1999/184/ECSC: Commission Decision of 29 July 1998 on aid granted by Germany to the companies Sophia Jacoba GmbH and Preussag Anthrazit GmbH for 1996 and 1997 (notified under document number C(1998) 2476) (Only the German text is authentic)
Date: 1998-07-29
Institutions: European Commission
Subjects: Germany, State aid, aid to undertakings, coal industry, competition, financial aid

L 60/74

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Official Journal of the European Communities

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COMMISSION DECISION

of 29 July 1998

on aid granted by Germany to the companies Sophia Jacoba GmbH and Preussag
Anthrazit GmbH for 1996 and 1997

(notified under document number C(1998) 2476)

(Only the German text is authentic)

(1999/184/ECSC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Coal and Steel Community, and in particular Article 88
thereof,

Having regard to Commission Decision No 3632/93/
ECSC of 28 December 1993 establishing Community
rules for State aid to the coal industry (1),

Whereas:

I

On 23 October 1996 and 5 November 1996 the British
company Celtic Energy Ltd lodged two formal complaints
with the Commission through the Office of the United
Kingdom Permanent Representative to the European
Union. Those complaints concern the German mining
companies Sophia Jacoba GmbH and Preussag Anthrazit
GmbH.

By letters of 5 October 1995 and 30 September 1996,
Germany notified the financial support it intended to
grant for the years 1996 and 1997 in accordance with
Article 9(1) of Commission Decision No 3632/93/ECSC.

the Commission sent a letter of

Following these complaints and its own subsequent in-
formal
vestigations,
notice to Germany on 2 August 1997 in which it officially
communicated the content of the complaints and asked
for information concerning the actions of the companies
and the German authorities. In its letter, the Commission
also indicated the principles of law which might have
been infringed by Germany and the companies Sophia
Jacoba GmbH and Preussag Anthrazit GmbH.

Germany replied to the letter of
October 1997.

formal notice on 6

The Commission invited comments
from the other
Member States and interested parties in a communication
the European
published in the Official Journal of

Communities (2). Comments were received from the
United Kingdom (letter of 23 September 1997), several
competitor companies and the German coal producers,
and duly forwarded to Germany.

On 13 March 1998, 15 May 1998 and 12 June 1998
respectively, the companies Consolidated Coal plc, Evans
& Reid Coal Co., Ltd and Betws Anthracite Ltd also
lodged complaints about the sale of German sized-anthra-
cite in the Community market and more particularly in
the United Kingdom. Preussag Anthrazit GmbH, for its
part, sent the Commission a paper through a firm of
solicitors setting out its position on the letter of formal
notice.

Since these complaints and the paper were forwarded to
the Commission after the date set in the letter of formal
notice and the Commission could not grant Germany
further legal hearing, they were not taken into account for
the purposes of this Decision.

The complaints in question relate to the sale in 1996 and
1997 by Sophia Jacoba GmbH and Preussag Anthrazit
GmbH of sized anthracite subsidised in the Community.
The extremely favourable prices (compared with the
production costs) offered by these companies on the
in the United
Community market
Kingdom are said to have been possible only through the
use of State aid paid by Germany under Decision No
3632/93/ECSC. This
according to the
complaint, covers a substantial part of the companies’
production costs, is said to have been used for an unau-
thorised purpose.

and primarily

aid which,

According to the complainant, such practices lead to
distortions of competition in the Community anthracite
market. In addition, the same product is sold in other
Member States by the companies concerned at higher
prices than in the United Kingdom.

(1) OJ L 329, 30. 12. 1993, p. 12.

(2) OJ C 258, 23. 8. 1997, p. 2.

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After examining Germany’s reply to the letter of formal
notice and the comments by the other interested parties,
the Commission considered that this reply did not consti-
tute sufficient grounds, as will be explained in this
Decision, to refrain from taking further action on the
complaint.

In the meantime, there were numerous meetings and
contacts between the Commission and representatives of
the companies and Member States concerned in order to
analyse the problem in greater depth. The Commission
also sent its representatives to the United Kingdom (26 to
30 January 1998) and Germany (10 and 11 February
1998) to meet the main representatives of the anthracite
industry in Germany, Wales, England and Northern
Ireland. The purpose of these meetings was, on the one
hand, to ascertain the facts and in particular to assess the
situation on the geographical markets most affected
together with the manner in which the aid is being used
and, on the other, to analyse the respective price policies
and the legal arguments in order to determine whether
the German aid is compatible with the common market.

