2000/628/EC: Commission Decision of 11 April 2000 on the aid granted by Italy to Centrale del Latte di Roma (notified under document number C(2000) 1173) (Only the Italian text is authentic)
Date: 2000-04-11
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, dairy industry, privatisation, production aid

19.10.2000

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Official Journal of the European Communities

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 11 April 2000

on the aid granted by Italy to Centrale del Latte di Roma

(notified under document number C(2000) 1173)

(Only the Italian text is authentic)

(2000/628/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Communities, and in particular Article 88(2) thereof,

Having regard to Council Regulation (EC) No 1255/1999 of 17
May 1999 on the common organisation of the market in milk
and milk products (1), and in particular Article 37 thereof,

Having called on interested parties to submit their comments
pursuant to the provisions cited above (2) and having regard to
their comments,

Whereas:

I

PROCEDURE

(1)

On 4 December 1996 the Commission received a
complaint in respect of the decision of the Rome Muni-
cipal Council of 8 July 1996 concerning the privatisa-
tion of Azienda Comunale Centrale del Latte (ACCL) by
direct agreement. The complaint also mentions the fact
that between 1992 and 1994, ACCL recorded huge
operating losses
(amounting to ITL 156,6 billion),
which were written off by the Municipality of Rome.
According to the plaintiff, the above operations consti-
tute State aid to ACCL that is incompatible with the
rules on competition in the Treaty.

(2)

By letter of 25 March 1997 the Commission requested
the Italian authorities to provide further information
concerning the alleged State aid. By letter of 25 July

(3)

(4)

(5)

(6)

1997, recorded as received on 31 July 1997, the Perma-
Italy to the European Union
nent Representation of
information requested.
forwarded the additional

Having received no State- aid notification in accordance
with Article 88(3) of the Treaty regarding the writing-off
of sums owed by ACCL or its privatisation, the Commis-
sion decided to enter the case in the register of non-noti-
fied aid measures under NN 185/97.

By letter SG (98) D/3692 of 8 May 1998, the Commis-
sion informed Italy of its decision to initiate the proce-
dure laid down in Article 88(2) of the EC Treaty in
respect of the aid measures to write off ACCL's oper-
ating losses, the aid to Lazio milk producers and the
privatisation of ACCL and possible aid to the buyer
through the privatisation process. The case was entered
in the register under Aid C 28/98.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties (3). The Commission called on interested parties to
submit their comments on the measures in question.

By letters of 6 and 26 July 1998, recorded as received
on 7 and 28 July 1998 respectively, the Italian authori-
ties submitted their observations to the Commission on
In reply to a further
the aid measures in question.
Commission letter of 21 September 1999,
Italy
forwarded new information by letter of 13 January
2000, recorded as received on 19 January 2000.

(1) OJ L 160, 26.6.1999, p. 48.
(2) OJ C 206, 2.7.1998, p. 6.

(3) See footnote 2.

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(7)

The Commission has received no comments from other
interested parties.

suffered from management problems and confronta-
tional

labour relations.

Writing-off of operating losses

(8)

(9)

(10)

(12)

II

DESCRIPTION

Since 1992 the company's annual turnover has been
around ITL 170 billion, with net losses of ITL 45,3
billion in 1992 and ITL 30,7 billion in 1993. Net losses
reached ITL 75,6 billion in 1994 as a consequence of
reducing the workforce (141 jobs cut) and other one-off
losses. Overall losses amounted to ITL 30,0 billion in
1995 and ITL 33,5 billion in 1996 (including ITL 23,7
billion for one-off losses in those years). The forecasts
at
for 1997 (4) put
ITL 17,664 billion.

expected operating loss

the

On 10 December 1992 the Azienda Comunale Centrale
del Latte was set up to produce and sell packaged fresh
milk and dairy products (cream, yoghurt and long-life
UHT milk). Legally speaking, ACCL was established as a
public service, so all operating losses were to be written
off by the owner (Municipality of Rome). ACCL was not
in fact a private company, but simply a separate body of
the Municipality of Rome for accounting purposes.

fresh milk from local producers and
ACCL bought
processed and packaged it under
the brand name
‘Centrale del Latte’. It also produced long-life milk and
yoghurt. The products were sold on a local, albeit signif-
icant, market (Rome and surrounding area) comprising
about 4 million consumers.

(13) All these operating losses were written off each year by
the Municipality of Rome in accordance with Article
23(6) of Law No 142 of 8 June 1990 on the provisions
governing local authorities. Consequently, at the time of
initiation of the Article 88(2) procedure, the Commis-
sion put the overall debt written off in 1992 to 97 at
ITL 215,1 billion.

