Government subsidies that selectively favor a particular firm or firms may substantially distort competition within an industry, thereby skewing trading terms, reducing efficiency, and harming consumer welfare. To its credit, the European Union (EU) seeks to stamp out distortive state aid, as explained by the EU’s administrative and law enforcement arm, the European Commission (EC):
A company which receives government support gains an advantage over its competitors. Therefore, the Treaty [governing the EU] generally prohibits State aid unless it is justified by reasons of general economic development. To ensure that this prohibition is respected and exemptions are applied equally across the European Union, the European Commission is in charge of ensuring that State aid complies with EU rules. . . .
State aid is defined as an advantage in any form whatsoever conferred on a selective basis to undertakings [businesses] by national public authorities. Therefore, subsidies granted to individuals…
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