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Published online by Cambridge University Press: 27 October 2017
The European Union is faced with many challenges as the new millennium dawns. These range from highly political issues, such as the challenge of enlargement, to highly technical questions arising in areas such as regulation of anti-competitive behaviour. This article will examine one narrow, but topical, issue falling within the ambit of competition policy—how the rules of the EC Treaty on State aid should be applied in the area of broadcasting as it enters the new “Digital Age”.
1 Commission Communication of March 30, 1999: “Seventh Survey on State aid in the European Union in the manufacturing and certain other sectors”.
2 Ehlermann, C.D. “State aid Control: Failure or Success” 1995/D/018 Paper available from the European Commission Competition Directorate, 1.
3 Financial Times September 2, 1999.
4 Financial Times September 9, 1999.
5 Ehlermann, above n 2 at 3.
6 Council Regulation 994/98 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid, OJ 1999 L 142/1.
7 Article 1 provides: “The Commission may, by means of regulations declare that the following categories of aid should be compatible with the common market and shall not be subject to the notification requirements of Article 93(3) of the Treaty:
(a) aid in favour of:
(i) small and medium-sized enterprises;
(ii) research and development;
(iii) environmental protection;
(iv) employment and training;
(b) aid that complies with the map approved by the Commission for each Member State for the grant of regional aid.
8 Three draft Regulations are currently under discussion, concerning State aid for small and medium sized enterprises, State aid for training and the rules on de minimis aid. These will give an important legal basis to the Commission’s existing practice on de minimis aid (aid falling under a particular threshold, currently set at €100,000 over a three year period, is not considered to constitute State aid falling within Article 87(1) on the grounds that it does not distort competition or trade to an appreciable extent), see Tilmans, M. “Recent Developments in State aid”, Commission Competition Policy Newsletter, October 1999.
9 Council Regulation 659/1999 laying down detailed rules for the application of Article 93 [now Article 88] of EC Treaty, OJ 1999 L 83/1.
10 For example, provisions regarding provisional recovery of aid orders and on-site monitoring visits to assess compliance with decisions. This Regulation has not however advanced the position of third party complainants in the State aid investigation process, as advocated inter alia by the UNICE (Union of Industrial and Employers’ Federations of Europe): see Mehta, C. “Hoping for Plain Sailing” European Counsel, October 1999, 51.
11 “Public service broadcasting” essentially means a system that is supported by public funds, is ultimately accountable to those funding it, is aimed at providing a service to the entire population, and does not apply only commercial principles in determining its programming. It does not, at least in Europe now, necessarily mean that the broadcaster is non-profit oriented and non-commercial. The BBC for example, is now required by the UK government to maximise its revenues from commercial exploitation.
12 Complaints have been lodged regarding state funding for public service broadcasting in countries including: Spain, France, Portugal, Italy, Germany, Greece, the UK, Ireland and Austria, and “information is being sought” with regard to Finland. See section c(ii) below.
13 Commission Press Release IP/99/981 “The Commission adopts a strategy for the Community’s audiovisual policy in the digital age”.
14 For a detailed and admirably clear review of the law on state aid, see D’Sa, R. European Community Rules on State aid (Sweet & Maxwell, 1998)Google Scholar.
15 Treaty of Paris Article 4(c): “The following are recognised as incompatible with the common market for coal and steel and shall accordingly be abolished and prohibited within the Community … subsidies or aids granted by States or special charges imposed by States, in any form whatsoever.”
16 Treaty of Rome originally Article 3(f), now amended by the Treaty of Maastricht and Treaty of Amsterdam and contained in Article (1)(g).
17 Articles 87 and 88 (prior to the Treaty of Amsterdam numbered as Articles 92 and 93).
18 Article 87(1).
19 “Explanation of the rules applicable to State aid”, Luxembourg: Office for Official Publications of the European Communities, 1997, 5.
20 The notification obligation is subject to the rules on de minimis aid.
21 Detailed rules on the investigation procedure are now contained in Regulation 659/1999, above n 9.
22 D’Sa, above n 14, paras 9.01–9.05
23 Case C-301/87 Commission v. France (Boussac) [1990] ECR I-307, now codified in Council Regulation 659/1999, Articles 10–14.
