1999/133/EC: Commission Decision of 10 June 1998 concerning State aid in favour of Coopérative d'exportation du livre français (CELF) (notified under document number C(1998) 1728) (Only the French text is authentic) (Text with EEA relevance)
Date: 1998-06-10
Institutions: European Commission
Subjects: France, State aid, book trade, cooperative, export, trade volume

18. 2. 1999

EN

Official Journal of the European Communities

L 44/37

COMMISSION

COMMISSION DECISION

of 10 June 1998

concerning State aid in favour of Coop(cid:130)rative d’exportation du livre fran(cid:135)ais
(CELF)

(notified under document number C(1998) 1728)

(Only the French text is authentic)

(Text with EEA relevance)

(1999/133/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of
Article 93(2) thereof,

Having given the parties concerned the opportunity to
submit their comments, in accordance with Article 93,

Whereas:

I. ANNULMENT OF THE CELF DECISION

On 18 September 1995, the Court of First Instance (here-
inafter ‘the Court'), in its judgment, Case T-49/93, SIDE v.
Commission (1), partly annulled a Commission decision
of 18 May 1993 which had authorised aid granted by the
French Government
to exporters of French-language
books. The Court annulled the decision in so far as it
concerned aid granted to Coop(cid:130)rative d’Exportation du
Livre Fran(cid:135)ais (CELF) to offset the extra cost involved in
handling small orders placed by foreign booksellers.

By letters dated 2 April 1992 and 23 February 1993 the
Commission asked the French Government to provide
information on the measures in respect of CELF. By letter
dated 29 June 1992 and fax dated 19 April 1993 the
French authorities sent
the Commission information
concerning CELF.

On 7 August 1992 the Commission wrote to SIDE
confirming that
the aid had not been notified, and
requesting it to send the Commission any further infor-
mation which it considered relevant. By letter dated 7
September 1992 SIDE submitted information to the
Commission.

On 18 May 1993 the Commission decided to raise no
objection to the aid. On 27 May the Commission wrote to
SIDE to inform it of this decision. By letter of 10 June
the Commission informed the French Government that
the aid had been authorised under the exemption provi-
sion in Article 92(3)(c) of the Treaty.

II. PROCEEDINGS PRIOR TO THE COURT ACTION

INSTANCE

III. MAIN FINDINGS OF THE COURT OF FIRST

On 20 March 1992, Soci(cid:130)t(cid:130) International de Diffusion et
d’(cid:144)dition (SIDE), a competitor of CELF’s and the party
which subsequently brought the Court action, wrote to
the Commission asking whether aid granted to and by
CELF had been notified in accordance with Article 93(3)
of the Treaty.

(1)

[1995] ECR II-2501.

On 2 August 1993 SIDE applied to the Court of First
Instance for the annulment of the decision taken by the
Commission. SIDE put forward three pleas in support of
its claims. The Court upheld one of these, alleging breach
of Article 92(3), and accordingly annulled the relevant
parts of
the Commission’s decision on procedural
grounds.

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therefore considered,

In the contested decision, the Commission applied the
derogation under Article 92(3)(c), on the basis of
the
cultural aim of the schemes involved and the special
situation with respect to competition in the book sector.
the
The Court
Commission had been able to establish that the objective
pursued by the French authorities was in fact cultural and,
second, whether it had carried out an economic analysis
of the sector enabling it to conclude that the aid did not
affect conditions of competition and trade to an extent
contrary to the common interest.

first, whether

As regards the purpose of the aid, the Court accepted that
the Commission was legitimately satisfied that the objec-
tive was a cultural one. On the second point, however, the
Court found that the information on which the Commis-
sion based its analysis of the compatibility of the aid with
the common market was inadequate.

The Court concluded that the Commission should have
initiated proceedings under Article 93(2) in order to allow
all parties concerned to make their views known, so as to
ensure that it was aware of the essential aspects of the
matter before it
took a decision, and could ascertain
whether its assessment, which gave rise to serious difficul-
ties, was correct.

subsidy for small orders abolished and the sums paid so
far reimbursed.

to
The Commission notice asking interested parties
comment on the case was published on 5 December
1996 (2). During December 1996 and January 1997 the
Commission received submissions from several parties,
most of whom opposed the aid granted to CELF (see
section VII). The Commission passed on those observa-
tions to the French Government in a letter of 15 April
1997.
In a letter dated 6 January 1997 SIDE had
complained of the slowness of the procedure at national
level and asked the Commission to take urgent measures
requiring the French Government to ‘suspend forthwith
the payment of all aid for the export of books and all aid
that is liable to distort competition on the export agency
market, regardless of who is the official recipient, and to
the aid granted unlawfully since 1980 be
order that
repaid'.

In letters dated 2 July and 25 July 1997 SIDE drew the
the French
Commission’s attention to the fact
authorities were still
and
aiding CELF unlawfully,
the slowness with which the French
complained at
Government was
observations
to
responding
submitted by interested parties.

that

the

IV. PROCEEDINGS UNDER ARTICLE 93(2) OF THE

TREATY

Before considering whether or not
to initiate inquiry
proceedings the Commission wrote to the French author-
ities, on 17 October 1995, asking them to inform it of any
changes they might have made to the aid granted to
CELF in the light of the judgment delivered by the Court.
The French authorities
replied by letter dated 5
December 1995, stating that no changes had been made
to the aid arrangements.

On 7 June 1996 a meeting took place between SIDE and
the Commission. On 28 June SIDE submitted further
information to the Commission that it considered rele-
vant to the case.

The French Government replied to the Commission’s
decision to open proceedings in a lengthy letter dated 12
December 1996, and to the submissions by interested
parties in another extensive letter dated 1 October 1997.
A meeting between representatives of the Commission
and the French authorities took place on 29 October
1997. Following those discussions, the French Govern-
ment submitted further information and observations to
the Commission in letters dated 30 October and 21
November 1997.

the
By letter dated 19 December 1997 SIDE sent
Commission a copy of the rejoinder it had lodged that
month in its proceedings at national level against the
French State concerning the aid granted illegally to
CELF. On 10 February 1998 the Commission received a
copy of the French Government’s rejoinder in the same
case.

On 30 July 1996 the Commission decided to open
proceedings pursuant to Article 93(2) of the Treaty against
the aid. It
that
decision by letter dated 21 August.

informed the French Government of

On 13 February 1998 Commission representatives met
representatives of the French authorities and of CELF to
discuss the question of the proportionality of the aid in
more detail.

In reply to a French Government letter of 23 September
1996 the Commission agreed, by letter dated 1 October,
to allow further time for a response to the decision.

By letter dated 5 March 1998 the French authorities
submitted further information, relating in particular to
the compensatory nature of the aid. By faxes dated 26
March and 10 April CELF provided the Commission with

On 13 October 1996 SIDE wrote to the Commission
explaining that it had brought an action before the Paris
Administrative Court seeking to have the compensatory

(2) OJ C 366, 5. 12. 1996, p. 7.

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updated information on the extra costs of handling small
orders and on the compensatory nature of the aid to the
Commission. By fax dated 17 April
the Ministry of
Culture likewise provided additional information. Finally,
the French authorities again
by fax dated 19 May,
supplied further information to the Commission.

— dissemination (diffusion) is a more recent activity, in
which CELF offers publishers the equivalent of an
export structure. This allows publishers to be repre-
sented in geographical areas which they regard as less
important without having to run the risks normally
associated with exporting,

V. FOUNDATION AND OBJECTS OF CELF AS A

COOPERATIVE SOCIETY

Coop(cid:130)rative d’Exportation du Livre Fran(cid:135)ais, trading as
Centre d’Exportation du Livre Fran(cid:135)ais (CELF),
is a
cooperative society in public limited company form
(soci(cid:130)t(cid:130) anonyme coop(cid:130)rative) whose object, according to
its present statutes,
is ‘directly to handle orders from
abroad or the overseas territories and departments for
books, brochures and all communications media, and
more generally to carry out any transactions for the
in particular, of furthering the promotion of
purpose,
French culture throughout the world by means of the
abovementioned media'.

Most of the 101 members of CELF are publishers estab-
lished in France, although membership is open to anyone
engaged in the publication or distribution of French-
language books, irrespective of their place of establish-
ment. CELF distributes books commercially, mainly in
countries and areas that are not French-speaking, since in
French-speaking areas, particularly Belgium, Switzerland
and Canada, that task is performed by the distribution
networks set up by publishers (see section X for an
analysis of the market).