(14) At the time the procedure provided for in Article 88(2)
of the Treaty was initiated, the Commission took the
view that the assistance granted by the Municipality of
Rome in writing off ACCL's operating losses constitutes
State aid within the meaning of Article 87(1) of the
Treaty. The
likely to cause distortion of
competition because it involves writing off operating
losses of a company operating in a sector (dairy prod-
ucts) where there is a considerable intra-Community
trade.

aid is

Traditionally ACCL's production focused on fresh milk,
which originally accounted for almost 100 % of sales.
That percentage has declined steadily over
time,
however, with the development of other dairy-product
lines. In 1996 fresh milk accounted for 85 % of total
sales. Over the same period, there was a rise in sales of
secondary products (such as yoghurt and long-life UHT
milk). Although they accounted for only around 6 % of
income in 1994, sales doubled in the first half of 1995
when a new line of products was launched. In 1996 new
markets opened up, bringing growth of 129 % in long-
life UHT milk sales. Over the same time, sales of yoghurt
and fresh cream rose by 45,3 % and 34,8 % respectively.
At the time it was privatised, ACCL still had a signifi-
cant, albeit constantly declining, share (60 %) of the
Rome market for its main product (fresh milk). At the
time its share of the market in other products was
marginal (e.g. between 1 % and 2 % for long-life milk).

(16)

(15) On the

the

case,

substance of

the Commission
concluded that
the aid was operating aid, which it
in accordance with its practice in applying
regards,
Articles 87, 88 and 89 of the Treaty, as not compatible
with the common market since by its nature it does not
lead to any development of the sector or the region (5).

The Commission noted that, in view of ACCL's ‘struc-
tural’ operating losses, the company could be regarded
as ‘in difficulty’ by reference to the relevant Community
guidelines applicable at the time of
initiation of the
Article 88(2) procedure (6). The Commission considered
that the losses written off necessarily involved expendi-
ture connected with a restructuring programme (job
cuts, investments and production conversion). However,
in the Commission's opinion, two of the three main
conditions for allowing restructuring aid under those
guidelines
of
of
competition brought about by the aid and proportion-
ality in terms of restructuring costs as compared with
benefits) were not fulfilled.

(prevention

distortions

undue

(11)

From the outset ACCL could be regarded as a company
in difficulty systematically producing operating losses.
The main reasons for its difficult economic and financial
situation seem to lie in its oversize production structures
and severely underutilised capacity. ACCL's labour costs
were high and its workforce did not have the necessary
skills for the specialised activities required by the market.
As a result, turnover and productivity per employee
were half the average for the sector. The company also

(17) According to the Commission's assessment, the aid fell
within the purview of Article 87(1) of the Treaty but did
not qualify under any of the exceptions in Article 87(2)
and (3) thereof.

(4) These were the most recent data available on the date of initiation
of the procedure provided for in Article 88(2) of the Treaty.
(5) Judgment of the Court of First Instance in Case T-459/93 Siemens
SA v Commission of the European Communities [1995] ECR II-1675.

(6) OJ C 283, 19.9.1997, p. 2.

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(18) When assessing whether the aid complied with the rules
on State aid, the Commission concluded that in this case
account should also be taken of the fact that the compa-
ny's debts were written off under the rules governing
‘public service’. The Municipality of Rome was in fact
managing what was defined as a ‘public service’ that
involved the collection, processing and marketing of
milk for human consumption through a special under-
taking (‘Azienda Speciale’). The Municipality of Rome
was required to settle the ‘social costs’ of such special
undertakings by virtue of the fact that they provided a
‘public service’.

(19)

(20)

In accordance with Article 86(2) of the Treaty, undertak-
ings entrusted with the operation of services of general
economic interest are subject to the Treaty rules,
in
particular on competition, in so far as the application of
such rules does not obstruct the performance, in law or
tasks assigned to them.
in fact, of
According to the information available, ACCL's activities
did not exhibit any particular special characteristics
warranting a derogation under Article 86(2) of
the
Treaty (7).

the particular

Furthermore,
the Commission held that companies
producing and marketing products listed in Annex I to
the Treaty and covered by a common organisation of
the market cannot be regarded as undertakings entrusted
with the operation of services of general economic
interest within the meaning of Article 86(2). The opera-
tion of the common market in milk and milk products
(and in the other products subject to common organ-
isation of the market) is incompatible with State inter-
vention in the market
through companies pursuing
objectives other than economic profitability.

(23) Under the common organisation of the market, milk
prices are set by the market. Accordingly, differences
between prices offered by processors should reflect the
free interplay of supply and demand, the company's
commercial policy and its financial soundness. Since
ACCL was incurring significant operating losses each
year, it seems to have been able to maintain high prices
and ensure outlets to local producers thanks only to its
‘public service’ status whereby the State would write off
debts outstanding each year.

