WRITTEN QUESTION E-1680/99

by Karl von Wogau (PPE-DE) to the Commission

(22 September 1999)

Subject: Distortion of competition resulting from European Union subsidies

Does the Commission agree that there is overcapacity in Germany in the field of collecting and sorting old clothes?

Is the Commission aware that SOEX Textil-Vermarktungsgesellschaft mbH in Bad Oldesloe has been granted assistance for setting up a company in Saxony-Anhalt, although the business in question is the European market leader in this sector?

The collecting and sorting of old clothes is affected by overcapacity in the Federal Republic of Germany. Assistance for the market leader in this sector is likely to lead to predatory practices. It also gives rise to the possibility that the market leader could take a dominant market position.

Answer given by Mr Monti on behalf of the Commission

(26 October 1999)

At the end of 1998 the Commission's attention was drawn to possible unlawful state aid in the context of the construction of a plant for the recycling of textiles which was carried out by the SOEX group in the Bitterfeld industrial park in Sachsen-Anhalt. Accordingly, the Commission wrote to the German authorities and requested information on whether the firm had received state aid in favour of its investment and if so, what amount and on which legal basis.

The German authorities replied by letter of 16 November 1998 and confirmed that the firm had invested DM 76,037 million creating employment for 417 people, and had received state aid. By decision of the Land Sachsen- Anhalt of 7 November 1996, the firm was awarded an investment grant consisting of both national and Community funds totalling DM 23,419 million. The aid share related to the overall investment thus amounted to 32,48 %.

The German authorities pointed out that the investment aid was awarded in full respect of the provisions contained in the 25th framework plan of the Gemeinschaftsaufgabe regionale Wirtschaftsstruktur which is the relevant regional aid scheme for Germany notified to and approved by the Commission. Therefore, an individual notification was not necessary. The scheme even authorised aid for new investment up to 35 % of the overall investment cost. In addition, the project was approved by the Commission on 11 April 1997 for co-financing by the Commission under the European regional development fund (ERDF) in the framework of the operational programme of the Land Sachsen- Anhalt 1994-1999.

The Commission examined the German authorities' information and concluded that, on the basis of the information available, there was no breach of the Community rules on state aid. The aid was granted on the basis of an approved aid scheme concerning new investment in a depressed area. The aid ceilings permitted by that scheme were respected.

In this context, it has to be pointed out that the Commission, in the past, did not generally examine individual state aid for new investment projects in depressed areas. Consequently, it neither could assess the impact of the new investment on the capacities in the respective industrial sector. An exemption existed only for the so-called sensitive sectors such as shipbuilding, car and synthetic fibres industry for which there are specific rules regarding the control of state aid. However, a change occurred with the new multisectoral regional framework for large investment projects which entered into force on 1 September 1998. Following the rules of this framework, state aid in favour of large investment projects has to be notified individually if certain thresholds in investment sums or state aid payments are exceeded. In the framework of the individual assessment, the Commission now is in a better position to investigate the impact of an investment on the capacities within the relevant product market and to take this impact into account when determining the maximum allowed aid intensity.