The French Government states that prior to the setting
up of CELF small orders were in many cases handled as
part of the international activities of Hachette, the struc-
ture for which was established between the wars when
distribution networks had not yet been developed. These
activities were
and Hachette
loss-making, however,
decided to end them in 1976. CELF was founded in 1977.
In 1979 it was in financial difficulties, and booksellers,
publishers, the Syndicat National de l’(cid:144)dition and the
public authorities reached agreement that it should be
preserved, particularly because the handling of small
orders was felt to be a service of general economic interest
and no other economic operator was willing to undertake
it. Thus the grant of compensatory subsidies towards the
handling of small orders began in its present form only in
1980.

CELF currently carries on the following activities:

— its main activity is distribution. As a wholesaler, CELF
supplies only to publishers and booksellers who have
placed firm orders,

— CELF

administers

State-supported

public
programmes, such as the handling of small orders and
certain aid schemes; the Court accepted that these
could be authorised on the ground that they did not
affect trade between Member States,

— the ‘C(cid:130)zame' CD-ROM is a new activity which is not
supported by the State. In 1996 CELF decided to
launch a CD-ROM for use by booksellers. It enables
them to order books on line from CELF or any other
supplier.

VI. THE AID GIVEN TO CELF TOWARDS THE

HANDLING OF SMALL ORDERS

The operating subsidy granted to CELF is intended to
offset the extra cost involved in handling small orders
from booksellers abroad. It enables CELF to meet orders
which publishers or their associated distributors do not
consider it profitable to satisfy, given the increased trans-
port costs and the total value of
the order involved.
Consequently, the grant of that subsidy helps to spread
the French language and to propagate French-language
literature.

According to the French Government, other possible
ways of achieving the objectives pursued by means of the
subsidy granted to CELF, such as granting aid direct to
the many bookshops concerned, or to the publishers and
distributors who would undertake to fill such small orders,
were thought to be too costly and likely to create prob-
lems of supervision. The solution adopted was the one
which appeared to be the most rational
in economic
terms, the safest in terms of the use of public money and
the least disruptive for distribution channels. It consists of
administering the scheme at the export agent level by
offsetting the extra expense involved in handling book-
sellers’
through provision of a specific
subsidy from the Ministry of Culture.

small orders

Among the various operators involved in the distribution
of books, agents (commissionnaires), who deal only with
retailers or organisations but not with the final consumer,
enable orders which publishers or
their distributors
consider unremunerative to be satisfied. The agent
collects orders,
from
each inconsiderable
different customers and approaches the publisher or
distributor, who thus needs to deliver to only one place. If
the customers are booksellers or institutions which wish
to place orders for works from different publishers, the
agent makes up the respective packages and thus spares

in itself,

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his customers the need to place multiple orders with
many different suppliers. On account of the fixed costs
for handling each order, an agent’s involvement makes it
possible to make savings at both the distributor level and
the customer level, which makes it economically worth-
while.

In practice the aid is granted in the following way. Book-
sellers who need small quantities of works published by
different publishers place their orders with CELF, which
then acts as export agent. The subsidy is specifically
designed to make it possible to meet orders to the value
of less than FRF 500, excluding costs of carriage, which
are considered to be below the break-even point. One
quarter of
the amount of subsidy granted during the
previous year is disbursed at the beginning of the year, the
balance being granted in autumn, after the public authori-
ties have examined CELF’s operational estimates and the
fluctuations in the first part of the financial year. Within
three months of the end of the financial year, an account
showing how the subsidy has been used must be
forwarded to the Ministry of Culture and French
Language.

The amount of aid budgeted is normally FRF 2 million
per year. However, the unused balance, if any, is set off
against the sum to be granted in the subsequent year. The
aid amounted to FRF 2 million in 1990, FRF 2,4 million
in 1991, FRF 2,7 million in 1992 and FRF 2,5 million in
1993. The aid actually used in 1992 was FRF 1,7 million,
rather than the budgeted estimate of FRF 2,7 million. The
same trend has continued in subsequent years: in 1994
and 1995 the aid amounted to some FRF 2 million, so
that for the years 1992 to 1995 the average was FRF
2,0675 million (FRF 1,77 million in 1992, FRF 2,5
million in 1993). In 1996, the amount of the aid again
totalled FRF 2 million. Once again, however, the level of
small orders was somewhat lower that year, and CELF
received only FRF 1,6 million in 1997.

The handling of a small order begins with the receipt of
an order sent by a bookseller. When the order is received,
the customer’s details are checked (for example to identify
the bookseller, to ensure that he is solvent, and to estab-
lish whether or not he is insured). CELF carries out these
checks systematically, regardless of the value of the order.
In the case of small customers the checks usually have to
be carried out more often, and are consequently more
time-consuming.

A search is then made in which the ISBN numbers of the
the books are found in
books ordered are identified,
publishers’ catalogues and databanks (such as (cid:144)lectre,
C(cid:130)zame and Minitel), and their availability is verified. The
precision of the information in the order form and the
provenance of small orders are important here. Large
publishing houses have automated systems for placing
orders; they use modern facilities which enable CELF to
identify the material ordered easily. But the majority of
CELF’s customers are small booksellers, and this increases
the workload, even though the proportion of CELF’s
turnover accounted for by small orders is only 4,8 %.
Book searches and books out of print entail additional
costs to CELF.

The order is sent to a publisher either electronically (via
(cid:144)dilectre or Allegro) (3) or on paper. Orders sent to large
publishers such as Point Seuil, Folio Gallimard or Hach-
ette pose no particular problems. But most orders are sent
to small publishers and cannot be dealt with electroni-
cally. CELF states that the additional costs are particularly
apparent here, since small orders are often for books
published by publishers operating in a structure which
requires special treatment. Of all small orders, 67 % are
handled without
the use of automated transmission.
Terms of payment also depend to a great extent on the
size of the publisher. For instance, small publishers tend
to require payment immediately.

regards

transport costs,

As
large publishing houses
currently charge FRF 0,75 per kilogram for delivery to
customers in Paris, a price agreed in the trade. Books
from small distributors are delivered by express parcel
services at FRF 6,5 per kilogram, and by the post office at
FRF 24 per kilogram. The charges invoiced to foreign
booksellers are fixed on a global basis, and according to
the French Government
this reduces margins on the
handling of their orders.

According to the French authorities,
the handling of
small orders requires a series of manual tasks and proced-
ures, and this makes such operations more costly than
large orders. The average value of the orders is low, and
the additional costs mean that handling them is largely an
unprofitable business. The French authorities have
submitted a calculation of the extra costs, based on a cost
accounting system which ascertains the costs of
the
specific operations involved in the handling of small
orders. These operations are explained below.

Each delivery has to be carefully wrapped, and a detailed
invoice has to be made out in triplicate, one copy being
attached to the parcel, one being sent to the customer by
post, and one being retained for accounting purposes.

(3) Books published by large publishing houses can be recognised

automatically by optical scanning using the EAN code.

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Finally, CELF’s accounts department has to register all the operations referred to above.
The French Government points out here that the registration of an invoice with a value of
FRF 100 involves the same amount of work as the registration of one with a value of FRF
10 000 or more.

In terms of statistics, the French Government submits that the year 1994 provides an
illustration of the normal level of small orders handled. In that year, the number of
invoices for small orders was 9 725, or 47 % of the total number of invoices issued by
CELF, which was 20 672. These small orders were placed by 1 848 customers, and
amounted to 19 761 items and 24 933 books ordered. Turnover deriving from invoices
with a value of less than FRF 500 totalled FRF 2,28 million. This amounted to only
4,83 % of the CELF’s total turnover (4).

On the question of the profitability of small orders, the French Government accepts that
some orders falling below the FRF 500 threshold may be profitable while others are not.
The profitability of an order depends on the type and number of books involved and the
precision of the information supplied on the order form. The French authorities maintain,
however, that orders of FRF 500 or less, to all of which CELF is required to respond, are
generally unprofitable. The French authorities arrived at this threshold on the basis of
objective considerations: on economic criteria alone, orders between FRF 0 and FRF 500
will not be profitable overall to a private operator; orders under FRF 500 are mainly for
books published by publishers who do not use automated systems (67 %); and the
handling of small orders up to FRF 500 means that small accounts have to be managed.
On purely economic grounds an agent would not handle such orders. The French author-
ities base this argument on their cost accounting analysis.