(24)

(25)

The Commission considers that granting ACCL the
status of a ‘public service’ and public financing of milk
bought at favourable prices constitute State aid to Lazio
milk producers within the meaning of Article 87(1). In
substance, the aid partly entails the total operating losses
suffered by ACCL since its establishment in 1992. For
the reasons mentioned with regard to the writing-off of
ACCL's operating losses, the Commission regarded the
aid as incompatible with the common market. The
Commission also took the view that those measures
could involve a breach of the provisions in force on the
common organisation of the market in milk and milk
products (8).

In view of the uncertainty regarding the exact rules
governing, and the amounts of, such aid, the Commis-
sion called on the Italian authorities to forward all infor-
mation that could be relevant to assessing the overall aid
granted by the Italian Government to Lazio milk produ-
cers since 1992, the date of ACCL's establishment. In
particular, the Commission asked for statistics of deliv-
eries by Lazio milk producers, the prices paid by ACCL,
the average prices and, if possible, the prices paid by
other market operators, together with all relevant legisla-
tion.

(21)

Consequently, the Commission concluded that Articles
87 and 88 of the Treaty were fully applicable to the
assistance granted by the Municipality of Rome in
writing off ACCL's operating losses.

Privatisation of ACCL

Aid to Lazio milk producers

(22) One of the reasons why the company was granted the
status of a ‘public service’ was that it provided support
to local milk producers. According to the information
available at the time of initiation of the Article 88(3)
procedure, ACCL had signed supply contracts with Lazio
milk-producer cooperatives under which it took delivery,
at prices favourable to the producers, of larger quantities
of milk than it could have sold on the free market.
Moreover, there were allegations that Italian ‘govern-
ment authorities’ required ACCL to buy milk at higher
prices in ‘less-favoured’ areas.

(7) Judgment of the Court of Justice in Case C-179/90 Merci convenzio-
nali porto di Genova SpA v Siderurgica Gabrielli SpA [1991] ECR I-
5889.

(26)

In June 1995 the Municipality of Rome launched the
procedure to privatise ACCL. In November 1995 the
Municipality of Rome selected J. P. Morgan as consul-
tants and entrusted them with the task of drawing up an
industrial plan. At the end of March 1996 the Consul-
tants presented an evaluation of the company and a
proposal for organising the sale.

(27) On 8 July 1996 the Rome Municipal Council decided to
amend the ‘public service’ status of ACCL and turn it
into a joint stock company (SpA or ‘societa per azioni’)
with a view to its privatisation. The decision also dealt
with the sales procedure, which was to involve direct
negotiations subject to certain criteria connected with
State control of the procedure and protection of the
interests of the workers and local milk producers. By
that decision, ACCL's assets were transferred to Centrale
del Latte di Roma SpA, 95 % of whose registered capital

(8) See footnote 1.

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of ITL 200 million was assigned to the Municipality of
Rome and the remaining 5 % to the company Risorse
per Roma SpA, the latter being entirely owned by the
Municipality of Rome. Privatisation was to involve an
increase in capital by the buyer(s). ACCL's liabilities
continued to be entered in the balance sheet of the
company, which was to be wound up.

(28) Under the sales procedure, a notice inviting companies
to bid for shares of Centrale del Latte SpA was published
in two leading Italian newspapers on 2 and 3 October
1996. Within the time limit laid down the consultants
received 25 bids from individual companies and joint
ventures. On 30 December 1996 the consultants sent
invitations to tender to all
interested parties. On the
receipt of four full proposals, the Consultants submitted
a report recommending that direct negotiations start
with all four bidders. From 5 March to 6 May 1997 the
consultants undertook a final round of negotiations with
the shortlisted companies.

(29) Meanwhile, on 22 May 1997 the company was valued
by an independent expert designated by the President of
the Tribunale di Roma (in accordance with Article 2343
of the Italian Civil Code). In his report, the expert valued
Centrale del Latte di Roma SpA at ITL 75,272 billion.

(30)

Following the final round of negotiations with the
bidders, the consultants presented a report to the Muni-
cipality of Rome recommending the sale of Centrale del
Latte di Roma SpA to Company A* (9), which had made
the best bid. Company A had offered ITL 75,472 billion
for 75 % of the shares of Centrale del Latte di Roma SpA
and ITL 106,6 billion for 100 % of the capital. The
other bidders offered significantly less: Company B*
offered ITL 55,105 billion, Company C* ITL 43,944
billion and Company D* ITL 37,5 billion for 75 % of
the shares of Centrale del Latte di Roma SpA. As for the
20 % share earmarked for local fresh-milk producers, the
Municipality of Rome decided that the price offered by
the main buyer of 75 % of the shares would apply to
these producers. The Consultants also said that:

— Company A* intended to maintain 200 of

the
existing 392 jobs for the next five years; the other
offers were: Company B* – 300; Company C* – 256
and Company D* – 142,

— Company A undertook to buy at least 80 % of its
raw materials from Lazio milk producers (one of the
bidders was not prepared to make such a commit-
ment); it also agreed not to transfer the plant from
its present site in Rome.