II

The Community anthracite market mirrors fairly clearly
the difficulties facing the Community coal
industry:
decline in demand, particularly in the household market,
growing competition from imports from third countries
and high production costs in certain production sectors,
with substantial variations in costs between the individual
production sectors.

According to the information supplied by Germany and
the United Kingdom, the average production costs of the
main German anthracite producer, Preussag Anthrazit
GmbH, amount to DEM 300 per tonne or ECU 152,
compared with average costs of GBP 30, or ECU 43, for
Celtic Energy Ltd, the main UK producer. This difference
is largely due to the favourable geological conditions
under which the UK producer can operate, whereas
Preussag Anthrazit GmbH works coal at depths of up to
1 500 m. The production costs of DEM 373 for Sophia
Jacoba GmbH in 1996 are not representative, as it ceased
production in March 1997. Its production costs in 1995
amounted to DEM 307 per tonne.

Anthracite has the highest carbon content of all types of
coal. It is a high-grade, almost smokeless fuel with a low
proportion of volatile components. It has a low flamm-
ability, but gives off constant, intense heat. Because of
these properties, it has always been highly suitable for use
in industry and above all in the home.

The raw anthracite undergoes several processing stages to
separate the fines, a product of low commercial value
(DEM 60 to 70 tonne) of particle size 0 to 5 mm, which
accounts for around 60 % of pit production and at best
finds a market in the power industry, from the nuts or
sized anthracite. The latter accounts for 20 to 30 % of pit
production, has a high commercial value (DEM 190/t)
and is sold to industry and domestic households.

Consequently, the marketing of anthracite traditionally
concerned mainly sized anthracite.

The market for sized anthracite is geographically limited
to the traditional coalmining regions of the Community
in Belgium, Germany, Spain, France and the United
Kingdom.

German anthracite has
a good reputation in the
Community market owing to the regularity of deliveries,
the quality and the competitive prices. Deliveries to the
United Kingdom began in 1971 in the case of Sophia
Jacoba GmbH and in the middle of the seventies in the
case of Preussag Anthrazit GmbH.

The market in the United Kingdom for deliveries from
Germany comprised the east of the country from the
Humber to the south coast and — in the case of Sophia
Jacoba GmbH — Northern Ireland.

The two German companies were able to open up a
market
in the United Kingdom as the State-owned
National Coal Board (subsequently British Coal) had done
little prospecting for storage sites in these areas, and they
offered very favourable prices.

When the British Coal Corporation was privatised in
1994, Celtic Energy Ltd, a private company, took over
several pits in Wales, most of which produce anthracite.
Following the acquisition of these open-cast mines, Celtic
Energy Ltd embarked on a completely new policy, as it
decided to expand its business in England and opened a
distribution centre for its products in Hull, the main
British port of entry for German anthracite. As already
mentioned, eastern England was traditionally the main
market in Britain for Sophia Jacoba GmbH and Preussag
Anthrazit GmbH.

In order to capture part of the English market, Celtic
its products in
Energy Ltd decided in 1995 to sell
England at the same prices as in Wales, which it was able
to do by meeting the costs of transport.

As a result, Sophia Jacoba GmbH and Preussag Anthrazit
GmbH decided to lower their prices, triggering a process
of mutual undercutting of prices which continued until
the end of 1997.

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investigations have

shown that
The Commission’s
Preussag Anthrazit GmbH’s prices for anthracite in the
United Kingdom were, at least in the period 1996-1997,
systematically lower than the prices of the companies
which succeeded the National Coal Board as reference
producers within the meaning of Article 2 of Commission
Decision No 72/443/ECSC of 22 December 1972 on
alignment of prices for sales of coal
in the common
market (1), as last amended by the Act of Accession of
Austria, Finland and Sweden. In January 1996 the grade
‘beans' (Nuß IV) was on sale on the east coast of Britain at
a price of GBP 93 per tonne from Preussag Anthrazit
GmbH and GBP 101 per tonne from Celtic Energy Ltd.
The prices in October 1997 for the same grade were GBP
94 and GBP 103.40 respectively. By way of comparison,
anthracite from the People’s Republic of China was being
sold at GBP 94 in January 1996 and at GBP 102.7 in
October 1997.
sized anthracite from both
Preussag Anthrazit GmbH and Celtic Energy Ltd was
selling for GBP 105, while the same product from China
was selling for GBP 94.

