbying by large firms in relation to state aid disbursed under the TCTF, both at the national and EU level, should be clearly disclosed

To know more in detail about the letter’s contents and details, you can find it here.