24 Regulation 659/1999 above n 9, Article 11.
25 On the grounds that Article 88(3) final sentence, which states that a Member State must not put proposed measures into effect until the aid has been notified and the Commission has had an opportunity to assess the matter, is directly effective.
26 Case C-39/94 SFEI/La Poste [1996] ECR I-3547.
27 See e.g. Mehta above n 10 at 27.
28 This provision was added by the Treaty of Maastricht.
29 D’Sa above n 14, quoting Roberti “Rules on State aids”, at para 1-20.
30 D’Sa above n 14 at para 1-16.
31 Case C–295/97 Ronaldo Piaggio, judgment of the Court of Justice of June 17 1999, (not yet reported) paras 34 and 35.
32 Case 30/59 De Gezamenlijke Steenkolenmijnen in Limburg v. High Authority [1961] ECR 1 and Case 61/79 Denkavit Italiana [1980] ECR 1205.
33 Case C–189/91 Kirsammer-Hack [1993] ECR I-6185 and Joined Cases C–72 and 73/91 Sloman Neptun [1993] ECR I–887.
34 For further detail, see D’Sa above n 14 Chapter 3.
35 http://Europea.eu.int/comm/dg04/lawaid. As noted above, important measures in the pipeline include the two Commission Regulations to adopt block exemptions for State aid for Small and medium sized companies and for training and the Commission Regulation confirming the threshhold under which State aid will not fall under Article 87(1).
36 On the application of state aid rules to public undertakings see, in general, “Commission communication to the Member States on the Application of Articles 92 and 93 of the EEC Treaty and of Article 5 of Commission Directive 80/723/EEC to public undertakings in the manufacturing sector” OJ C 307/3, in which the Commission states that the principles outlined are likely to be applied in other sectors on a case by case basis (para 3).
37 For further detail, see Weatherill, S. & Beaumont, P. EU Law (Penguin, 1999, 3rd ed) 805–808 Google Scholar.
38 Weatherill & Beaumont ibid at 1003–1008.
39 Article 86(2), emphasis added.
40 For example: Case C–41/90 Höfner & Elser v. Macrotron [1991] ECR I–1979; Case C–179/90 Porto di Genova v. Siderurgica Gabrielli [1991] ECR I–5889; Case C–266/96 Corsica Ferries [1998] ECR I–3949.
41 The Court had confirmed this in fact in 1974; Case–127/73 BRT v. SABAM [1974] ECR 313.
42 Case C–320/91 Paul Corbeau [1993] ECR I–2533, confirmed by subsequent jurisprudence e.g. Cases C-157/94 [1997] ECR I-5699, C-158/94 and C-159/94 [1997] I-5815 and C- 160/94 [1997] ECR I-5851, the gas and electricity cases.
43 Address by Commissioner Oreja, formerly responsible for audiovisual policy, the Spanish Parliamentary Subcommittee on the (RTVE) Spanish Broadcasting Corporation, December 11, 1998.
44 Case 155/73 Sacchi [1974] ECR 409 and Commission Notice: “Services of general interest in Europe”, OJ 1996 C 281/3.
45 Commission Communication above n 36 at para 1.
46 Commission Directive 80/723/EEC, OJ 1980 L 195/35, as amended by Directive 85/413/EEC, OJ 1985 L 229/20 and Directive 93/84/EEC, OJ 1993 L 254/16 obliged Member States to ensure that the flow of all public funds to public undertakings and the uses to which these funds are put are made transparent (Article 1). Member States must supply information on all public funds, including:
(i) the setting off of operating losses,
(ii) the provision of capital,
(iii) non-refundable grants or loans on privileged terms,
(iv) the granting of financial advantages by forgoing profits or the recovery of sums due,
(v) the forgoing of a normal return on public funds used,
(vi) compensation for financial burdens imposed by the public authorities.
47 OJ 1999 C 377/2.
48 Soukup, K. “Commission proposes change to Transparency Directive, Commission Competition Policy” Newsletter June 1999, 37.
49 Commission Communication above n 36 at para 2.
50 Under Article 88(3).
51 Under Article 88(1).
52 See Commission White paper on modernisation of the rules implementing articles 85 and 86 [now 81 and 82] of the EC Treaty—Commission programme No. 99/027—approved on 28.04.1999.
