----

            COMMISSION DECISION         

of 16 November 2004         

on aid granted by Germany to grain brandy distilleries

(notified under document number C(2004) 3953)

(Only the German text is authentic)

(Text with EEA relevance)

(2006/240/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular the first subparagraph of Article 88(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to the provisions cited above and having regard to their comments (1),

Whereas:

I.   PROCEDURE

II.   DESCRIPTION OF THE SCHEME

A.   The German spirits monopoly and its development

B.   Description of the aid

Offsetting production costs

Compensatory amounts in the event of early withdrawal from the monopoly

Funding the aid

Market in figures

C.   Comments from third parties

Agricultural producers

The complainant and the industrial distilleries

Other comments

D.   Germany's comments

III.   LEGAL ASSESSMENT

A.   Applicability of the competition rules

Grain brandy not covered by Annex I to the EC Treaty

B.   The measures in question should be regarded as existing aid within the meaning of Article 87(1) of the EC Treaty

Covering the production costs

Compensatory amounts

(a)   Preparatory measures pursuant to Regulation (EC) No 659/1999

(b)   Proposal of appropriate measures

C.   Assessment of the case law cited by Germany as justification for the aid measures

D.   Compatibility of the aid

HAS ADOPTED THIS DECISION:

Article 1

The aid scheme for grain brandy producers contained in Germany's Spirits Monopoly Law is incompatible with the common market.

Article 2

Germany shall take all necessary measures to abolish the aid scheme referred to in Article 1 as from 30 September 2006.

Article 3

By 30 June 2005 at the latest Germany shall report to the Commission on the measures for abolishing the aid scheme.

By 31 December 2006 at the latest Germany shall report to the Commission on the actual application of the measures taken.

Article 4

This Decision is addressed to the Federal Republic of Germany.

Brussels, 16 November 2004.

For the Commission

Mario MONTI            

Member of the Commission

----

(1)OJ C 269, 8.11.2003, p. 2.

(2)  Bundesgesetzblatt Jahrgang 1999 Teil I Nr. 58, published in Bonn on 28 December 1999. The Budget Consolidation Law introduced a general reform of the German spirits monopoly. It came into force on 1 October 2000.

(3)  Branntweinmonopolgesetz of 2 May 1976.

(4)OJ L 83, 27.3.1999, p. 1, as amended by the 2003 Act of Accession.

(5)OJ C 308, 11.9.2002, p. 6.

(6)  Reichsgesetzblatt I, pp. 335, 405.

(7)  [1976] ECR 181 (para. 27). The Court held in particular that Article 37 (now Article 31) of the Treaty is infringed ‘if the charge imposed on the imported product is different from that imposed on the similar domestic product which is directly or indirectly covered by the monopoly’.

(8)  Gesetz zur Änderung des Gesetzes über das Branntweinmonopol, Bundesgesetzblatt I N 50, 7 May 1976, p. 1145.

(9)  The notification concerned all products covered by the monopoly, including grain brandy.

(10)OJ 30, 20.04.1962, p. 62/993, as amended by Regulation No 49 (OJ 53, 1.7.1962, p. 62/1571).

(11)  Annex II of the Treaty became Annex I with the entry into force of the Treaty of Amsterdam. The contents remained unchanged, however.

(12)  Rectification: processing of alcohol by distillation, filtration, etc.

(13)  The civil-law partnership DKV (GmbH), set up in 1930 by regulation of the Reichsmonopolamt (now the Bundesmonopolbehörde - Federal Monopolies Authority) and today coming under the Ministry of Finance, holds the exclusive selling rights for grain brandy.

(14)  Until the entry into force of the Law of 28 December 1999.

(15)  According to DKV, in the 2000/2001 operating year (i.e. one year after the entry into force of the HsanG) 24 %, and in the 2000/2001 operating year 40,6 %, of grain brandy output was produced in the open market.

(16)  The operating year starts on 1 October of each year and ends on 30 September of the following year.

(17)  The ‘open’ grain brandy market constituted 40,8 % of the market in the 2001/2002 operating year.

(18)OJ L 60, 12.6.1989, p. 1; as last amended by Regulation (EC) No 1882/2003 of the European Parliament and of the Council (OJ L 284, 31.10 2003, p. 1).

(19)  [1979] ECR 935.

(20)  [1985] ECR 157.

(21)  Article 90 (ex Article 95) states: ‘No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products. ... no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.’         

(22)OJ 7, 30.1.1961, p. 71/61.

(23)OJ L 97, 15.4.2003, p. 9.

(24)  Commission italics.

(25)  [1994] ECR I-3829.

----