Subsidy Control Act 2022: My competitor has been given a subsidy - what do I do?

In a market environment, a boost for a competitor can mean losses for you.

So, if your competitor is awarded a subsidy by a public authority, your nose may be firmly out of joint. The same could be true of someone who is excluded by the conditions of a subsidy scheme. If you’re in such a position, the Subsidy Control Act 2022, which came into force on 4 January, just might provide you with a solution.

One of the key changes from the EU’s “state aid” regime to the domestic “subsidy control” alternative, is that the Subsidy Control Act is concerned not only with market competition between EU States, but with competition within the United Kingdom. That makes it possible for more local rivals to defend their interests which have been negatively affected by the award of a subsidy.

This blog seeks to explain what can be done, who can do it and when to do it, when it comes to challenging a subsidy given by a public authority.

What Can Be Done?

Section 70 of the Subsidy Control Act allows for an application to be made to the Competition Appeal Tribunal (CAT) to review the decision to award a subsidy or make a scheme. A CAT review would examine the basis on which the subsidy was given, whether that is an assessment against the subsidy control principles or an exception such as relying on minimal financial assistance for smaller subsidies.

This doesn’t automatically suspend the decision to make the subsidy (S70(6)), but if the CAT finds that the decision was non-compliant, it can make a “recovery order” under S74, instructing the authority to recover the subsidy from the beneficiary. The tribunal can also make orders relevant to the decision, with its powers varying dependant on jurisdiction.

For applications in England, Wales and Northern Ireland, the CAT has a defined list of powers under S72 of the Act. It can grant five kinds of relief:

• a mandatory order, compelling the public authority to fulfil their duties;
• a prohibiting order, preventing the public authority from doing something which the tribunal considers to be illegal, irrational or improper;
• a quashing order, which nullifies or invalidates a decision which has already been made;
• a declaration, which defines the rights of the parties regarding the legal question presented but does not in and of itself compel any particular action; or
• an injunction, which prevents a future course of action from being taken.

In Scotland, the CAT has powers “the same as the powers of review of the Court of Session in an application to the supervisory jurisdiction of that Court”. Broadly speaking, this overlaps significantly with the powers listed above.

To start the process, an interested party should first make a “pre action information request” under S76 of the Act. This is a request made directly to the public authority in writing for the purpose of deciding whether or not to apply for a review of a subsidy decision. If such a request is made, the public authority has 28 days to respond, providing such information as would enable, or assist in, deciding whether the subsidy decision was compliant. This is likely to mean disclosure of the rational behind the decision to award the subsidy or make the scheme along with relevant evidence bases and other documentation.

Who Can Do It?

Application for review by the CAT can be made by any “interested party”, defined in S70(7) of the act as:

"(a) a person whose interests may be affected by the giving of the subsidy or the making of the subsidy scheme in respect of which the application under subsection (1) is made, or

(b) the Secretary of State;"

A person’s “interests may be affected” in various ways. The Statutory Guidance on the Act says that this “An interested party would most typically be a competitor of the person that receives the subsidy” (paragraph 13.22) but makes other suggestions including a trade association or local administration who represents an interested party.

It could be argued that a person’s “interests” are more broad than merely their own economic interests (e.g. their competitor has been awarded a subsidy), and include political or social interests. It could be that someone disagrees with a subsidy having been awarded for reasons that are not directly economic. Ultimately, whether or not a party is “interested” will be a decision for the CAT to make. It will be interesting to see whether such interested groups or individuals are able to apply for reviews as caselaw develops in due course.

When To Do It?

The Act is fairly restrictive in terms of when a subsidy decision can be reviewed. An interested party must apply for a review within one month of the “relevant date” – which can be determined in three ways.

• Firstly, the relevant date is the date on which the public authority notifies the interested party that they have responded to a “pre-action information request” where such a request has been made. In practice, this means that issuing a pre-action information request can have the effect of extending the time bar by up to 28 days.
• Secondly, where the secretary of state has referred a subsidy or scheme to the CMA to review a decision after the fact (a “post-award referral”), the relevant date is the date on which that  referral is made.
• Thirdly, and initially in most instances, the relevant date will be the “transparency date”. This is either the date that the details of a subsidy or scheme are uploaded to the subsidy database or, where there is no duty to do so (for certain subsidies of less than £100,000), the date on which the interested party first knew or ought to have known of the subsidy decision.

One month is really not a long time to become aware of a subsidy, consider the negative effects it might have, decide to apply for a review, take legal advice and then make an application. That means that if you’re aware of a subsidy that you would like to challenge, the time to start the process is now.

If you’re looking for help in challenging a subsidy decision, we would be delighted to hear from you.

You can read our full guide to the Subsidy Control Act 2022 for public authorities here.