In 1995,

Preussag Anthrazit GmbH offers major reductions on its
list prices in the various Member States. A study by an
independent expert shows that the lowest (pithead) prices
charged by the company for sales in the United Kingdom
in summer 1996 ranged from DEM 153 per tonne (Nuß
IV)
to DEM 183 per tonne (Nuß II) compared with
(pithead) list prices of DEM 400 for sized anthracite of
grade Nuß IV (14/23) and (Nuß II (37/55). By way of
comparison, the pithead prices for grade (Nuß IV were
around DEM 248 for deliveries to France, DEM 265 to
Belgium and DEM 95 to Spain.

In the case of Sophia Jacoba GmbH, Nuß V anthracite
(6/14), which had a pithead list price of DEM 361 per
sold in winter 1995/96 in the United
tonne, was
Kingdom at
(pithead) prices of DEM 160 per tonne
compared with DEM 202 per tonne (pithead price) for the
same grade in France (2).

Preussag Anthrazit GmbH’s
the
competition from the Welsh producers can be seen from
the 1995 company report, which states that Welsh anthra-
cite, which has reasserted itself on the market following
the privatisation of British Coal, was a cause for

concern

about

concern’ (3). Sophia Jacoba GmbH comes to the same
conclusion in its 1995 company report (4).

Furthermore,
that
the 1996 company report
‘Preussag Anthrazit GmbH was able to increase its market
share on the home market and some foreign markets for
household fuel by means of an elastic price policy' (5).

states

This policy proved effective in practice, as the informa-
tion available shows that the company’s exports rose from
279 000 tonnes to 358 000 tonnes between 1995 and
1996, an increase of 20 %. Sales in the United Kingdom
apparently increased by 49 % from 66 000 tonnes to
98 000 tonnes between 1995 and 1996. The cor-
responding increase in France and Belgium was 13 %
and 8 % respectively. In 1997 the volumes dropped to
68 000 tonnes and to zero at the beginning of 1998.

Sophia Jacoba GmbH’s sales in the United Kingdom rose
from 25 700 tonnes to 37 500 tonnes in 1996. According
to the company, no deliveries were made in 1997, the
year in which its only pit was closed.

This growth in exports is all the more remarkable as it
took place in difficult market conditions. Firstly, there is
such as
growing competition from third countries
Vietnam, the People’s Republic of China or Russia, the
quality of whose products is wholly acceptable for the
Community market.

Secondly, the main market for sized anthracite, i.e. house-
holds, is very demanding. Although private consumers are
loyal to their suppliers, they are attracted to cheaper, more
user-friendly energy sources such as natural gas or fuel oil.

It can be concluded from the above that the prospects for
the Community sized-anthracite market are less than
is in steep structural
the market
promising, and that
decline.

III

In its letter of formal notice to Germany, the Commission
expressed the view that Sophia Jacoba GmbH and
Preussag Anthrazit GmbH pursued their corporate policy
on the market for sized anthracite in the Community and
more particularly in the United Kingdom with the aid of
subsidies which were used indirectly for purposes not
provided for in Commission Decision No 3632/93/ECSC
and 96/560/ECSC of 30 April 1996 on German aid to the
coal industry in 1995 and 1996 (6).

(1) OJ L 297, 30. 12. 1972, p. 45.
(2) The classification of sized anthracite ranges from a particle
size of 5/12 mm (Nuß V, grains) to a particle size of 45/74
mm (large nuts). The category Nuß IV corresponds
to a
particle size from 10/15 to 14/22 mm. The designation Nuß
II relates to a particle size from 30/50 mm to 35/55 mm.

(3) Preussag Anthrazit, company report October 1994/September

1995, p. 13.

(4) Sophia Jacoba GmbH, company report 1995, p. 5.
(5) Preussag Anthrazit, company report October 1995/September

1996, p. 13.

(6) OJ L 244, 25. 9. 1996, p. 15.