Type of order

Number of books

Total cost (1)

Unit cost (1)

Other orders

Small orders

442 740

24 933

53 666 275

4 485 354

Total

467 673

58 151 629

121,21

179,90

124,34

(1) Before the breakdown of non-attributable costs related to small orders.

In 1994 the number of books sold in response to small orders was 24 933. Earnings from
small orders amounted to FRF 2,5 million, i.e. FRF 100,2 per book sold. The total cost of
handling small orders was FRF 4,48 million, i.e. FRF 180 per book. Comparing the two
figures, the loss per book incurred in the handling of a small order can be estimated at
100,2 – 179,6 = FRF 79,4. On average a small order is for 2,56 books, so that the average
loss per order is 79,4 x 2,56 = FRF 203,2. The French Government notes that these
figures are the same as those which the authorities submitted to the Court of First Instance
in April 1995.

The table below presents an overall analysis of the coverage of extra costs by the aid
granted to CELF. The result obtained from the cost accounting gives a surplus of about
FRF 50 000. It is important to note, however, that revenues totalling some FRF 44 000 are
not directly related to the small order activity of CELF but were nevertheless included for
reasons of transparency (5). That sum has accordingly been deducted from the total result,
thereby giving a pre-tax result of some FRF 5 600 which is directly attributable to small
orders.

(4) CELF has submitted a list containing information on all orders for the year 1994 (showing such
things as bookseller, country, number of invoices of FRF 500 or less, number of items ordered,
number of books ordered, value in FRF, number of items supplied, etc.).

(5) According to CELF, these revenues are related to other activities of CELF, in particular to the ‘Plus'

programme.

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According to the French Government, this result indicates that the amount of the subsidy
to offset the additional cost of handling small orders is correctly evaluated. In this respect
the French authorities point out that if, following ex-post checking of the activity of CELF,
it emerges that the subsidy paid was too high, the excess is either set off against the subsidy
for the following year or repaid, and that the subsidy is allocated in accordance with strict
rules and in an endeavour to achieve full transparency.

Overview of the coverage of extra costs by the aid

Turnover on small orders of less than FRF 500 (1)

Other earnings

Subsidy

Total turnover (I)

Purchases of books, including transport

Staff costs

Overheads

Total costs (II)

Operation result (III) = (I) – (II)

Non-recurring net items (IV)

Pre-tax result from small order activity (III) + (IV) (cost accounting)

of which: items not directly related to small orders

Pre-tax result directly attributable to small orders

(1) Including packaging, insurance and transport.

(in FRF)

Amount

2 419 455

55 247

2 000 000

4 474 702

2 106 939

1 670 963

660 719

4 438 621

36 082

14 383

50 465

44 822

5 643

VII. OBSERVATIONS SUBMITTED TO COMMISSION

IN THE ARTICLE 93(2) PROCEEDINGS

In the course of the Article 93(2) proceedings various
economic operators made submissions to the Commis-
sion; these are discussed further in sections XI and XIII.

The Syndicat national des importateurs et exportateurs
de livres (‘SNIEL') considered that the handling of small
orders covered by the compensatory subsidy was CELF’s
sole object;
these
small orders averaged FRF 300 in amount, and made up
about 6 % of CELF’s turnover, which in its view meant
that 94 % of CELF’s turnover was accounted for by an
activity which CELF ought not to be pursuing.

it produced estimates showing that

SNIEL believed that the compensatory subsidy was too
high, first because the total was close to the turnover
achieved through small orders, whereas ‘it seems impos-
sible that the costs arising out of these small invoices
should amount to FRF 3 million (amount of operating
subsidies + estimated margin)'; and second because the

FRF 500 threshold which was used to define ‘small'
orders was too high, when the proportion of some opera-
tors’ orders which was for higher amounts was only 50 %.
SNIEL did not call into question the principle of aid for
non-profitable orders, but nevertheless considered that
CELF was using the subsidy to pursue other activities for
commercial purposes.

The exporting bookseller Aux Amateurs de Livres Inter-
national, which supplies to university libraries, argued
that it contributed to the spread of French culture and the
French language without public support. It took the view
that the compensatory subsidy, which it said accounted
for some 3 % of CELF’s turnover, allowed CELF to grant
an additional discount of three percentage points to its
customers. It pointed out that CELF now supplied libra-
ries itself, and argued that CELF could not therefore any
longer receive a subsidy for small orders placed by book-
sellers.

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to more than 60 % of

Aux Amateurs de Livres International also stated that
the subsidy was ‘a piece of hypocrisy'; it was ‘amazed that
the subsidy can amount
the
amount of the orders involved'. It took the view that the
aid promoted the development of CELF’s business activi-
ties. It concluded that the scheme should be stopped, that
aid already disbursed should be refunded, that the aid
should be divided ‘between the booksellers concerned in
proportion to their turnover on business with third coun-
and that CELF should be prohibited from
tries',
supplying to anyone but foreign booksellers.

Hexalivre, which is likewise a bookseller whose clientele
consists of
institutional customers established abroad,
took the view that CELF, whose task was to supply book-
sellers abroad, ought not in principle to be interfering
with Hexalivre’s own business. The subsidy, according to
Hexalivre, was given to a ‘private company supported by
the public authorities and as near as possible approaching
a monopoly position'. But the facts of the situation were a
different matter, Hexalivre maintained, ‘firstly because of
a clear restrictive agreement among the various bodies
subsidised for the purpose of disseminating and distrib-
uting French books abroad, and secondly because of
direct intervention by the authorities in our business'.

Mr Van Ginneken, manager of Hexalivre, submitted sep-
arate observations on behalf of a second company which
bears his name and which operates broadly as an
exporting wholesaler; he began by setting out a back-
ground summary of his relations with CELF, having
representatives. Mr Van
its
previously been one of
Ginneken expressed surprise that he could have been
given an incentive (commissionn(cid:130))
for sales involving
small orders, since CELF was receiving a subsidy.

conditions to CELF, Tec et Doc presented information to
show that the terms and conditions that CELF in turn
offered to foreign booksellers were not particularly advan-
tageous. Tec et Doc took the view that CELF was
exploiting its image of being ‘the preferential partner of
publishers and the public authorities', which it used in its
business, and that it took advantage of the preferential
terms and conditions of publishers to supply institutional
customers.

Tec et Doc did not call into question the purpose of the
subsidy, but considered that the FRF 500 threshold for
small orders was not justified. On the basis of estimates
showing that these sales accounted for between 3 % and
6 % of turnover, i.e. between FRF 1 500 000 and FRF 3
million, Tec et Doc argued that aid amounting to
between FRF 2 million and FRF 2 400 000 was dispro-
portionate, unless productivity was particularly low. Tec et
Doc considered that a proportion of small orders of 3 %
to 6 % was not in any way an intolerable burden (6). Tec
et Doc stated that about 50 % of the orders it received
were ‘small' orders. On the basis of the orders sent to it by
CELF over a two-month period, Tec et Doc concluded
that CELF received few small orders.

Tec et Doc called for ‘the re-establishment of conditions
of normal competition in exports, in particular by abol-
ishing aid which is not based on a genuine public-service
task or a clear cultural objective that cannot be achieved
by existing means'.

SIDE began by arguing that within the book exports
market there was an export agency submarket on which it
was in competition with CELF. While it acknowledged
that export agents generally handled books published in
their own country, it took the view that the market never-
theless had a Community dimension. CELF had built up
a conventional export agency business, with small orders
accounting for only 3 % of its turnover, and its public-
service task was nowhere clearly identified.

Mr Van Ginneken criticised the ‘permanent ambiguity' of
CELF. He criticised the publishing houses’ stakes in
CELF, since he argued that this induced them to give
preferential
to it, notably by establishing
permanent CELF offices. He took the view that its posi-
tion as an administrator of public programmes gave it an
advantage, even if some of the programmes had been
transferred to other operators.

treatment

SIDE argued that the Commission’s inquiries ought to
cover not just the compensatory subsidy for small orders
but also ‘the whole complex of aid granted not only to
CELF, but also to various bodies which, like it, group
together publishers and the public authorities in a highly
opaque manner'. As
the other bodies were
concerned, SIDE took the view that all the state measures
to assist exports of French books distorted competition on
the export agency market.

far as

Lavoisier/Tec et Doc, a scientific and technical publisher
and exporting bookseller, whose manager
also
chairman of SNIEL, and which is one of the shareholders
took the view that CELF was intended to
in CELF,
operate only as an export agent for foreign booksellers,
and not to supply institutional customers. Stressing that
publishers had been asked to grant their best terms and

is

SIDE denied that the aid was aid for the propagation of
culture. Firstly, it argued, the concept of small order made
no sense to an export agent, who in the nature of things
handled small orders without any need for a subsidy. The
profitability of the business had to be seen in overall

(6) The French Government observes here that what is in fact
involved is 3 % to 6 % of turnover, and not 3 % to 6 % of
orders. Almost 50 % of the orders are small orders.

