Private Enforcement in State aid law – broadband roll-out as a competition law problem

Since 2010, the European Commission’s "Digital agenda for Europe" has called on the Member States to ensure nationwide access to broadband connections and thus provide citizens with access to fast internet. Especially in times of home schooling and home office, the need for reliable and fast internet access has become evident.

To speed up the broadband roll-out, the German Ministry of Transport and Digital Infrastructure has issued the "Framework Regulation of the Federal Republic of Germany to support the roll-out of nationwide Next Generation Access (NGA) broadband coverage" ("NGA-RR"), which has already been approved by the European Commission on 15 June 2015. Therefore, State aid granted for broadband expansion within the scope of the NGA-RR is not subject to the stand still-obligation of EU State aid law (Article 108 (3) sentence 3 TFEU).

In its judgement of 10 September 2020 (court file no. 2 K 4848/19.TR) the Administrative Court of Trier had to deal with several issues in that context.

In the case, the action was brought by an internet provider offering directional DSL connections in seven local communities in the Eifel district of Bitburg-Prüm, among others. The plaintiff opposed a planned cooperation agreement on the subsidised area-wide broadband roll-out between the defendant, a German county, and the network operator, and sued to have the agreement declared null and void due to a violation of EU State aid law.

However, the Court confirmed the validity of the planned cooperation agreement, as the cooperation agreement did not violate a legal prohibition. In particular, the Court found no violation of the stand still-obligation because, firstly, the NGA-RR was an aid scheme compatible with EU law which, secondly, had been properly applied in the individual case.

A prerequisite for aid under the NGA-RR is that there is a "white spot" (i.e. an area with less than 30 Mbit/s per user, Sec. 2 NGA-RR) that will not be improved within the next three years. To determine this, the competent public authority has to conduct a corresponding market investigation procedure which must be published on an online platform (www.breitbandausschreibungen.de) (Sec. 4 NGA-RR). The public authority has to evaluate the information provided in the market investigation procedure to independently determine whether a reliable broadband coverage exists.

In the case in question, the county’s own analysis showed that – in contrast to the plaintiff’s claims – by no means a reliable, area-wide coverage existed. Rather, the county detected a "market failure" – i.e. an adequate broadband coverage had not been ensured by the market. In the opinion of the Administrative Court of Trier, an (allegedly) planned expansion by the plaintiff did not alter the outcome, since according to the NGA-RR, the required coverage had to be available at the time of the market investigation. 

In the Court’s view, it was also irrelevant that the plaintiff was willing to increase the coverage if there was a corresponding demand, because the plaintiff had not made any binding commitments with regard to an expansion.

The finding of a white spot and thus of lawful state aid was justified due to the independent assessment conducted by the county. According to the Court, the relevant time for the assessment of the lawfulness of the aid is when the right to aid arises– i.e. when the notices of grant to the competing network operator was issued. At this point in time – according to the Administrative Court of Trier – the legality of the aid could be assumed on the basis of the properly conducted market investigation procedure.

Even though the Administrative Court of Trier dismissed the action, the judgement shows that competitors can in principle also enforce the prohibition of implementation of Art. 108 TFEU by way of declaratory action: The Court expressly affirmed the admissibility of the action for a declaratory judgement, justified the plaintiff’s standing with the erga omnes-effect of the stand still-obligation and derived the plaintiff’s interest in a declaratory judgement from its position as an at least potential market participant.

The judgment of the VG Trier thus substantiates the requirements for the market investigation procedure and confirms the declaratory action as a possibility of private enforcement in broadband state aid proceedings for (potentially disadvantaged) competitors (cf. our recent article published in InfrastrukturRecht 2020, p. 129 as well as OVG Berlin-Brandenburg, judgement of 18.12.2017, court file no. OVG 6 B 3.17 and VGH Mannheim, judgement of 10.04.2019, court file no. 9 S 75/17, both regarding state aid private enforcement cases brought before administrative courts). In view of the numerous remaining white spots in broadband expansion, a large number of state aid grants can be expected, against which (allegedly) disadvantaged competitors could take legal action.

The experienced EU/COMP Team of Chatham Partners has been advising public authorities as well as companies and their managements for many years on all issues of State aid and EU Law, including public and private enforcement before EU Courts as well as German Civil and Administrative Courts. It regularly holds (industry-related) training courses and webinars on the above-mentioned topics. Please feel free to contact us to find out how we can assist you.