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The letter stressed that the interests of Celtic Energy Ltd,
whose production is clearly more competitive, could be
damaged by the competition from Sophia Jacoba GmbH
and Preussag Anthrazit GmbH. The two latter companies’
conduct could be seen as infringing the second paragraph
of Article 2 of the ECSC Treaty, according to which the
Community ‘shall progressively bring about conditions
which will of
rational
distribution of production at the highest possible level of
regarded as
productivity'. Their
infringing Article 3(b) and (g) of
the ECSC Treaty.
Furthermore, Article 4(b) of the ECSC Treaty states that
the application by a seller of dissimilar conditions to
comparable transactions is prohibited pursuant
to the
second indent of Article 60(1) of the ECSC Treaty, par-
ticularly if buyers are treated differently on grounds of
nationality.

themselves ensure the most

could be

conduct

The Commission reasoned that the aid, which according
to Germany was aid to the marketing of coal for power
is in reality aid to secure the companies’
generation,
their fixed
survival by covering a substantial part of
production costs. It also took the view that this aid in
actual fact benefited the whole of production. Production
as a whole would no longer be competitive if the aid
ceased, irrespective of the market on which the individual
products were sold.

The Commission considered Germany’s distinction
between subsidised and non-subsidised production,
depending on the market for the anthracite, to be artifi-
cial and unfounded, and that it facilitated, through State
aid, pricing which did not cover production costs.

In its reply to the letter of
formal notice, Germany
addressed the cross-subsidies argument, contending that
the aid was granted to support sales of coal for power
generation and to the steel industry, and that deliveries to
other consumption sectors were not subsidised at all.

Germany stresses that the subsidies under the Fifth Law
on coal for power generation (1) are intended to cover the
difference between production costs and the price of coal
from third countries.

the

the

justifies

conduct of

Germany
companies
concerned, without providing supporting evidence, by
arguing that it can make economic sense to maintain or
expand production temporarily beyond the volume that
can be sold without incurring a loss. If, according to
Germany, the resulting additional production leads to a
reduction in the average costs of overall production, the
additional output can bring about an improvement in the

(1) BGBl. 1995 I, p. 1638.

It

further argues

the results of
average costs.
comparing the average costs of overall production with
the sales proceeds
in the British market will be
misleading unless account is taken of this context.

that

On the basis of the information supplied by Germany,
the Commission notes that 1.1 million tonnes of sized
coal were sold in the Community in 1996 and 770 000
tonnes in 1997 at prices which did not cover the average
production costs. The average price of the sized anthracite
sold by Sophia Jacoba GmbH and Preussag Anthrazit
GmbH in the Community is in fact some DEM 100 per
tonne lower than the average costs of production as a
whole.

With regard to the argument that it is in a company’s
interests to produce as long as the prices cover the vari-
able costs and possibly also a proportion — however
small — of the fixed costs, the Commission considers
that, in applying this marginal costs principle, Germany
is explicitly acknowledging that most, if not all, of the
fixed costs are covered by that part of the output whose
sales proceeds cover the costs of production, i.e. by the
anthracite fines (2,3 million tonnes in 1996 and 1,4
million tonnes in 1997), which according to Germany is
the only production sector in receipt of aid.

The Commission considers that the proceeds of sales
overall, whether of fines or sized coal, would not cover the
costs of production without the subsidies. The companies’
sales as a whole have been running up losses for several
years owing to the high level of production costs. Ger-
many’s contention that the production costs are covered
by the proceeds is explained by the fact that the accounts
do not make a clear distinction between the companies’
earnings and State aid. In other words, the companies
treat the aid as part of their turnover and do not distin-
guish between the consumption sectors, regardless of
whether they are subsidised or — as Germany claims in
the case of the industrial and household sectors — non-
subsidised.

Preussag Anthrazit GmbH’s profit and loss account for
the 1997 financial year shows sales revenue of DEM
530,27 million (2), in which more than DEM 270 million
in aid is included. The company report for 1996 gives
turnover of DEM 473,74 million, but the breakdown of
sales revenue in point 12 of the appendix to the profit
and loss account gives no indication — as for the 1997
financial year — of the aid totalling DEM 278 million
authorised by the Commission for 1996. The sales

(2) Annual accounts and notifications of deposit, Annex to the

Federal Gazette No 85 of 8 May 1998.