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Official Journal of the European Communities

18. 2. 1999

terms, not in terms of the individual value of each order.
The FRF 500 threshold applied by the French authorities
was arbitrary. The aid was consequently operating aid.
The French Government had never indicated the legal
basis on which the aid was based, still less the criteria
applied in granting it. SIDE considered that
the aid
granted to CELF was incompatible with the common
market. The aid granted to other operators, which had
been referred to by the French Government during the
proceedings, was in no way comparable.

CELF cited various letters from publishers expressing
their satisfaction with CELF’s performance and with the
mechanism at issue.

VIII. ARGUMENTS PRESENTED BY THE FRENCH

AUTHORITIES

the aid was amongst

In its letter informing the French Government of the
initiation of proceedings, the Commission noted that the
objective of
those which could
qualify for exemption from the ban on aid laid down in
Article 92(1) of the Treaty. The aid had a clear cultural
purpose, covered by Article 92(3)(d), in that its object was
to spread the French language and to propagate French-
language literature.

However, the Commission wondered whether, despite the
objective pursued, the impact of the aid on competition
might not be such as to affect trade to an extent contrary
to the common interest. The Commission referred both
to the impact on book publishing itself and to the impact
on the various operators distributing and exporting books.
The Commission did point out, however, that constraints
of language and culture might limit intra-Community
trade in books, and that this would reduce the impact on
trade between Member States.

On competition in publishing, the French Government
points out that the book trade is distinguished by a very
low degree of product substitutability, since the contents
of each title are specific to that title. There is some
product substitutability only in limited subcategories of
books, generally of a technical nature and very rarely
literary. At Community and international level, substitut-
ability is even smaller, owing to language barriers. There
is genuine competition between books only where the
distinctive qualities of the author’s writing are of little
importance and the books are published in the same
language.

Given its objective, the aid can affect competition only in
respect of books published in the French language.
However, as the Commission is aware, the CELF aid
mechanism is open to any French-language book, regard-
less of the country in which it is published, and regardless

of whether or not the publisher is a CELF shareholder.
And because of the way it is designed the mechanism by
which the aid is granted does not affect the four countries
in which competition between French-language works is
greatest, and which represent the bulk of the market,
namely France, Belgium, Switzerland and Canada. The
impact on competition between publishers is conse-
quently very marginal.

On competition in the distribution and export of books,
the French Government stresses that the mechanism is
not in any way likely to affect the business of publishers
distributing their own works or of ordinary distributors.
Because they are so small, the orders to which the aid
relates are never handled by such operators, and in any
event the aid benefits them indirectly, since it is to them
that CELF turns to obtain its supplies. Any competitive
impact which the aid may have therefore arises only in
respect of operators engaged in the export agency busi-
ness.

The orders which the mechanism is intended to render
feasible are outside the normal market, even if in indi-
them.
vidual cases an individual operator may accept
They account for only a very small proportion of an
export agent’s turnover (less than 5 % in the case of
CELF in 1994, even though it has the aid mechanism to
support it). Thus the aid does not significantly reduce the
level of sales by operators in the relevant segment. It
should also be borne in mind that for most of CELF’s
competitors, exporting French-language books on an
agency basis is merely one activity amongst others; they
for
all have another clientele (such as
example), or sell other books (SIDE acknowledges that
only 50 % of its turnover derives from French-language
works), or carry on another business (such as a conven-
tional bookshop). Above all, the system is open to any
operator who accepts a sufficient degree of transparency.

institutions

The French Government therefore considers that, in the
light of the objective pursued, the impact of the aid on
competition cannot be regarded as affecting trading
conditions to an extent contrary to the common interest.
On the contrary, the aid promotes trade between French-
and non French-speaking
speaking Member States
Member States in the relevant field.

that CELF was

In reply to the allegations put forward by third parties, the
French Government argues
indeed
initially assigned the task of handling small orders placed
by foreign booksellers, but that this did not preclude it
from diversifying its activities into other areas like any
other economic operator. When granting the aid, the
public authorities have taken account of the fact that
CELF’s main business is that of an export agent, and this

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Official Journal of the European Communities

L 44/45

fact has satisfied them that it is in a position to carry out
the task of supplying to small foreign bookshops. This
does not, however, prevent CELF from carrying on other
activities, provided that they do not obstruct its public
service function.

— data on turnover (total turnover and sales of French-
language books abroad), broken down by country,

— the number of French-language books sold country by

country,

The French Government takes the view that the aid is
indispensable and proportionate to the performance of a
task in the public interest (7). That task could not be
performed without the aid, whose purpose is to make up
the losses on unprofitable orders. The French Govern-
ment therefore considers that the aid falls within the
scope of Article 90(2) of the Treaty, and is not caught by
Article 92(1), as the Commission concluded in the case of
the local tax exemption given to the French post office in
consideration of
operate
throughout the country.

requirement

that

the

it

it

The French Government also contends that even if
CELF’s main business is that of an export agent, there is
no reason why it should not meet orders from final
consumers such as libraries. This general business must
not prevent
the public service
entrusted to it by the authorities, which is the handling of
small orders from booksellers. Public support
for the
handling of small orders is designed to facilitate the circu-
lation of publications in French and to consolidate the
retail network of bookshops
selling French-language
books abroad.

from carrying out

CELF provides its services to final consumers, if they so
wish, when the local distribution networks are limited.
CELF began to supply libraries two years ago, with the
agreement of
the publishers. For instance, CELF has
supplied to Algerian university libraries and the national
library of Algeria. CELF was responding to demand from
libraries, and was not competing with local booksellers,
since in 1994 and 1995 private enterprises in Algeria were
not permitted to import.

The French authorities state that if the aid mechanism is
found to be compatible with the common market they
propose to issue a call for tenders following which the
obligation to meet small orders would be entrusted to an
export agent
in accordance with the criteria already
applied at present. While the amount of the aid may
change, the mechanism would remain largely as it is now
and as it was described to SIDE by the authorities at a
meeting on 24 September 1996.

Interested operators would accordingly have to provide at
least the following information:

(7) The French Government points out once more that the use
made of the subsidy is monitored ex post, with any amounts
not used being deducted from the subsidy for the following
year.

— the number of small orders already being fulfilled, and
the number it is proposed to fulfil with the support of
the State,

— precise figures for the losses made on the handling of
small orders, the number of publishers concerned, and
the degree of openness to other French-language
publishers.

To ensure proper supervision, tenderers would also have
to agree to certain procedures of control:

— accounts showing the use made of the subsidy, with
supporting documents, would have to be submitted
within three months of the end of the relevant year,
along with a detailed report on the operation,
including a financial statement,

— the report would be distributed to the trade as a
whole; confidential information on business secrets
might be blanked out if necessary,

— without prejudice to control measures applicable to
the use of public funds, the successful tenderer would
have to allow the public authorities access to docu-
ments, and especially accounting documents, showing
that the operations towards which the subsidy was
granted were being carried out.

The French authorities state that until now there has been
no need to advertise the terms of participation in the
support mechanism because the scheme has been open to
any economic operator wishing to take part on the same
conditions as CELF. Furthermore, the SIDE/CELF case is
widely known in the trade, and any interested operator
could have approached the French authorities.

IX. APPLICATION OF ARTICLE 92(1) OF THE TREATY

it would be wrong to say that

Intra-Community competition in the book trade is
subject to constraints imposed by language and culture.
However,
there is no
competition at all. Books aided through various schemes
may be in competition with books on the same subject or
in the same category for which no aid has been awarded.
This may happen in fiction, non-fiction or any other
category. Aid to promote the publishing, distribution or
marketing of certain books can consequently have an
effect, albeit limited, on intra-Community competition.
Furthermore, such aid may have an effect, not only on
competition in the sale or export of books, but also on the

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Official Journal of the European Communities

18. 2. 1999

business of other players in the market, such as export
agents, publishers with their own export channels, and
distributors acting for publishers on a contractual basis.

it qualifies for
sion must determine whether or not
exemption under any of the derogations in Article 92(2)
and (3).

