Joined Cases T-231/06 and T-237/06

Kingdom of the Netherlands and

Nederlandse Omroep Stichting (NOS)

v

European Commission

(State aid – Public service broadcasting – Measures taken by the Netherlands authorities – Decision declaring aid partly compatible and partly incompatible with the common market – New aid or existing aid – Concept of State aid – Concept of an ‘undertaking’ – Over-compensation for costs of the public service remit – Proportionality – Duty to state reasons – Rights of the defence)

Summary of the Judgment

1.      State aid – Commission decision to initiate a formal procedure to investigate a State measure provisionally classified as new aid – Duty to state reasons – Scope

(Art. 88(2) EC; Council Regulation No 659/1999, Art. 6)

2.      State aid – Examination by the Commission – Decision to initiate the formal investigation procedure under Article 88(2) EC – Changes in the Commission’s position following the procedure

(Art. 88(2) EC; Council Regulation No 659/1999, Art. 7)

3.      Competition – Community rules – Undertaking – Concept – Pursuit of an economic activity – Concept – Public service obligations – Not relevant – Activities related to the exercise of public powers – Not included

(Art. 87(1) EC)

4.      State aid – Adverse effect on competition – Operating aid – Finance granted to an undertaking exercising a public service mission on a market open to competition

(Arts 87(1) EC, 86 EC and 88 EC)

5.      State aid – Concept – Measures seeking to compensate for the cost of public service missions performed by an undertaking

(Arts 86(2) EC and 87(1) EC)

6.      State aid – Existing aid – Measures seeking to compensate for the cost of public service missions performed by an undertaking – Decision 2005/842 – Scope

(Art. 86(2) EC; Commission Decision 2005/842)

7.      State aid – Existing aid and new aid – Measure amending an existing State aid scheme – Classification as new aid – Criteria

(Art. 88 EC; Council Regulation No 659/1999, Art. 1)

8.      Competition – Undertakings entrusted with the operation of services of general economic interest – Definition of services of general economic interest – Member States' discretion

(Art. 86(2) EC; Commission Communications 2001/C 17/04, point 22, and 2001/C 320/04, point 36)

1.      Under Article 6 of Regulation No 659/1999 on the application of Article 88 EC, where the Commission decides to initiate the formal investigation procedure, it is permissible for its decision merely to summarise the relevant issues of fact and law, to include a preliminary assessment as to the aid character of the State measure in question and to set out its doubts as to the measure’s compatibility with the common market. Pursuant to Article 6, the decision to initiate the procedure must therefore give interested parties the opportunity effectively to participate in the formal investigation procedure, during which they will have the opportunity to put forward their arguments. For that purpose, it is sufficient for the parties concerned to be aware of the reasoning which has led the Commission to conclude provisionally that the measure in issue might constitute new aid incompatible with the common market.

(see paras 37-38)

2.      It follows from Article 7 of Regulation No 659/1999 on the application of Article 88 EC that, at the end of the formal investigation procedure, the Commission’s analysis may have changed, as it may ultimately decide that the measure does not constitute aid or that the doubts as to the compatibility of the measure have been removed. It follows that the final decision may contain certain differences with respect to the initiating decision, without their necessarily vitiating the final decision.

(see para. 50)

3.      In the context of competition law, the concept of an undertaking covers any entity engaged in an economic activity, regardless of the legal status of the entity or the way in which it is financed. Any activity consisting in offering goods and services on a given market is an economic activity.

In that regard, the fact that a body is entrusted with some public interest tasks does not prevent the activities at issue from being regarded as economic activities. By contrast, activities which fall within the exercise of public powers are not of an economic nature justifying the application of the Treaty rules of competition.

Thus, in order to determine whether the activities of an undertaking are those of an undertaking within the meaning of the Treaty, it is necessary to establish the nature of those activities.

(see paras 92-95)

4.      Aid which is intended to relieve an undertaking of the expenses which it would normally have had to bear in its day-to-day management or its usual activities in principle distorts competition.

The fact that the undertaking is entrusted with a public service remit and performs its tasks in accordance with the provisions governing that remit does not of itself eliminate the risk of a distortion of competition in relation to other undertakings, short of depriving Articles 86 EC to 88 EC of all effectiveness. The public service remit may be over-compensated by the Member State in question, which, where such over-compensation is established, itself carries a risk of distortion on a market open to competition.

(see paras 119-120)

5.      It is clear from the entirely unequivocal terms of the judgment of 24 July 2003 in Case C‑280/00 Altmark that the sole purpose of the four conditions which it laid down is the classification of the measure in question as State aid, and more specifically the determination of the existence of an advantage.

State intervention which does not meet one or more of those conditions must be regarded as State aid within the meaning of Article 87(1) EC.

(see paras 145-146)

6.      Article 1 of Decision 2005/842, concerning the application of the provisions of Article 86(2) EC to State aid in the form of public service compensation granted to certain undertakings entrusted with the operation of services of general economic interest, provides that the decision in question sets out the conditions under which State aid is to be regarded as compatible with the common market and exempt from the requirement of notification laid down in Article 88(3) EC.

It follows that Decision 2005/842 does not in any way itself define the conditions which public service compensation must fulfil, in particular as regards the advantage obtained, in order to escape classification as State aid; on the contrary, it applies to measures already classified as State aid whose compatibility with the common market must be determined. Moreover, Decision 2005/842 refers explicitly to the criteria laid down by the Court of Justice in the judgment of 24 July 2003 in Case C-280/00 Altmark, in order to establish, at the previous stage, whether compensation constitutes State aid.

The Commission is therefore required first to examine whether the criteria laid down by the Court of Justice in the Altmark judgment are fulfilled in order to establish whether the payments constitute State aid and then, having concluded that State aid exists, to examine whether it is compatible with the common market.

(see paras 153-155)

7.      It is clear from Article 1 of Regulation No 659/1999 on the application of Article 88 EC that existing aid means all aid which existed prior to the entry into force of the Treaty in the Member State concerned and all aid which has been authorised by the Commission or by the Council and that any alterations to existing aid must be deemed to be new aid.

According to that unequivocal provision, it is not ‘altered existing aid’ that must be regarded as new aid, but only the alteration as such that is liable to be classified as new aid. Accordingly, it is only where the alteration affects the actual substance of the original scheme that the latter is transformed into a new aid scheme. There can be no question of such a substantive alteration where the new element is clearly severable from the initial scheme.

Whether aid may be classified as new aid or as alteration of existing aid must be determined by reference to the provisions providing for it.

(see paras 176-177, 180)

8.      Member States have wide discretion to define what they regard as services of general economic interest. Hence, the definition of such services by a Member State can be questioned by the Commission only in the event of manifest error.

As regards the definition of the public service in the broadcasting sector, although it is true that it is not for the Commission to decide whether a programme is to be provided as a service of general economic interest, nor to question the nature or the quality of a certain product, it must, as guardian of the Treaty, be able to intervene in the event of manifest error.

(see paras 223-224)