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revenue of Preussag Anthrazit GmbH based on actual
turnover for 1996 and 1997 therefore amounts to only
DEM 200 million and 260 million respectively. The
Commission refers in this connection to Article 2(3) of
Decision No 3632/93/ECSC, according to which all aid
received by undertakings must be shown together with
their profit and loss accounts as a separate receipt, distinct
from turnover. Germany has not complied with this
requirement and thus infringed the principle of transpar-
ency and use of aid for its intended purpose.

the reduction of activity, Article 3
concerns aid for
provides for the continuation of production for an inde-
terminate period on the basis of
improved economic
viability in view of the conditions prevailing on the world
market. If, as Germany maintains, the companies had
refrained from taking all permissible measures to preserve
their assets, which, in view of the foregoing, would be a
policy amounting to their closure, this would conflict
with its notification of
the aid to Preussag Anthrazit
GmbH for 1996 and 1997 as operating aid pursuant to
Article 3 of Decision No 3632/93/ECSC.

under

operating

competitive

The marginal costs argument may appear conclusive for a
company
conditions;
however, it no longer holds good where a company covers
more than 50 % of the costs of its overall production
from State aid, and virtually all fixed costs are borne
exclusively by the production which,
according to
Germany, is subsidised. Were there to be effects of scale
as Germany claims, they would be possible only because
of the subsidies. Moreover, the level of subsidy is so great
that the company would have to close immediately if the
subsidies ceased.

argument

Germany’s
according to which Preussag
Anthrazit GmbH covers the fixed costs of its allegedly
non-subsidised production from other resources, leading
to an erosion of
therefore
unfounded and also difficult to square with the profits for
1996 and 1997. It does not appear logical either that the
company could have an interest in operating its entire
production at a loss.

the company’s assets,

is

is not

Since the loss-bringing sale of anthracite, which Germany
claims
subsidised, concerns a relatively large
volume of production and has been going on for several
years, and since it is unlikely that the ratio of market
improve in future, the
prices to production costs will
Commission considers that such a practice is possible
only because Germany keeps the company viable with
State aid.

This view is corroborated by the fact that Germany noti-
fies the aid for Preussag Anthrazit GmbH under Article 3
of Decision No 3632/93/ECSC. Unlike Article 4, which

As already mentioned, on examining Preussag Anthrazit
GmbH’s profit and loss accounts for 1996 and 1997 the
Commission found an annual surplus of DEM 12,59
million and DEM 39,72 million respectively, despite
losses from the allegedly non-subsidised sales of DEM 65
million in 1997 and DEM 56,6 million in 1996.

Germany also claims that the aid is compatible with
Decision No 3632/93/ECSC, as it forms part of a national
programme to secure energy supplies, which contributes
to improved security of supply in Germany and the
Community, and the Decision explicitly authorises such
measures. The Commission would stress in this context
that the Decision makes no such provision, and this
objective cannot
therefore be used as a criterion for
authorising aid. Reliance on this criterion would also
conflict with the provisions of the second paragraph of
Article 2 of the ECSC Treaty.

It is clear from the above that the State aid granted under
Decision No 3632/93/ECSC and 96/560/ECSC enabled
the beneficiary companies to sell sized anthracite at prices
which do not cover the costs of production, and that these
sales in part conflict with the provisions of Article 2 and
of Article 4(b) of the ECSC Treaty.

Germany states that the aid is calculated on the basis of
the average costs of overall production, determined in
accordance with the guidelines for company accounts in
the coal industry (RBS) (1). It explains that this approach is
appropriate as the different types and grades of coal can
only be produced simultaneously (co-production) and the
costs consequently cannot be calculated by marketing
sector (power generation and heating), so that any alloca-
tion of costs (e.g. according to technical or profitability
criteria) would ultimately be arbitrary. According to
Germany, cost components cannot be shifted between the
different market sectors in this system. The point of
departure for calculating the aid is the average costs of
overall production.

(1) Issued by the General Association of the German Coal In-

dustry.

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The Commission’s view is that the anthracite fines and
the sized anthracite are co-products owing to the homo-
geneous nature of the unprocessed product and the undif-
ferentiated production costs. The considerable difference
in the commercial value of the two products, which can
be as much as 500 %, should basically favour a method of
cost allocation which takes account not only of the quant-
ities produced, but also of the market value of products of
such divergent quality as anthracite fines and sized
the average pithead prices
anthracite. In actual
charged by the two German companies concerned are
DEM 60 to 70 per tonne for anthracite fines and DEM
190 per tonne for sized anthracite.

fact,

differently on grounds of nationality, is prohibited under
the second indent of Article 60(1) of the ECSC Treaty and
therefore infringes Article 4(b).

With regard to the alignment mechanism provided for in
Article 60(2) of the ECSC Treaty, the Commission found
in its letter of formal notice that the direct or indirect use
of State aid for the purpose of systematic alignment of a
product price on the prices of producers not receiving aid,
cannot be considered to be in conformity with the ECSC
Treaty.