53 [1994] ECR I-877.
54 Ibid at para 21.
55 Case T–106/95 FFSA v. Commission [1997] ECR II-229.
56 Case C–174/97 P FFSA v. Commission [1998] ECR I-1303 Order of the Court dismissing the appeal as inadmissible.
57 Case T-106/95 FFSA v. Commission above n 55 para 65.
58 Case T–106/99 FFSA v. Commission above n 55 at paras 167 and 168: “ In principle, that tax concession constitutes State aid within the meaning of Article [87(1)] since, although not taking the form of a transfer of state resources, it places La Poste in a more favourable financial situation than other taxpayers, including the companies represented by the applicants … It has been consistently held that aid within the meaning of Article [87(1)] of the Treaty covers advantages granted by the public authorities which, in various forms, mitigate the charges normally included in an undertaking’s budget.
59 Case T–106/95, FFSA v. Commission above n 55 at para 11.
60 Case T–106/95 ibid at para 11.
61 Case C–174/97 above n 56 at para 6.
62 Case T–106/95 above n 55 at para 196, Case C-174/97, ibid at para 6.
63 T–106/95 ibid at para 11 “In that respect, the Commission must be allowed a certain discretion in deciding on the most appropriate method for making sure that the grant of the aid does not involve any cross-subsidy for the benefit of the competitive activities of the undertakings concerned.”
64 Ibid at para 192.
65 Ibid at para 8.
66 This criticism is not infrequently made of the Court of First Instance, particularly in the area of anti-dumping and competition cases.
67 Speech Brussels, January 31, 2000, BBC News Release.
68 Pons, J.F. “The Future of Broadcasting”, Speech to the Institute of Economic Affairs, London June 29, 1998 Google Scholar.
69 Pons ibid at 2, also Oreja, note 43 above.
70 For an outline of the different development of the US system of public broadcasting compared with the UK and Canada see Robert W. McChesney, Speech, March 1995 at the University of California, San Diego, published in Current, Aug. 14, 1995. “While the BBC and the CBC regarded their mandate as serving entire nations, the U.S. public broadcasters realised that they could only survive politically by staying on the margin. They could not take listeners or viewers from the commercial broadcasters. They could only provide programs that were unprofitable for the commercial broadcasters to produce…. This encouraged U.S. public broadcasting after 1935 to emphasise elite cultural programming at the expense of generating a large following…. Indeed, in international discussions of public broadcasting, the term “PBS-style system” refers to a public system that is marginal and ineffective. It is the fate that the BBC, CBC and others wish to avoid.”
71 For example John Gautereaux, “Taking a Swing at Subsidies for PBS”, Neopolitique March 1996.
72 “Supporters of the BBC like myself have to address the problem of how we can fund it adequately in the digital era.” Clive James, Chief Executive of Carlton, The Guardian August 16, 1999.
73 Dyke above n 67 “… as the digital revolution quickens there is a very real question about who will be able to afford to create quality indigenous programming, particularly the more expensive end of production—comedy and drama. Maybe the figures will stack up for a few multi-media giants in the larger European markets, but without strong Public Service Broadcasters, European viewers and listeners are bound, in my opinion, to lose out. And so is the European television production industry.”
74 See further McChesney, Robert W., University of Wisconsin-Madison, “The Mythology of Commercial Media and the Contemporary Crisis of Public Broadcasting”, Spry Memorial Lecture 1997 Google Scholar, Montréal & Vancouver, 2 & 4 December 1997: “Indeed, the commitment to public service broadcasting in the digital era is effectively a commitment to public service media writ large. The ultimate goal must be to have the public service sector be the dominant component of the broadcasting and media system. Hence the struggle for public service broadcasting cannot avoid direct confrontation with the existing corporate media giants.”
75 Democracy, freedom, an unfettered media, pluralism, diversity of cultures, languages and dialects, the provision of ethical, quality, universal services, etc.
76 For a full discussion see Report of MEP Carole Tongue, The future of Public Service Television in a Multi-channel Digital Age, July 11, 1996 European Parliament A4-0243/96.
