Press Release: State aid: Commission finds aid to BT partially unlawful and orders recovery

The European Commission has concluded that a UK Crown guarantee covering the pension liabilities of British Telecom plc on the EU telecommunications markets is partially unlawful under EC Treaty state aid rules. The Commission does not call into question the safeguards for BT's employees at the time of privatisation, introduced by the guarantee. However, as a consequence of the guarantee, BT is partially exempted from certain common law financial obligations, such as the payment of a levy to the Pension Protection Fund since 2005. Following an in-depth investigation, opened in November 2007, the Commission concluded that this exemption conferred an unfair competitive advantage to BT that constitutes state aid. Such aid cannot be justified under EU rules because it merely dispenses BT from charges that its competitors have to pay. The UK must therefore recover the aid by ensuring that a full levy is paid to the Fund.