The Commission considers that allocating costs purely on
a volume basis without distinguishing between the two
products, which results in average costs of over DEM 300
per tonne, gives a disproportionate weight to the book
costs of the (low-value) anthracite fines, because account is
not taken of the commercial value of the products based
on their physical properties. As a result, the volume of aid
is set too high.

As already demonstrated, Sophia Jacoba GmbH and
Preussag Anthrazit GmbH could not in the long term
have maintained their price policy, consisting in selling
sized anthracite in the United Kingdom at different
prices from those in the other Member States and at
prices below those of
the British producers of sized
anthracite, without the aid granted under Decision No
3632/93/ECSC.

It could be deduced from this that a system of cost
allocation based on the respective contribution of the
products to turnover calculated in terms of market prices,
which would take account of the unit value of the prod-
ucts and not only of volume, would create a more logical
relationship between the unit costs, the commercial value
of the products and the necessary subsidies.

Germany’s argument regarding the protection of legit-
imate expectations is not applicable here, as the Commis-
sion’s decisions require a Member State to ensure that it
honours its commitments, without specifying how this is
to be done. The Commission never intimated that the
cost allocation system used in Germany is sufficient proof
of aid being used for the intended purpose. Consequently,
in the event of improper use of aid, neither Germany nor
the companies concerned can plead the protection of
legitimate expectations in respect of a requirement to
repay aid on grounds that the Commission did not act.

IV

The Commission noted in its letter of formal notice that
the application of dissimilar conditions to comparable
transactions by a seller, particularly if buyers are treated

Germany argues that High Authority Decision No 30/53
of 2 May 1953 on practices prohibited by Article 60(1) of
the Treaty in the common market for coal and steel (1), as
last amended by Commission Decision No 1834/81/
ECSC (2), and Decision 72/443/ECSC do not make the
authorisation to align prices conditional on the com-
panies not receiving any aid. Germany also argues that a
general ban on price alignment for companies in receipt
of State aid should have been enshrined in the above
Decisions.

The Commission considers that the use of aid granted
pursuant to Decision No 3632/93/ECSC to align prices
on those of competitors within the meaning of Article
60(2) of the ECSC Treaty is not provided for in the
Decision and does not contribute to the achievement of
any of the objectives set out in Article 2(1) thereof.

Section III of the preamble to Decision No 3632/93/
ECSC states that the objectives of the Decision must be
achieved with strict adherence to the rules of competition
in order to avoid distortion of competition and discrim-
ination between coal producers, purchasers or consumers
in the Community as a result of the aid. By the same
token, the fourth paragraph of Section I of the preamble
stresses that the aid rules must be in the common interest
and in no way disturb the functioning of the common
market.

(1) OJ 6, 4. 5. 1953, p. 109/53.
(2) OJ L 184, 4. 7. 1981, p. 7.

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It is worth pointing out that the ECSC Treaty provides for
a total ban on aid as a fundamental principle, although
price alignment is permitted (Article 60 ff). Furthermore,
the Commission’s decisions on State aid to the coal
industry relate exclusively to the principle of non-
discrimination between buyers (Article 4(b)) and not to
Article 60 ff and the price alignment rules. It is normal
practice for the Commission, in its decisions on State aid,
to impose conditions relating to the conduct of the recipi-
ents in order to limit any distortions of competition.

Finally, contrary to the Commission’s position, Germany
considers that Article 4(b) of the ECSC Treaty cannot be
applied simultaneously with Article 60(2) of the Treaty.
Germany refers in this connection to the judgment of the
Court of Justice of the European Communities in Case
C-128/92 Banks v British Coal (1).

It is true that, according to the case law of the Court of
Justice, Article 4(b) can be applied independently only if
more specific rules are lacking; if these rules have been
incorporated in other provisions of the Treaty or if they
are specified there in greater detail, the texts relating to
one and the same rule must be viewed as a whole and
applied simultaneously.

The ‘more specific rules' in this case concern decisions on
State aid to the coal industry, which refer only to Article
4(b) and specifically exclude any discrimination between
purchasers and consumers in order to minimise any
distortion of competition because of the aid, but which in
line with this reasoning do not permit the aid to be used
for price alignment.

The price alignment mechanism is, moreover, closely
linked to the sale of production on the Community
market. As Decision No 3632/93/ECSC does not provide
for aid to marketing, it cannot be quoted in defence of
alignment of prices on those of Community competitors.

