(18)

The Commission, in its decision to initiate the formal investigation procedure in the present case, noted that it had doubts as to the compatibility of the aid with the common market based on Article 87(3)(a) of the EC Treaty and on the Guidelines on National Regional Aid (9) (hereinafter referred to as ‘RAG 1998’) for the following reasons: — First, it appeared that the two phases of the investment belong to the same investment project since they constitute part of an overall plan to accommodate the production lines to be relocated gradually from Denmark and the UK. In the submitted notification the Slovak authorities themselves also referred to the two phases as one single investment project. ‘The investment project submitted by the company Glunz&Jensen is being implemented over the period 2004-2009 in two phases: 2004-2006, 2007-2009’. Furthermore, on page 6 of the ‘Application for the provision of State aid in the form of tax relief’ submitted by the beneficiary to the Slovak authorities, which was annexed to the notification, Glunz&Jensen s.r.o. indicated that the investment period runs from 2004 till 2008 (10), and the total investment costs amount to ‘more than SKK 200 million’, which is the amount corresponding to the total investment made by Glunz&Jensen s.r.o. in Slovakia. In light of the above, it appeared that the notified project concerned the second phase of a single comprehensive investment project which had already started in 2004. Moreover, since the aid application by the beneficiary itself did not distinguish between the two phases of investment, the Commission could not rule out the possibility that the investment period was artificially split into two phases so that the beneficiary would be eligible to apply for the aid in 2006. — Second, according to the information provided by the Slovak authorities, the application for aid, signed on 29 of June 2006, was not submitted until November 2006, i.e. after the first stage of the investment had started in 2004. Consequently, the Commission had doubts whether the condition regarding the incentive effect of the aid as laid down in point 4.2 of RAG 1998 was being respected. The Commission underlined that, as a general principle, State aid which distorts or threatens to distort competition and affects trade between Member States can only be approved if these negative effects are more than outweighed by the aid’s positive contribution to a Community objective (here: regional development). The Commission considered that an aid applied for at the end of 2006 could not retrospectively trigger an investment decision which led to work starting in 2004 and production activities getting under way in April 2005. — Third, the idea that the availability of the aid was not a decisive factor for the beneficiary’s decision to start work on relocation, seemed to be confirmed by the beneficiary’s own statement in its aid application which explained the reasons for relocating its activities to Slovakia: ‘The Board (of Glunz&Jensen) decided during the course of 2003 to investigate the possibility of establishing a production unit in a low-cost country. The objective was to lower the production cost, develop sub-suppliers in central and eastern Europe … Glunz&Jensen has conducted a comparative analysis of 11 central and eastern European countries to decide on the optimal location of the subsidiary …. Out of these 11 countries, the Czech Republic, the Slovak Republic and Bulgaria were investigated. The conclusion was that the Slovak Republic was deemed the most appropriate location considering Glunz&Jensen’s business and the factor combinations on the assessed markets (11)’. — Fourth, the Slovak authorities explained why the beneficiary did not apply for aid for the first phase of the investment project. According to their explanation, the company assumed that prior to the Slovak Republic’s accession to the EU it was not necessary to seek authorisation for State aid in the form of tax relief. In their understanding, the application for the aid had to be submitted only in the tax declaration for the year in which the company first incurred a tax liability. According to the Slovak authorities, this means that Glunz&Jensen s.r.o. planned to apply for state aid from the very beginning of the investment project’s implementation in 2004. In the Commission’s view, the fact that the beneficiary did not know the proper procedure to be followed cannot be taken into account. It should be stressed that the aid under Section 35a of Slovak Income Tax Act No 366/1999, as amended, was not granted automatically prior to Slovakia’s accession, nor is it granted automatically now, since there is no existing aid scheme referring to the above mentioned Section. Consequently, this type of aid was and remains individually notifiable to the Commission as ad hoc aid, as is shown by approximately 40 ad hoc notifications submitted by Slovakia applying this legal base under the so-called interim procedure. — Finally, even if the aid had had an incentive effect, substantial doubts would need to be raised: in fact, RAG 1998 (point 2) takes a negative stance towards ad hoc aid unless it can be proved that the regional contribution of the measure outweighs the distortion of competition and the effects on trade. In this context, the Commission noted the following: — Although the measure provides a significant contribution to regional development (155 direct jobs, some 30 indirect jobs), its negative effects seem to be equally substantial. — The relevant product market of the beneficiary is graphic arts pre-press processing equipment, in particular computer-to-plate (CtP) processors. The Commission noted that the aid is to be granted to a company which has a market share of approximately […] % on the European market. The closest competitors of Glunz&Jensen in Europe along with their market shares are: Height Design […] %, Agfa (Lastra) Belgium […] %, E-graf, Italy […] %, Haase, Germany […] % and Ovit, Italy […] %. Given the market position of the beneficiary, the Commission was of the opinion that the planned measure could have a major impact on competition in the relevant, very specific market in which the beneficiary is active. — Furthermore, the project concerns the relocation of production activity and machinery from Denmark and the UK. Because it was solely a production facility, the plant in Thetford in the UK was closed down at the end of 2006, following the transfer of production to Slovakia. According to information found on the company’s web site, 77 employees were made redundant in Thetford. The Danish company will focus in future on sales, customer services, R&D and the operation of a pilot plant. The relocation therefore has a significant effect on trade between Member States.