The aid is granted to CELF to enable it to handle small
orders from foreign booksellers. The Commission accepts
that the mechanism may be beneficial to buyers of the
books, since they do not have to pay the full price, and
also to publishers of French-language books, since it
boosts their sales; but the Commission takes the view that
it is CELF who is the main beneficiary, especially as other
export agents who distribute French-language books do
not receive such aid towards their small orders.

The subsidy granted to CELF therefore constitutes State
aid within the meaning of Article 92(1) of the Treaty.

The derogations in Article 92(2) do not apply, because the
measures do not pursue any of the objectives listed there.
The aid does not satisfy the definition in Article 92(3)(a),
as it is not intended to promote regional development in
areas eligible for aid under that clause. The first part of
Article 92(3)(b) allows ‘aid to promote the execution of an
important project of common European interest';
this
does not apply to the aid to CELF, which is not intended
to promote the execution of such a project. Nor is it
designed ‘to remedy a serious disturbance' in the French
economy, so that it does not qualify for exemption under
the second part of Article 92(3)(b) either. Article 92(3)(c) is
not applicable because the aid is not intended ‘to facilitate
the development of certain economic activities or of
certain economic areas'.

the Treaty;

In the course of the proceedings before the Court, SIDE
raised the question of infringement of Articles 85 and 86
of
the Commission should decide to
consider CELF’s conduct in the light of those provisions,
it will do so as a separate matter (8). This Decision is
concerned only with the compatibility of the support
mechanism with Article 92 of the Treaty.

if

Article 93(3) of the Treaty requires Member States to
notify the Commission of planned aid measures prior to
their implementation. The French Government did not
notify the aid for the handling of small orders by CELF
before putting it into effect, so that the aid was granted
unlawfully. Since in SIDE v. Commission,
the Court
partly annulled the Commission’s decision of 18 May
1993 approving the aid granted to CELF, the aid given for
the handling of small orders by CELF remains illegal (9).

Given that the aid is within the scope of the general ban
on State aid in Article 92(1) of the Treaty, the Commis-

(8) In the case of La Poste (State aid measure No NN 135/92,
France), the Commission likewise considered the application
of Articles 92 and 90(2) separately from that of Articles 85
and 86.

(9) The Court upheld the Commission’s decision in so far as it
authorised aid to CELF for administering public programmes,
that is to say aid other than that for the handling of small
orders, on the ground that
it did not constitute State aid
caught by Article 92(1) because it had no effect on trade
between Member States;
these measures are not considered
here and are outside the scope of the State aid rules.

in that

In SIDE v. Commission, as already indicated, the Court
accepted that
the objective pursued by the French
Government in granting the aid to CELF was a cultural
one,
the French
the aim was the spread of
language and French literature (paragraph 62 of the judg-
is so
ment). The Commission would emphasise that
provided that the aid is used only for the handling of
small orders, and does not serve to cross-subsidise other
commercial activities carried on by CELF. But if that is
so, the only derogation possible is that under Article
92(3)(d), under which ‘aid to promote culture and heritage
conservation' may be considered to be compatible with
the common market ‘where it does not affect trading
conditions and competition in the Community to an
extent that is contrary to the common interest'.

If the Commission is to conclude that the aid granted to
CELF for the handling of small orders qualifies for
exemption under Article 92(3)(d) of the Treaty, it must
establish that it pursues a genuine cultural objective, and
then that
trading conditions and
competition to an extent that is contrary to the common
interest. An assessment of the relevant market is given in
section X, and section XI considers the aid mechanism in
terms of
the objective
pursued, and its effect in a Community context.

the proportionality of

it does not affect

the aid,

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L 44/47

X. ANALYSIS OF THE MARKET IN BOOKS

aid on book publishing itself and on the various operators
distributing and exporting books.

The Commission has analysed the detailed information
that the parties have submitted to it regarding conditions
on the market in books. The analysis has been compli-
cated by features specific to the sector. Developments in
the book, magazine and newspaper trade depend on a
complex interplay of different
factors. For private
consumers these include economic and social aspects
such as demographics, education,
the
number of public libraries, and purchasing power. The
European printing and publishing industry is more a
collection of national industries than an integrated Euro-
pean industry, as can be seen from the small proportion
of turnover accounted for by exports. A further barrier to
the ‘Europeanisation' of the industry is the multiplicity of
languages in use across the Community (10).

leisure trends,

What has to be established in this case is whether the
impact of the aid on competition and intra-Community
trade is such as to distort competition to an extent
contrary to the common interest. The question is, in other
words, whether CELF gains an undue advantage vis-(cid:133)-vis
other operators exporting French-language books abroad,
be it other export agents, distributors or publishers. For
the purposes of this Decision, an assessment has to be
made of any effect of the aid on the segment of the book
market made up of orders of French-language works with
a value of no more than FRF 500.

In its decision to initiate these Article 93(2) proceedings,
the Commission referred to the potential impact of the

that

is manifest

It
there is trade in books between
Member States, and on the market in books CELF is in
competition with other operators exporting French-
language books abroad. According to figures published by
the Syndicat National de l’(cid:144)dition (11), the total annual
turnover of the book sector in France in 1993 amounted
to FRF 14 192 million. The relative share of exports of
French books to the Community that year totalled 7,8 %,
out of which almost half went to Belgium. The share of
exports to European countries outside the Community
was 2,9 %.

In 1994, the last year for which the Syndicat National de
l’(cid:144)dition has produced statistics, total exports of books
from France amounted to FRF 2 978 501 000. CELF had
a turnover of FRF 50 million, i.e. about 1,7 % of the total.
Small orders of less than FRF 500 accounted for less than
5 % of CELF’s turnover (FRF 2,3 million out of a total of
FRF 50 million), equal to 0,08 % of exports of books
from France.

Data on exports of books, brochures, leaflets and similar
from France to other Community
printed material
Member States,
than the
taken from sources other
Syndicat National de l’(cid:144)dition, is summarised in the
table below. These figures likewise show that the bulk of
French exports go to Belgium (and Luxembourg).

Exports (1) from France to the other Community countries, 1993-96

(in ECU thousand)

Country

1993

1994

1995

1996

Belgium/Luxembourg

88 465,75

98 392,47

112 953,67

115 192,55

Netherlands

Germany

Italy

12 305,33

9 866,07

12 745,27

12 914,60

30 966,57

35 623,91

30 944,99

27 992,26

10 440,52

15 023,02

12 375,61

13 246,71

United Kingdom

13 218,16

16 994,67

17 800,70

19 278,79

Ireland

Denmark

Greece

Portugal

305,93

1 103,78

341,61

880,79

475,28

874,53

2 669,94

1 505,46

2 483,90

2 122,86

2 279,57

2 452,32

2 707,45

3 056,24

2 919,62

3 052,68

(10) European Commission, Panorama of EU Industry — 1997.

— Statistiques 1993.

(11) Syndicat National de l’(cid:144)dition, L’(cid:144)dition de livres en France

L 44/48

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Official Journal of the European Communities

18. 2. 1999

Country

1993

1994

1995

1996

(in ECU thousand)

Spain

Sweden

Finland

Austria

9 555,04

11 709,49

12 796,60

14 474,82

1 412,99

1 083,82

1 721,06

3 116,54

431,30

281,18

1 398,26

803,28

1 329,44

1 710,14

1 288,18

1 267,96

Total Community

143 759,59

161 462,36

179 628,35

189 975,65

(1) Books, brochures, leaflets and similar printed material (CN code 4901).
Source: Eurostat (Comext database)

According to the French Government, the distribution of
books has
to satisfy a number of different needs,
depending on the type of customer, who may be a
middleman or a final consumer (e.g. a wholesaler, a
conventional bookseller, a private consumer, or an institu-
tional customer). The diversity is a reflection of cultural
and technical needs, and is influenced by economic
conditions. The distribution and marketing of scientific
books for university purposes, for example, differs from
that of art books aimed at specific readerships or of
fiction sold in bookshops. Without government interven-
tion the market alone would not be able to meet all the
various needs; supply would be limited to the most profit-
able business, and the promotion of culture would suffer.