77 Tongue ibid.
78 Pons, above n 68 at 6.
79 Greg Dyke above n 67.
80 Leading to concerns as to the concentration of broadcasting in the hands of a few multinational companies, epitomised perhaps by the Murdoch media empire: see e.g. Carole Tongue MEP, “Public Service Broadcasting and European Community Policy”, speech to Experts Meeting on Public Service Broadcasting in Europe, Amsterdam February 17, 1997.
81 Table taken from Oreja above n 43.
82 Commission Communication of December 14, 1999, “Principles and Guidelines for the Community’s audiovisual policy in the digital age”, Com (1999) 657 final.
83 The Commission is also active in other crucial areas affecting digitalisation and broadcasting, in particular: the need to ensure “interoperability” of systems.
84 Case T–106/95 above n 55 para 165 “It is clear from Article [86] of the Treaty that, save only for the reservation in Article [86(2)], Article [87] covers all undertakings, private or public, and all their production … Thus, the Commission’s power, under Article [88] of the Treaty, to assess the compatibility of aid with the common market also extends to State aid granted to the undertakings referred to in Article [86(2)], in particular those which the Member States have entrusted with the management of services of general economic interest.”
85 Pons above n 68 at 7.
86 Since Article 87 allows the Commission to authorise certain defined State aids only where they compatible with the Community interest.
87 See above n 82 at 12.
88 The section begins with a declaration of principle: “Public service television plays an important role in the Member States of the European Community: this is true with regard to cultural and linguistic diversity, educational programming, in objectively informing public opinion, in guaranteeing pluralism and in supplying, on a free-to-air basis, quality programming. The integration of public service broadcasting in the new digital audiovisual environment requires a balanced approach.”
89 DG IV Discussion Paper “Applications of Articles 90(2), 92 and 93 of the EC Treaty to the Broadcasting sector at 6.
90 See also Oreja address above n 43 at 5.
91 For example in Germany, advertising is limited to a particular number of minutes per day, and only allowed after 20.00 hours.
92 See e.g. definition in the Commission Decision on European Broadcasting Union: OJ 1993 L 179/23, Case T–529/93 Métropole v. Commission [1996] ECR II-649.
93 Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities OJ 1989 L 298/23, as amended by Directive 97/36 OJ 1997L 202/60: “national or non-national events of major importance for society”, e.g. the Olympic games, the football World Cup and European Championships Article 3a requires the Member States to draw up a list of designated events.
94 Such programmes should be funded on the same competitive conditions as private broadcasters, e.g. out of advertising revenues where a broadcaster has both public and commercial activities. DG IV Paper above n 89 at 7.
95 “Wholeheartedly” endorsed by former Commissioner Oreja, above n 43.
96 Directive 80/723 as amended, n 46 and n 47 above.
97 However, following public hearings in 1998 with public broadcasters and their commercial rivals, the Commission promised to look into the different régimes applying in Europe, and own initiative information is apparently being sought from Finland.
98 Case T–95/96 Gestevisión Telecinco v. Commission [1998] ECR II-3407. The Commission is still investigating if the aid involved is existing aid. Contrary to some press reports, it appears it is not planning to close the case.
99 Case T–17/96 TF1 v. Commission, judgment of the Court of First Instance of 1 June 1999 (not yet reported), Commission Press Release IP/99/531 July 20, 1999, Commission Notice OJ 1999 C 340/57; Commission Press Releases IP/99/79 and IP/99/81.
100 Commission Report on Competition Policy 1996, paras 32 and 78. Commission Press Release IP/96/882, appeal pending before the Court of First Instance, Case T–46/97.
101 Commission Press Release IP/99/532 July 20, 1999.
102 Commission Report on Competition Policy 1997, para 279, Commission Press Release IP/99/132 February 24, 1999.
103 Commission Press Release IP/99/79.
104 Commission Press Release IP/99/706, September 29.
105 Irish Times 9 September 1999. The Irish government is currently drafting a definition of the public service remit of the RTE, which is the subject of some controversy.
106 7 November 1996 SG(96) D/9555, State aid NN 141/95—Financing of public television channels, Commission Annual Report on Competition Policy, 1996, para 78.
