The European Commission has found that some grants issued to large agricultural companies in the Czech Republic, also known as Czechia, breached EU State aid rules.
As a result the commission has ruled that the country must now recover all over the incompatible State aid, including interest.
In January 2021, the commission opened an in-depth investigation on aid granted by the Czech Republic to certain large agricultural companies in 2017 and 2018 for investing in irrigation and the restructuring of orchards.
Grants
The 2014 Agricultural Guidelines enable member states to grant investment aid in favour of enterprises of all sizes, subject to certain conditions.
When investment aid is granted to large enterprises, due its potential distortive effects, certain additional conditions need to be met to ensure that possible competition distortions are minimised.
The commission had doubts that the Czech aid in favour of the large agricultural companies complied with those conditions.
The investigation found that the large agricultural companies had received aid through Czech schemes that were supposed to be accessible only to small or medium-sized enterprises (SMEs).
The commission said that some of the beneficiaries that received grants in 2017 and 2018 were erroneously qualified by the Czech authorities as SMEs, when they were in fact large enterprises.
It said that the aid received by the concerned large companies could not be compatible under the block-exempted schemes.
State aid
EU State aid rules require that incompatible State aid is recovered without delay in order to remove the distortion of competition created by the aid.
There are no fines under EU State aid rules and the purpose of recovery is to restore the situation which existed in the internal market before the aid was paid.
By paying back the unlawful aid, the commission said that the beneficiary “forfeits the advantage which it has enjoyed over its competitors”.
The Czech Republic must now identify all large companies that wrongly received aid and determine the amount to be recovered.
Commenting on the outcome of the investigation, Margrethe Vestager, Executive Vice-President in charge of competition policy said:
“Public support for investments carried out by large companies must meet certain specific conditions to minimise its potential distortive effects.
“After an in-depth investigation, we have confirmed that some of the beneficiaries of Czechia’s investment aid in 2017 and 2018 did not meet these conditions.
“Czechia must now recover the incompatible aid to restore equal treatment with other companies in the agricultural sector.”