Competition policy and institutional politics in the European Community: State aid control and small business promotion

Abstract. The article examines EC competition policy from a political science perspective, analyzing the political and institutional considerations which inform the development of the Commission's controlling capacities in competition. It concentrates on policy towards small businesses in manufacturing. We argue that the Commission's general capacities in the formation and the administration of competition policy have been growing in both the merger-controlling aspects and in the control of state subsidization. Against this background, the handling of state aid to small businesses presents us with a paradox: the more developed the enforcement system in competition, the less the Commission applied it to national subsidization of small-scale production. The role of EC competition policy and particularly the subtle handling of state subsidies should be analyzed as part of the developing system of Community policy vis-à-vis small business, encompassing measures at the EC and national levels. Community policy has emerged as a result of an accommodation between different EC institutional and domestic political objectives, and to some extent this accommodation has been achieved at the expense of policy content. The article traces the development of Community policy in this area from the early 1970s to the adoption of the first-ever detailed policy guidelines in 1992, and suggests an analytical scheme for explaining the emergence of small business promotion as an issue in EC institutional politics.