107 Para 31 of the Commission Annual Report on Competition Policy 1996.
108 Pons above n 68 at 7.
109 Cases T–106/95 above n 63 and C–174/97 P, above n 56.
110 Case T–46/97: Action brought on 3 March 1997 by SIC—Sociedade Independente de Comunicação SA v. Commission of the European Communities OJ 1997 C 142/21. See postscript to this paper, judgment was delivered on May 10, 2000, after completion of this text.
111 Case T–95/96 Gestevisión Telecinco v. Commission [1998] ECR II–3407.
112 On the basis of Case C–312/90 Spain v. Commission [1992] ECR I–4117.
113 Case T–17/96 TF1 v. Commission judgment of the Court of First Instance of June 1, 1999 (not yet reported).
114 Commission Press Release IP/98/916.
115 See above n 89.
116 Commission Press Release IP/99/132.
117 Fox Kids Europe, a pan European children’s broadcaster is planning to launch a channel in Germany this year. The channels controls the rights to many leading cartoons and plans to concentrate on developing Internet web sites for games and E commerce for children: Financial Times March 2, 1999. Arguably, a public service broadcaster would offer a wider range of educational, as well as entertaining, programming targeted for children.
118 Cases T–106/95 above n 63 and C–174/97 P above n 56.
119 Commission Press Releases IP/99/79, IP/79/80 and IP/79/81.
120 Commission Decision initiating Article 88(2) procedure—concerning aid C60/99—Capital Increases and other ad hoc subsidies in favour or France 2 and France 3, OJ 1999C 340/57; concerning aid C62/99—Capital increase and other support measures in favour of RAI, OJ 1999 C 351/20.
121 Commission Press Release IP/99/706.
122 It appears that no new public funding was involved.
123 Commission Press Release IP/99/706.
124 Ibid.
125 The Independent September 30, 1999.
126 Following a report by the Culture, Media and Sport Select Committee in December 1999 which concluded that the BBC was wasting its funding on unwatched digital channels, and had failed to make a case for a much expanded role in the digital era or for additional external funding. The Government disagreed, and has awarded the BBC an above inflation increase in the licence fee.
127 Proposed by the “Davies Report on the Future Funding of the BBC”, chaired by Gavyn Davies, August 1999.
128 The Guardian January 21, 2000: BSkyB is likely to bring a complaint either on its own or via an alliance with inter alia Ondigital, Cable and Wireless Communication, Carlton TV.
129 In particular, they apparently relied on the fact that the new funding would be used to offer digital services to a part of the general population only, in competition with existing commercially provided services. In order to fall within the definition of a general public service function, a service should in general be universal.
130 Financial Times October 13, 1999.
131 Financial Times February 21, 2000.
132 The switch over from analogue to digital TV in the UK is expected to happen sometime between 2006 and 2010, on two conditions: 99.4% of the population is within range of the digital signals and 95% of the populations have a digital receiver (set top box or digital TV). Selling off the existing analogue frequencies will be lucrative for the government: BBC On line February 21, 2000 “Q&A on Digital TV”.
133 Its present charter is valid until 2007.
134 The Guardian February 22, 2000.
135 These channels will also have to be careful in how they promote “spin off” products from TV programmes. An investigation into the promotion of magazines published by the BBC commercial publishing wing by the Commission in 1992 was closed because the BBC agreed to stop its practices, “Commission Report on Competition Policy”, 1993, para 445. The BBC itself notes in the Fair Trading document forming part of the “BBC Commercial Policy Guidelines”, available from BBC Online “The BBC’s core public services may not be used unfairly to promote BBC commercial activities, since this would be an inappropriate use of our privileged access to the airwaves, or of public funds…. There should be no promotion of BBC commercial products and services within BBC programmes on our core UK publicly funded services … Simple, factual information about BBC publications or services designed to complement a programme may be given in continuity announcements at the end of a programme.”
136 E.g. BBC Choice, with “bespoke versions” for Scotland, Wales and other regions, BBC Online, BBC News 24, BBC Knowledge, BBC Learning, BBC Parliament; BBC World is an entirely privately funded satellite channel: see “Developing a new range of services” in “BBC Beyond 2000” on BBC Online
137 This provides: “The Commission shall, in cooperation with the Member States, keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the common market.”