Anthrazit GmbH at least did not adhere to the alignment
rules. Even though the company could in theory cite
these rules as a possible defence, its actual conduct in
terms of how it used the State aid in practice is not in
conformity with the common market.

In its letter of formal notice to Germany, the Commission
the
explained the grounds
corporate policy of Sophia Jacoba GmbH and Preussag
Anthrazit GmbH could result
in the application of
dissimilar conditions to comparable transactions.

the assumption that

for

Germany replied that market and competitive conditions
in the common market vary over time and from one
region to another. Furthermore, the offers related to prod-
ucts of differing grade. Germany therefore considered that
the sales of anthracite by Sophia Jacoba GmbH and
Preussag Anthrazit GmbH in the different Member States
were not comparable.

Article 2(1) of Decision No 30/53 states that the applica-
tion by a seller in the common market of dissimilar
conditions to comparable transactions is to be regarded as
a prohibited practice within the meaning of Article 60(1)
of the Treaty. The preamble to Decision No 3632/93/
ECSC states that State aid may not cause any discrim-
ination between coal purchasers or consumers in the
Community.

The Commission has found from its investigations that
there are substantial price differences between products of
the same quality and with the same delivery times sold in
the various Member States by Sophia Jacoba GmbH and
Preussag Anthrazit GmbH. The magnitude of these price
differences cannot be explained by differences in freight
costs alone.

Furthermore, a rule which was created to ensure market
transparency and compliance with the provisions of the
ECSC Treaty cannot be invoked in order to infringe the
very principles which it sets out to protect.

According to Article 3 of Decision No 30/53, transactions
are comparable within the meaning of Article 60(1) where
they are concluded with purchasers exercising the same
commercial
function and they concern identical or
similar products whose other essential commercial prop-
erties do not significantly differ.

the Commission’s view that

Finally,
the beneficiaries
cannot rely on the price alignment rules is not based on
the above legal considerations alone. It also notes that,
with regard to the main point of the complaint, Preussag

(1)

[1994] ECR I-1209.

Germany also contends that the company Sophia Jacoba
GmbH and the sellers of sized anthracite from Preussag
Anthrazit GmbH have been practising price alignment
for their exports to the British market for years, but never
undercut
the
market never occurred.

their competitors so that distortion of

9. 3. 1999

EN

Official Journal of the European Communities

L 60/81

that companies
The Commission would point out
wishing to use the price alignment mechanism are
required to notify the Commission in the manner
prescribed in Article 60(2) of the ECSC Treaty and the
the two companies,
derived legislation, which one of
Preussag Anthrazit GmbH, failed to do.

compatible with the common market and has not been
used improperly.

With regard to the conduct of the sellers of the sized
anthracite produced by Preussag Anthrazit GmbH,
to
which Germany refers, Article 7, second paragraph, of
Decision No 30/53 states that undertakings are to be
responsible for infringements by their agents, selling
the
agencies or Commission agents.
responsibility for the price alignment cited by Germany
with regard to sales by Preussag Anthrazit GmbH lies
entirely with that company.

follows

that

It

the

that

considers

The Commission therefore
aid
amounting to DEM 99,5 million which it authorised for
1996 in Decision 96/560/ECSC, of which DEM 42,9
million went to Sophia Jacoba GmbH and DEM 56,6
million to Preussag Anthrazit GmbH, was used to support
the production and sale of anthracite for the industrial
and household sectors and that the prices charged did not
cover the production costs.

As already explained, it emerges from the information
available to the Commission that that company undercut
its competitors’ prices.

Furthermore, since the price alignment cited by the
company in its defence was not notified, the Commission
was unable to take the measures provided for in the final
subparagraph of Article 60(2).

It
the
is clear from the Commission’s investigations,
volumes of anthracite sold and the prices charged that
part of this aid — DEM 13,55 million, i.e. DEM 3,75
million for Sophia Jacoba GmbH and DEM 9,8 million
for Preussag Anthrazit GmbH — led to distortion of
competition incompatible with the common market in
the Community market for sized anthracite for industry
and households, in contravention of Decision No 3632/
therefore
93/ECSC. The companies in question must
repay those amounts to Germany.

The Commission considers that the discrimination found
comes under Article 4 of the ECSC Treaty and cannot be
justified by the price alignment rules. By using the aid for
the purposes described, the companies have infringed the
specific conditions of Decision No 3632/93/ECSC and
96/560/ECSC, with the result that the aid cannot be
considered compatible with the common market.