(i) publishers;

According to the French Government, the main players
in the distribution of books are:
(ii)
promoters (diffuseurs), whether or not integrated into a
publishing house, engaged in the commercial promotion
of books among retail booksellers and some large institu-
tional consumers; (iii) distributors, whether or not integ-
rated into a publishing house, engaged in the physical
they receive orders from book-
distribution of books;
sellers, certain large institutional customers and various
intermediaries, and are supplied by the publishers; and
(iv) wholesalers, who do not always play a part in the
distribution network, and who act as
intermediaries
between distributors and retail booksellers and large insti-
tutional customers. A distinction has to be made between:
(v) export agents (commissionnaires), who serve retail
booksellers and not
(vi) booksellers
mainly serving large institutional customers direct; and
(vii)
final
consumers, whether private or commercial (this category
includes both ordinary booksellers and large self-service
stores).

retail booksellers

final consumers;

serving the

traditional

SIDE gives a similar description of the French book trade,
but puts more emphasis on the distinction between the
domestic market and the export market. It argues that
CELF, like SIDE, is engaged in exporting books from
France. Among operators active in the exporting country
(in France, that is to say the domestic market), SIDE
distinguishes between the following categories:

the books

— publishers or publishing houses with their own export
structure, such as Gr(cid:129)nd, Picard or Vrin, themselves
they publish. There are also
export
publishing groups, such as Groupe Hachette and
Gallimard, which channel
several
publishing houses through distributors such as Hach-
ette Livre Diffusion Internationale, which belongs to
Groupe Hachette. Hachette Livre Diffusion Interna-
tionale exports not only books published by Hachette
or by Fayard, which is part of the Hachette group, but
also books published by Ramsay, for example, or by
Calmann-L(cid:130)vy, which do not belong to the Hachette
group,

the exports of

— distributors are not integrated into publishing houses;
their business
to distribute and export books
produced by publishers with whom they have
concluded agreements (examples are Distique and
Diff-edit),

is

— export agents (commissionnaires) market,

in other
words sell and supply, books from all publishers. The
service provided by the export agent begins with
orders received from booksellers, schools or institu-
for books
tions abroad. The agent
published by different publishing houses. He does not
keep a
from French-language
publishers or distributors. He then sorts the books by
customer, and sends the customer the invoice and the
books ordered.

stock; he buys

sorts orders

there are some distribution networks in
In addition,
which sales take less traditional forms, such as book clubs,
mail-order retail, and direct sales by publishers to final
consumers.

According to SIDE, the advantage to the customer of
using the services of an export agent is that the customer
is spared the necessity of making separate orders in order
to buy 20 books, say, from 15 publishers; this job is done
by the agent. The customer saves time and money as a

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L 44/49

result of such things as lower transport costs. Without
export agents small orders would be too great a burden on
publishers, who are unable to handle them properly
owing to their rigid structures. Many publishers conse-
quently require a minimum turnover before they will
open an account. If the customer has not got an account
with the publisher the publisher invoices the customer
before supplying the goods ordered, which makes the
handling of orders even more cumbersome and costly.

The export agent sends the order to the publisher after
having assembled all the small orders, which enables the
the order. The system means that
publisher to meet
customers residing abroad are not required to make one
or several payments in advance, as they would be other-
wise.

SIDE states that
the clienteles of export agents are
comprised of booksellers, schools, and institutions such as
university libraries, government departments and the like,
who are final consumers of books. Export agents supply
all
types of book published in France and in print,
including art books or technical publications, and also
out-of-print books no longer available from publishers.

SIDE considers that it does business in the same sub-
sector as CELF. The names of the export agents operating
in France are listed below, with what SIDE considers to
be their main business. They can be differentiated from
each other by the type of customer they serve and by the
types of book they sell.

— Aux Amateurs de Livres International supplies all
books available from French publishers, and sells to
university libraries,

— CELF exports French-language books, mainly to

foreign booksellers,

— Eska and Lavoisier are primarily technical publishers
who export scientific and technical works to institu-
tions abroad, mainly university libraries,

— SFL is mainly a wholesaler for the region of Paris;
unlike other export agents, it keeps its own stock,

— SIDE exports French books in print, and re-exports
British books and distributes them in France. SIDE
exports mainly to foreign booksellers,

— Touzot is a publisher specialised in exporting its own

publications and out-of-print books,

— Van Ginneken specialises in art books. Van Ginneken
from certain art
exports only books
publishers. As an export agent it supplies institutions
and booksellers abroad with books obtainable from
the same publishers.

available

According to SIDE, the export market, that is to say the
countries importing books from France, can be divided
into French-speaking areas and non-French-speaking
areas. The book trade in French-speaking areas resembles
the domestic market. All major publishers have branches
or
representatives covering the local French-speaking
markets in Belgium, Switzerland, Canada etc. The role of
the export agent is very limited. But this is so only in
Belgium, Switzerland and Canada.
In other French-
speaking countries export agents specialised in supplying
institutions do have a significant role to play in the
market.

In the French-speaking areas of Belgium, Switzerland and
Canada, the operators on the market comprise (i) local
distributors, (ii) local wholesalers, (iii) retailers (bookshops
and self-service stores), (iv) institutions (libraries, schools
and government departments), and (v) clubs, mail-order
retailers and direct sales agents.

SIDE states that
in countries which are not French-
speaking the presence of publishers is limited. A major
role is consequently played by export agents in general,
and those supplying booksellers in particular.

According to the French Government, the export agency
market represents only a marginal proportion of the main
markets for French-language books (12), namely France,
Belgium, Switzerland and Canada, and exports from
France outside these geographic markets amounted to
FRF 1 506 514 000 in 1994, of which CELF had a share
of about 3,25 %. If one takes account of the share of
Belgian, Swiss and Canadian French-language books
exported to countries other than France, Belgium, Swit-
zerland or Canada, which amounts to about FRF 521
million, CELF’s share falls to 2,47 %. Small orders of less
than FRF 500 handled by CELF account for 0,074 % of
total French-language book exports to countries other
than France, Belgium, Switzerland and Canada.

However,
the French Government doubts whether an
export agency market for French-language books can be
defined in anything more than purely theoretical terms.

In the first place, the product sold is not specific to export
agents.

Secondly, even when the four main French-speaking
countries are excluded, exports of French-language books
to other countries are obviously not all handled by export

(12) On these markets, almost all orders from booksellers are
sufficiently large to be placed directly with publishers and
conventional distributors.

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Official Journal of the European Communities

18. 2. 1999

agents. An appreciable proportion of orders from such
countries are sufficiently large to be placed directly with
conventional distributors, and do not
involve export
agents. This is clearly illustrated in a table submitted to
the Commission which compares total French exports to
the leading 50 importing countries with CELF’s exports
to those same countries (13).

parameter to estimate the impact of the aid on CELF’s
competitors. The competitive impact on the activity of
such operators must be assessed in terms of the whole of
their export business, which forms a coherent whole
centring, in different forms, on sales of books abroad.

The table is based on figures compiled by the Syndicat
National de l’(cid:144)dition for the year 1994. The French
authorities have compiled a table showing the data along-
side figures for the volume of exports by CELF to the
same countries in the same year.

Export turnover in 1995

Export agents

Export turnover

(in FRF million)

in the case of Japan;

These figures show that although CELF is a major export
agent the proportion of French-language book exports to
any one country which it accounts for is at best only
its share usually varies
20,7 %,
is
between less than 1 % and 5 %. For example,
1,03 % in the case of Germany, 0,88 % in the case of the
United States, and 2,73 % in the case of Mexico. Some
foreign booksellers place orders sometimes direct with
conventional distributors and sometimes with export
agents, depending on the size of the order. Nor can the
clientele be considered to constitute a specific market,
except perhaps in the case of very small booksellers.

it

Lastly, operators acting as export agents, other than CELF,
do not confine themselves to the business of supplying
solely to foreign booksellers.
French-language books
SIDE, usually
institutional
such as
Some,
customers
and libraries), others
fran(cid:135)aise
operate in France itself, and none of them are limited to
exporting French-language books.

(Alliance

supply

Amateurs de Livres International

Boussac/LSA

CELF

Hexalivre/Van Ginneken

Lavoisier

Le Livre Fran(cid:135)ais

Office du Livre

SIDE

SFL

Sous la Lampe

Touzot

(1) 1994 figure.

Sources: infogreffe/euridile.