138 DG IV paper above n 89 at 5.
139 DG IV paper ibid at 9 makes it clear that state funding to reimburse net costs incurred in fulfilling the public service remit may be exempted under either Article 87(3)(d or Article 86(2) but cannot be double counted. However Article 87(3)(d) may apply to exempt state reimbursement of net costs incurred by a public service broadcaster in broadcasting cultural programmes going beyond the requirements of the public service remit imposed on it.
140 Case C–387/92 above n 53 and Cases T–106/95 above n 55 and C–174/97 P above n 56.
141 Above n 110.
142 E.g. 1999 Communication on Audiovisual Policy, above n 82.
143 Funding which is specifically used for cultural programming above and beyond the public service obligation might conceivably be exempted under Article 87(3)(d) however. The intention is that a public broadcaster should not be able to cross subsidise commercial activities by additional funds from the state.
144 DG IV Discussion Paper Application of Articles 90 paragraph 2, 92 and 93 [now Article 86, 87 and 88] of the EC Treaty to the Broadcasting Sector, above n 89 3–4.
145 This approach was adopted in the 1999 German special interest channels case and the BBC News 24 case.
146 Arguably, there could be recognition that a public broadcaster should be able to put an amount of its public revenues into the creation of a subsidiary intended for commercial activities, and make investments, using public money, in running the commercial subsidiary. The idea would be that in the longer term these investments would be more than returned in the funding that the commercial subsidiary would generate both for developing the commercial activities of the broadcaster and for assisting the public service activities. Separate accounting systems would enable the public funding to be clearly tracked. However, the BBC “Fair Trading” document, part of the “BBC Commercial Policy Guidelines” available from BBC Online, notes that the BBC maintains separation of public funds from its commercial operations to the extent that where funds are required for start-up capital, or to cover the initial operating losses of a new commercial venture, “they must be supplied by either the reinvestment of commercial profits; or in the case of limited liability subsidiaries such as BBC Worldwide Ltd and BBC Resources Ltd, such costs may be met from their agreed borrowing limit; or the investment of capital by an external partner acceptable to the BBC, with no liability to public funds.”
147 DG IV Discussion Paper above n 89, 4.
148 Commission decision NN141/95 RTP, under appeal, above n 110.
149 E.g. Case C–174/97 P above n 56.
150 See for example the recent grant of the exclusive rights for radio broadcasting of English test cricket—for some, the epitome of “public interest” sport—to the BBC for the next five years, against competition from the independent radio station Talksport. Kelvin MacKenzie, head of Talksport, attacked the decision, claiming that the “establishment decided our [offer of more] money wasn’t good enough … We were prepared to spend our own money to buy the rights; the taxpayer has ended up with the bill. How can we flourish when a government-aided business is able to wield such power in such an anti-competitive manner?”, Guardian Unlimited, March 9, 2000.
151 Bartosch, “The financing of public broadcasting and EC State aid Law: an interim balance” [1999] ECLR 197, 204.
152 The Independent, February 21, 2000.
153 For example, on the Internet site of the French public service channels, France 2 and France 3, the first image is the “on line boutique”.
154 The programme was in fact devised by an independent production company and sold to the BBC, which has then marketed it worldwide. It is currently the BBC’s most successful export.
155 See for example “Friction at BBC as fact shows lose to comedy” the Times February 14, 2000.
156 “The way in which State aid is defined is of vital importance as, although it is solely for the Commission to determine whether derogations may be made from the principle of incompatibility of aid, defining a measure as State aid directly or indirectly affects a large number of players: first, the national courts and tribunals that have jurisdiction to decide on actions to determine the existence of State aid and, if necessary, whether it was granted in breach of the Treaty …; second the Member States, required as they are to notify the Commission of any plans to amend or introduce State aid; and lastly, recipient firms, required as they are to check whether the measure from which they benefit constitutes aid and, if so, whether the aid complies with the formal and substantive conditions applicable, as legitimate expectation cannot replace retroactively the normal diligence which all economic operators must display in checking the lawfulness of aid granted to them.” Commission Annual Report on Competition Policy 1996, para 31.