Unfair handouts: Challenging subsidies by public authorities

Every year government departments, councils and other UK public authorities grant hundreds of subsidies to businesses worth millions of pounds, usually for good policy reasons that comply with legal requirements. However, if you're a competitor of the beneficiary of a subsidy, your own business could be being put at a competitive disadvantage. You are entitled to know the details of the subsidy and the rationale for it and to challenge the subsidy if it is not compliant with legal requirements.

The Subsidy Control Act 2022 (SCA) came into force in January 2023 and replaces the EU’s state aid rules in the UK. The concept of a “subsidy” is defined widely in the SCA. It includes any form of financial assistance granted by a public authority that confers an economic advantage on an enterprise, and which has or could have an effect on competition, either internationally or on trade that is within the UK.

This subsidy definition is broader than applied under the EU state aid rules and is wide enough to include indirect forms of financial assistance, such as the provision (or purchase) by the public authority of goods and services, or the forgoing of revenue from an enterprise that would otherwise be due to the public authority. 

How do I know if a competitor is benefiting from a subsidy?

All subsidies granted by UK public authorities are published on a government website. The database is searchable by the name of the beneficiary of the subsidy, as well as industry sector, the purpose of the subsidy and other criteria. The SCA imposes duties on public authorities to publish subsidies on this database, and to disclose the amount of the subsidy and other mandatory details.

It is possible, therefore, to quickly and easily check if another company is being granted a subsidy which could be putting it at a competitive advantage.

Review of subsidy decisions

Interested parties who are affected by a subsidy decision (for example, a competitor of the beneficiary) can apply to the Competition Appeals Tribunal (CAT) for a review of the decision to award the subsidy. This review process allows the CAT to examine whether the subsidy decision complies with the SCA’s requirements, including whether the decision complied with principles set out in the SCA. These principles are broadly framed and include, for example, that the subsidy should pursue a specific policy objective in order to either remedy an identified market failure or address an equity rationale (such as local or regional disadvantage). The subsidy should also be proportionate to its specific policy objective, and limited to what is necessary to achieve it, as well as comply with a number of other principles.

The CAT has the authority to grant various types of relief, including mandatory orders, prohibiting orders, quashing orders (setting aside a subsidy decision), declarations, and injunctions. The CAT can also issue recovery orders, requiring the repayment of subsidies that do not comply with the SCA.

Pre-action request for information

An interested party who is considering a potential application to review a subsidy decision may decide to request information from a public authority under section 76 of the SCA. A public authority must respond to such a request within 28 days.

Time limits for reviews of subsidy decisions

Any challenger of a decision to grant a subsidy must either launch its challenge or at least ask the public authority for more information about the subsidy within one month of publication of the decision to award the subsidy. If the challenger requests more information, it must then launch its challenge within one month of receiving that information

Therefore, if you become aware of a subsidy granted to a competitor that may put your business at a disadvantage, it's important to seek legal advice as soon as possible. It may be appropriate to request further information about the subsidy from the public authority - in order to secure sufficient time to consider whether an application to the CAT to review the subsidy has merit, before the right to review the decision is lost.

Conclusion

Public subsidies often serve important public policy objectives. However, it's important that they comply with the principles in the SCA and do not unduly distort competition, either within the UK or internationally.

If your business may be disadvantaged by a subsidy granted to a competitor, then it's crucial that you seek legal advice as soon as possible, given the very strict time limits that apply to any challenge to the subsidy. Solicitors experienced in this area can help you obtain further information about the subsidy, assessing whether it complies with the requirements of the SCA and whether you may be able to take action to challenge the subsidy or to seek changes to it.

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