Independent regulatory agencies under political constraints: the determinants of the EC’s decisions on state aid

To what extent does European Commission regulate state aid independently of member states’ preferences? To what extent are member states able to affect the Commission’s decisions on state aid policy? State aid is a government measure supporting a company that thereby obtains an advantage over its competitors. Formally, the European Commission regulates state aid policy independently of member states. In real fact, state aid is such a contested issue that the member states would have to gain from constraining the Commission’s authority in order to play a leading role in the domestic economy. The present analysis investigates to what extent the conflict between national and supranational institutions affects the Commission’s decisions on state aid. The conflict between the member states and the Commission concerns the discretionary power of the latter. Such discretion derives from the ambiguity of the Treaty provisions and the Commission takes the opportunity to follow its own policy preferences. Since national and supranational preferences do not necessarily fit, I analyse to what extent member states affect the Commission’s decisions both setting procedural constraints on the regulation and by means of threats of non-compliance. The present analysis considers 3249 decisions on state aid that the Commission has taken from the 22nd of March 1999, when Regulation 659/1999 came into in force, until 31st of December 2009. The dataset covers all the state aid applications managed by the general directorate on competition.