V

The ruling by the Court of Justice in Case C-364/90 Italy
v Commission (1) established the principle that
the
burden of proof of the compatibility of aid lies with the
Member State seeking to apply the derogation.

In the light of the arguments advanced by Germany and
the beneficiaries of the Commission’s finding that the
companies had failed to provide proof that the aid had
been used properly and of the companies’ price conduct,
the Commission was unable to dispel
the doubts
explained in the letter of formal notice regarding the
compatibility of the aid and to conclude that the aid is

Pursuant to Article l of Commission Decision 98/687/
ECSC of 10 June 1998 on German aid to the coal
industry for 1997 (2), the Commission has postponed its
decision on operating aid of DEM 65 million to Preussag
Anthrazit GmbH pursuant to Article 3 of Decision No
3632/93/ECSC and aid for the reduction of activity of
DEM 12 million to Sophia Jacoba GmbH pursuant to
Article 4 of
total aid of DEM 77
million. By reserving its decision on those aid payments,
the Commission has made clear its belief that those sums
support the production of anthracite for the industrial and
household sectors in the Community and its sale at prices
which do not cover the production costs.

that Decision,

i.e.

The Commission’s investigations have shown that part of
that aid, namely DEM 6,8 million for Preussag Anthrazit
led to distortion of competition incompatible
GmbH,
with the common market in the Community market for
sized anthracite for industry and households, in breach of
Decision No 3632/93/ECSC. As the aid in 1997 was paid
in anticipation of a Commission decision, Germany must
require the company concerned to repay the sum of DEM
6,8 million pursuant to Article 9(5) of the Decision.

(1)

[1993] ECR- I-2097.

(2) OJ L 324, 2. 12. 1998, p. 30.

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Official Journal of the European Communities

9. 3. 1999

The balance of the aid intended for Sophia Jacoba GmbH
and Preussag Anthrazit GmbH for 1997 (DEM 70,2
million) can be regarded as compatible with the objectives
of Decision No 3632/93/ECSC, in particular Articles 3
and 4 thereof, in view of the justification based on those
Articles given in the annual decisions approving Ger-
many’s measures in support of the coal industry.

On the basis of the principle put forward by Germany
that aid payments are to be limited to coal production
destined for power generation and the Community steel
industry, Germany undertakes to ensure that sales of sized
anthracite in the industrial and household sectors will be
made at prices which cover the costs of production,

HAS ADOPTED THIS DECISION:

Article 1

The aid amounting to DEM 3,75 million to Sophia
Jacoba GmbH and DEM 9,8 million to Preussag
Anthrazit GmbH granted by Germany pursuant
to
Decision 96/560/ECSC was used improperly in breach of
that Decision.

Article 2

The aid of DEM 70.2 million to the coal industry paid by
Germany for 1997 in anticipation of a Commission
decision pursuant to Articles 3 and 4 of Decision No
3632/93/ECSC, namely operating aid of DEM 58,2 to
Preussag Anthrazit GmbH pursuant to Article 3 of the
Decision and aid of DEM 12 million to Sophia Jacoba
GmbH pursuant to Article 4 of the Decision, is hereby
authorised.

Aid of DEM 6,8 million paid by Germany to Preussag
Anthrazit GmbH in anticipation of a Commission
decision was used improperly in breach of Decision No
3632/93/ECSC.

Article 3

Germany shall recover the amounts referred to in Article
1 and the second paragraph of Article 2 from the benefi-
ciary companies.

Repayment shall be made in accordance with the proced-
ures and rules of German law concerning liabilities to the
State, with interest at the reference rate used in the assess-
ment of regional aid, from the time the aid was paid until
repayment in full.

Article 4

inform the Commission within two
Germany shall
months after notification of this Decision of the measures
it has taken to comply with this Decision.

Article 5

When making the annual statement of aid actually paid
in accordance with this Decision, Germany shall supply
all the information pursuant to Article 9(3) of Decision
No 3632/93/ECSC which is necessary in order to verify
the criteria of Articles 3 and 4 of that Decision and to
verify compliance with the present Decision.

Article 6

This Decision is addressed to the Federal Republic of
Germany.

Done at Brussels, 29 July 1998.

For the Commission

Monika WULF-MATHIES

Member of the Commission