17,2

16

55

14,5

3,6

17,7 (1)

4,2

26,8

9,3

0

20,2

The French authorities believe, therefore, that it is not
possible to compile data on an export agency market for
French-language books in the strict sense. Even if one
were to carry out an individual survey of all the operators
who state that they carry on this business, it is unlikely
that their cost accounting would always be sufficiently
precise to pinpoint it.

France has a limited number of operators known to deal
in export agency business (ten or so), but, with the excep-
tion of CELF, such operators handle few orders of less
than FRF 500, which are not profitable economically,
and, as indicated earlier, much of their business is with
institutional customers (14).

The French authorities have been able to provide the
Commission only with export turnover figures for opera-
tors established in France who are known to deal with the
type of order normally placed with export agents. The
French Government believes it is possible to use this

For a more precise idea of CELF’s competitors a propor-
tion of exports by some French booksellers and some
publishers’ export departments must be included. This is
because large booksellers specialising in the sale of
French-language works and located in major European
cities are for the most part supplied direct by French
publishers or by booksellers in France.

(13) The

table

covers

the west European countries, North
America, numerous African countries
(in most of which
French is spoken) and other countries around the world (such
as Japan, Brazil, Mexico and Russia).

(14) It

sometimes happens, exceptionally,

that CELF supplies
customers who are not dealers, either because there is no
local dealer, or for the account of publishers who pass on to
CELF specific orders which they receive.

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Taking account of these factors, the overall annual turn-
over of all those competing on the market may be esti-
mated at some FRF 200 million. This estimate is based
on a number of
the total
amounts to about 25 %. The share of small orders
handled by CELF accounts for 0,75 % of the total.

indices. CELF’s share of

the total

Looking at the Community in isolation, CELF’s turnover
amounts to some FRF 12 million, i.e. 24 % of its total
turnover. Of
turnover of French operators
engaged in export agency business with the Community
countries, those exports are estimated to account for some
i.e. around FRF 110 million. CELF’s turnover
55 %,
within the Community is equivalent to only 10,9 % of
the total turnover of such operators.

As regards the competitive situation, the following should
be noted:

— the proportion of French-language works published
outside France and benefiting from the support mech-
anism may be estimated at between 3 % and 4 %.
The French Government emphasises that it is natural
for booksellers situated abroad to turn as a rule to
in the publishing
distributors and export agents
country rather than in some other country. However,
it may be noted that in 1994 exports of French-
language books from the main countries in which
they are published were as follows: from France, FRF
2 978 million; from Belgium, some FRF 524 million;
from Switzerland, some FRF 376 million; and from
Canada, some FRF 315 million,

— it is not possible to determine the breakdown between
the relative shares of French book exports handled by
export agents and by publishers or their distributing
subsidiaries, for the reasons set out earlier,

— in 1994 the proportion of total exports of books in
French which went to French-speaking countries was
60,4 % (60,9 % in 1993). The proportion of exports
by CELF which went to French-speaking countries
was 16,1 % (13,6 % in 1993).

apportioned between the various steps in the handling of
an order (see section VI). The French Government has
taken 1994 as the reference year for quantifying the extra
costs. In order to verify the reliability of the analysis
submitted by the French authorities, the Commission
requested supplementary information on the handling of
small orders by CELF for other periods too. The French
Government submitted material for a number of other
financial years showing that the level of turnover from
small orders, the number of books ordered, the number of
invoices, the number of customers and the number of
items ordered remained more or less the same from year
to year.

The information submitted by the French authorities to
the Commission is therefore sufficient to allow an esti-
mate to be made of the extra costs really incurred by
CELF as a consequence of the handling of orders up to
FRF 500. Since the aid covers only the additional costs
related to such orders, with any excess being deducted
from the aid for the following year, it does not serve to
finance other commercial activities carried on by CELF,
as was alleged by several interested parties.

Criteria governing the aid mechanism

SIDE alleges that the aid mechanism has been reserved
exclusively to CELF, and questions the criteria according
to which aid is granted. The Commission does not share
SIDE’s view of the matter, for the following reasons.

First of all, the refusal to allow SIDE access to the aid
mechanism in 1991 was quite legitimate, since SIDE did
not offer the transparency required, being unable to
provide data on orders on a country-by-country basis. The
authorities in the Member States are free to determine the
criteria for the granting of aid aimed at a given objective,
always provided that the aid is compatible with Article 92
of the Treaty. This is true especially of supervisory meas-
ures taken to ensure that the aid is genuinely used for the
purpose for which it is granted, as is the case here.

XI. ANALYSIS OF THE COMPATIBILITY OF THE AID

UNDER ARTICLE 92 OF THE TREATY

Proportionality of the aid

Secondly, SIDE was offered the opportunity to benefit
from the aid on the condition that it complied with the
rules of the support mechanism.

The Commission has analysed the extensive material
submitted to it by the French Government regarding the
way in which the aid is used to cover the extra costs,
giving special attention to the cost accounting system.
The accounting system allows costs to be estimated and

Thirdly, two other operators have received aid similar to
that given to CELF for the handling of small orders. The
fact that the aided activities were confined to certain
geographic areas and certain types of book is not the
they
decisive point. What

is more important

is that

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Official Journal of the European Communities

18. 2. 1999

complied with the rules of the support mechanism, in
particular by providing transparent accounts. SIDE argues
that the aid granted to Servedit and (cid:144)cole des Loisirs is in
no way comparable to that granted to CELF. While the
aid given to these operators may have been limited to
certain geographical areas or to specific types of printed
matter, the Commission finds that it was designed to
offset the additional costs involved in handling small
orders, and consequently disagrees with SIDE.

are not French-speaking. In French-speaking countries
the major
such as Belgium, Switzerland and Canada,
publishers serve the local market
through their own
branches or representatives. Export agents consequently
play only a limited role on the main markets for French-
language books, that is to say in the three countries just
mentioned. Of total exports from France to these coun-
tries in 1994, CELF’s share was only 0,2 %.

The cultural nature of the aid mechanism

including SIDE. As noted earlier,

The statement that the aid is for the propagation of
culture has been contested by some of the interested
parties,
the Court
the aid was of a cultural nature. The
accepted that
Commission takes the view that
the only exemption
clause under which the aid given to CELF for the
handling of small orders can be authorised is that in
Article 92(3)(d). This states that aid to promote culture
and heritage conservation may be considered compatible
with the common market where it does not affect trading
conditions and competition in the Community to an
extent that is contrary to the common interest.

On the basis of the information supplied to it by the
French authorities, the Commission concludes that the
objective of
the aid is indeed a cultural one. CELF
supplies any book available in the French language. The
Commission accepts the French Government’s argument
that the French language is being promoted here, since
the support mechanism is specifically designed to enable
customers abroad to obtain books published in French.
Books published in other languages do not qualify, so that
it is only the French language that is promoted. Secondly,
small orders can be for specialised books or works of
literature such as poetry, novels, essays and art books.
Thus the nature of the books comprised in small orders
also clearly shows the cultural dimension of the aid. It
should be pointed out that text books for schools are
ordered in large quantities for each school year, and
therefore fall outside the support mechanism for small
orders.

The Commission notes that there is no adverse effect on
competition on the market as a result of the existence of
CELF; books published by publishers who are members
of CELF can be ordered through channels other than
CELF, and in particular through other export agents. To
be able to order books from CELF it is not necessary to
be a member. CELF handles orders for books in the same
it does not matter
the publisher;
way regardless of
whether or not the publisher is a member of CELF.
Booksellers are free to choose their supply channels.
CELF deals with every order it receives.

The aid granted to CELF relates to a segment outside the
conventional market, namely that of orders of less than
FRF 500. The French authorities maintain that this FRF
500 threshold has been arrived at by reference to objective
criteria. Only 2 % of CELF’s turnover derives from books
published in other Member States, specifically Belgium.
The main effect that the support mechanism has in terms
of competition is its effect on competition with other
operators engaged in the distribution of French-language
books. A customer will normally turn to a distributor
established in the same country rather than elsewhere. In
view of these considerations, and especially as the aid is
proportionate and covers only the additional costs related
to the handling of small orders by CELF, the impact of
the aid is not contrary to the common interest.

Conclusion

The Commission accordingly draws the following conclu-
sion regarding the aid granted to CELF for the handling
of small orders.

