WRITTEN QUESTION P-3173/00

by Valter Veltroni (PSE) to the Commission

(4 October 2000)

Subject: Measures to restrict the support arrangements for film and television production and distribution

At the recent seminar held at the Lumière Institute in Lyons on 11/12 September 2000 under the auspices of the French Presidency, the Commission Directorate-General for Competition, represented by one of its officials, formally announced the future assessment criteria applying to national support systems to promote the film and audio-visual industry. The criteria will apparently be as follows: 1. the State aid granted to any work may not exceed 50 % of the total; 2. a producer will be obliged to invest at least 20 % of the funding outside national territory. Furthermore, it seems that the concept of State aid is being interpreted in such a way as to cover every investment undertaken by the State, and hence including even the investment requirements that might be imposed on public-service corporations by law, with the result that investment in that category will be taken into account when calculating the total amount of aid subject to the 50 % threshold.

These measures, if they were in fact to be implemented, would pose a serious danger to the European film and audio-visual industry, which is already in difficulty, especially in small countries constituting national markets and language areas of limited size. What is at stake, therefore,

is the future of European culture and the policy in support of cultural diversity in the Union. An approach along the lines described above, moreover, is inconsistent with the repeated assertions that the audio-visual sector is strategically important both for economic development in general and for European cultural policy.

In the light of the foregoing, can the Commission confirm the formal statements by its official and say what it will do to ensure that the audio-visual sector is recognised for the purposes of the single European market specifically as a cultural industry, following the precedent already set at international negotiations? In particular, will it accept the obligations laid down by law to invest in the production of audio-visual works and make exceptions to allow for the intrinsic language implications of national audio-visual markets, bearing in mind that the sector in question has a key role to play in safeguarding and fostering Europe's diverse identities and cultures?

Answer given by Mr Monti on behalf of the Commission

(30 November 2000)

The Commission feels that promoting culture is an important objective. Although the articles in the EC Treaty relating to State aid cannot be an instrument for that purpose, the Commission is mindful of that objective when applying them.

Since the exemption from Article 87 (former Article 92(3)(d)) of the EC Treaty in favour of aid to culture was introduced, the Commission has been able to make a distinction between aid to culture and aid to industry. In 1998, for instance, it approved the French film production support scheme (N 3/98). In that decision, it set out for the first time the criteria it intended to use to evaluate compatibility of aid in those sectors and to authorise existing aid schemes in the Member States under the exemption. The Commission applies the same rules and principles in all its decisions on state aid for films and television production.

To be eligible for the exemption from Article 87(3)(d), support for films must be culturally oriented, that is to say, aid must go to a specific cultural product, therefore to a film; the producer must be able to spend at least 20 % of the total budget of the film in other Member States without any loss of aid; maximum aid intensity is basically limited to 50 % of the total budget of the film, except in the case of difficult and low-budget films; any bonus, that is to say any extra aid for a specific technical audiovisual production service, is ruled out.

Some Member States make aid conditional on the utilisation of a percentage of the budget in their country (local content rule). That condition applies broadly, without any cultural considerations. The application of the specific compatibility criteria reduces its discriminatory effect. It ensures that part of the risk is borne by the producer, and it prevents Member States from outbidding each other to attract or keep technical audiovisual production services in their own country.

As well as opening up markets, the application of the specific compatibility criteria is highly beneficial to small and medium-sized Member States in particular, since it helps create a Community cultural area without frontiers by reducing the atomisation of the film production market.

The smaller Member States tend to have less of a cultural impact and their cultural products consequently have a much smaller share of the Community market; it is therefore quite possible that the 50 % limit on aid intensity might cause problems when their aid schemes are examined. However, the Commission could envisage an additional exemption from this rule if it felt that strict application would be incompatible with the development and cultural creativity in those Member States or in certain areas. If the local content rule was confined to what is needed to preserve the minimum industrial fabric needed for cultural activities such as film production, consideration could be given to aid intensity above the 50 % threshold. Here, the French decision of 1998 already contained an exemption for difficult and low-budget films.