The aid in the Community context

CELF is indeed the main beneficiary of the aid, as noted
above. However, the aid is granted only to offset the
additional costs relating to its small order business. CELF
handles books essentially for countries and areas which

The aid granted to CELF for the handling of small orders
is compatible under Article 92(3)(d), because it pursues a
it promotes culture and heritage
cultural objective:
conservation without affecting trading conditions and
competition in the Community to an extent
is
contrary to the common interest.

that

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L 44/53

XII. APPLICATION OF ARTICLE 90(2) OF THE TREATY

XIII. OTHER ISSUES RAISED DURING THE ARTICLE

93(2) PROCEEDINGS

the aid to
The Commission has thus concluded that
CELF constitutes State aid within the meaning of Article
92(1) of the Treaty, and that it is compatible with the
common market under Article 92(3)(d). In accordance
with the case-law, therefore (15), there is no need for the
Commission to consider CELF’s State-aided activities in
the light of Article 90(2), since the application of Article
92 does not obstruct the performance by CELF of the task
of handling small orders, an activity for which it receives
aid from the State.

The Commission would point out, nevertheless, that for
an undertaking to be regarded as entrusted with the
operation of a service of general economic interest within
the meaning of Article 90(2),
it must have been so
entrusted by an act of public authority (16). The act in
question need not necessarily be a legislative measure or
regulation; it may take the form of a concession governed
by public law (17).

According to the French authorities, the legal basis for
the aid can be found in the Order (arr(cid:136)t(cid:130)) of 9 May 1995
on the organisation of the Directorate for Books and
Reading and the Orders (d(cid:130)crets) made under the Finance
Acts to apportion the appropriations managed by the
Ministry of Culture. Article 5 of the Order on the organ-
isation of the Directorate for Books and Reading states
that ‘The Department for the Book Trade (d(cid:130)partement
de l’(cid:130)conomie du livre). . . shall seek to stimulate the pres-
ence abroad of French-language books and of the French-
speaking world'. The Commission considers that
the
French Government has failed to demonstrate that the
service performed by CELF in handling small orders is
based on any legal or administrative act, since the acts
referred to are concerned with the book sector in general;
they do not refer to CELF, and do not relate directly to it.

Moreover, it has to be said that the arguments submitted
by the French authorities in support of the application of
Article 90(2) are contradictory: they claim that the aid
mechanism is open to other operators, and not exclusively
reserved to CELF, while at the same time maintaining
that the aid is being given to CELF because it performs a
public service obligation of general economic interest.

The French authorities point out that in the course of the
Article 93(2) proceedings numerous questions or affirma-
tions have been put forward which fall outside the scope
of proceedings of that kind. The main objective of these
proceedings has indeed been to establish whether the
support mechanism under which CELF receives aid for
the handling of small orders is compatible with the
Treaty; but the Commission would observe that it did not
rule out
the possibility of examining other questions
relating to CELF as well. When the Commission decided
to initiate the inquiry proceedings, it made reference to
several issues brought to its attention by SIDE regarding
linked
CELF and its operations (18). As these are not
directly to the support mechanism as such, they and other
related issues raised by interested parties are considered
separately below.

In 1980 CELF was recapitalised: its capital was increased
from FRF 80 500 to FRF 1 280 500. Half the cost of the
operation was borne by the Association pour le D(cid:130)vel-
oppement de l’(cid:144)dition Fran(cid:135)aise (‘ADEF'), and half by
CELF’s shareholders, which were private undertakings.
ADEF was an association set up by a number of
publishers; its main objective was to stimulate the pres-
ence of French-language books abroad and to support
investments carried out by publishers or exporters. It
received public assistance from the Ministry of Culture.
ADEF was dissolved in 1994, and its shares in CELF were
transferred to Syndicat National de l’(cid:144)dition (SNE). SNE
is entitled to transfer them to new members of CELF if
the occasion arises. The members of CELF have remained
the same: publishers, distributors and SNE. The Commis-
sion has analysed the material submitted to it by the
French Government, and concludes that the increase in
CELF’s capital did not constitute State aid, but merely the
acquisition of a shareholding, since private investors also
took part. The French authorities were consequently
acting in accordance with the market economy investor
principle. The transaction did not, therefore, comprise
any state aid component within the scope of Article 92(1)
of the Treaty.

(15) Judgment of the Court of Justice in Case C-387/92 Banco
Exterior de Espa(cid:157)a v. Ayuntamiento de Valencia [1994]
ECR I-877, paragraph 21.

(16) Judgments of the Court of Justice in Case 127/73 BRT v.
SABAM and NV Fonior [1974] ECR 313, paragraph 20, and
in Case 66/86 Ahmed Saeed Flugreisen and Others v.
Zentrale zur Bek(cid:132)mpfung Unlauteren Wettbewerbs [1989]
ECR 803.

(17) Judgment of the Court of Justice in Case C-159/94 Commis-

sion v. France [1997] ECR I-5815, paragraph 66.

It has been alleged that CELF derives an advantage from
administering public programmes; at present CELF is
responsible only for the ‘Plus' programme and for the ‘(cid:211)
l’Est de l’Europe' programme, successor to the ‘Page (cid:133)
Page' programme. In its judgment in SIDE v. Commis-
sion the Court upheld the Commission’s initial approval
administration
of

aid CELF received for

the

the

(18) See footnote 2, at point 9.

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Official Journal of the European Communities

18. 2. 1999

of these programmes, on the ground that it was outside
the scope of Article 92(1) of the Treaty, and the Commis-
sion sees no reason to address this issue further.

It has also been alleged that CELF derives an advantage
from its relationship with public bodies such as France
(cid:144)dition. Hexalivre, for instance, criticises the attitude of
France (cid:144)dition, which it claims gives preferential treat-
ment to CELF, in particular by granting it access to its
stand at international fairs, while refusing such access to
Hexalivre. The Commission observes that CELF, which is
a member of France (cid:144)dition, pays for such services, for
example by renting space at the stand, as shown by the
supporting documents supplied. CELF has also paid for
catalogues ordered from France (cid:144)dition.

relations with publishers,

In response to these allegations regarding CELF’s rela-
tions with France (cid:144)dition and Centrale de l’(cid:144)dition, and
its commercial
the French
Government argues that the public authorities are not
involved: these are bilateral relationships that have no
connection with any cultural policy measures taken by
the authorities. The Commission concludes that CELF
has not here received benefits in kind within the scope of
Article 92(1), because it has paid for the services provided
to it by France (cid:144)dition.

It has also been alleged that the public authorities favour
CELF through public orders. These allegations relate in
particular to support given for the implementation of a
programme known as ‘nouveaut(cid:130)s', which was adminis-
tered by the Ministry of Foreign Affairs, and to orders
placed by associations connected with that Ministry and
with the Ministry of Cooperation, such as the Association
pour le D(cid:130)veloppement de la Pens(cid:130)e Fran(cid:135)aise (‘the
ADPF') and Audecam. The main objective of the ADPF is
to ensure a regular supply to the libraries of the French
cultural
the
Ministry. CELF is one distributor among others used by
the ADPF.

situated abroad on behalf of

institutes

Hexalivre criticises the ADPF for giving preferential treat-
ment to CELF as compared with its competitors. Hexa-
livre cites the example of an order placed by the cultural
department of the French Embassy in Morocco, tradition-
ally a customer of Hexalivre, which, after approaching the

ADPF, was referred to CELF, which in turn passed the
order to Hexalivre. The Commission is satisfied that the
French authorities in no way sought to favour CELF to
the detriment of other suppliers. On the contrary, since
CELF passed on the order to Hexalivre, the latter cannot
claim to have lost it. The Commission, therefore, takes
the view that this falls outside the scope of Article 92(1) of
the Treaty.

Finally, SIDE has criticised ‘the whole complex of aid
granted not only to CELF, but also to various bodies
which, like it, group together publishers and the public
authorities in a highly opaque manner', and the author-
ities’ cultural policy in general; the French Government
replies that the authorities publish numerous documents
every year, including answers to parliamentary questions,
informing the public of the activities of the responsible
Ministry. Thus the authorities seek transparency rather
than opacity,

HAS ADOPTED THIS DECISION:

Article 1

The aid granted to CELF for the handling of small orders
of books in the French language constitutes aid within
the meaning of Article 92(1) of the EC Treaty. As the
French Government
failed to notify the aid to the
Commission prior to its implementation, the aid has been
granted unlawfully. It is, however, compatible aid as it
satisfies
for derogation under Article
92(3)(d) of the Treaty.

the conditions

Article 2

This Decision is addressed to the French Republic.

Done at Brussels, 10 June 1998.

For the Commission

Karel VAN MIERT

Member of the Commission