(31) On 26 June 1997 the Municipality of Rome decided to
sell 75 % of the shares of Centrale del Latte di Roma
SpA to Company A* for a total of ITL 75,472 billion.
The remaining 25 % was subsequently sold to the same
company, bringing the overall price to ITL 106,6
billion.

(32)

(33)

the
In accordance with its
the privatisation of a
Commission considers
publicly-owned company does not
involve State aid
within the meaning of Article 87(1) of the Treaty where:

longstanding practice,

that

— the company is sold by a competitive tender that is
open to all comers, transparent and unconditional,
or an equivalent procedure,

— the company is sold to the highest bidder,

— bidders have enough time and information to carry
out a proper valuation of the assets on which to base
their bids (10).

The Commission notes that the Municipality of Rome
decided not to organise a public invitation to tender.
This seems to have been a deliberate choice made to
ensure continuity of production, supplies from local
producers and the company's stability. In the case in
point, the Commission notes that public notices were
published in only two newspapers distributed nation-
wide. Since interest in the privatisation among other
European companies cannot be ruled out, the Commis-
sion considers that this procedure may not have been
sufficient to ensure broad participation from companies
operating outside Italy.

(34) As regards publication, the Commission concludes that
potential bidders had sufficient time and information
under the privatisation procedure to submit offers.

— Company A*'s bid included an industrial plan for
investments equalling ITL 59,409 billion over the
next five years (ITL 21,003 billion for modernising
plant and equipment and ITL 38,406 billion for
marketing);
the other bidders intended investing
smaller amounts over the same period: Company B*
– ITL 58,014 billion; Company C* – ITL 55,405
billion and Company D* – ITL 41,345 billion,

(35) As far as acceptance of the highest bid is concerned, the
Commission notes that the successful bidder offered a
much higher price than its competitors (ITL 106,6
billion). The bid was also significantly higher than the
company's real value, as assessed by an independent
expert
(ITL 75,272 billion), notwithstanding the fact
that the successful bidder also made various substantial
commitments.

(9) In order to safeguard commercial information, the names of compa-
nies/joint ventures have been replace by letters plus asterisks.

(10) Points 402 et seq. of XXIIIrd Report on Competition Policy (1993).

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(36)

Even if the company was sold to the highest bidder for a
price significantly higher than its estimated value, an
element of State aid may,
in the Commission's view,
have been involved if the private investor paid a lower
price than it would have had such conditions not been
the market
imposed. The Commission believes that
value of the company would have been the price a
private investor would have paid had the sale been
subject to no conditions, particularly those relating to
the maintenance of a certain number of jobs and the
supply of raw materials from local producers.

III

COMMENTS FROM ITALY

(42)

The Italian authorities submitted their comments by
letters of 6 and 26 July 1998 and 13 January 2000.

Writing-off of operating losses

(37)

In view of the foregoing and on the basis of the infor-
mation available at
the Commission was
the time,
unable to rule out the possibility that the buyer of the
company benefited from aid through the privatisation
procedure.

(43)

in December 1992)

Italy disputes the figure (ITL 215,1 billion) for the total
debts written off and the fact that the Commission based
its calculation on the period 1992 to 1997. It contends,
first, that 1992 should be discounted (ACCL was estab-
lished
company's
winding-up significantly affected expenditure in 1997.
Likewise, a large percentage of the overall losses incurred
(ITL 99,25 billion) was covered by ACCL's own funds
while ITL 5 billion is still outstanding. Consequently,
Italy puts the total sum written off in 1993 to 1996 at
not more than ITL 96,654 billion.

and

the

(44) According to the Italian authorities, by writing off the
sums concerned the Municipality of Rome sought to
restore ACCL's viability with a view to its forthcoming
privatisation. The principle governing the private
investor in a market economy was therefore abided by.

(45)

The Italian authorities point out that the measures do
not affect trading conditions. In this connection, Italy
claims that ACCL was mainly active on the market for
fresh milk, which, owing to the legal constraints
applying, can only be marketed up to four days from
packaging. In practice, therefore, the product can only
be sold relatively close to the area of production. As a
consequence, the Italian fresh-milk market is typically a
market of regional scope and there is no trade with
other Member States, but only with some regions of
northern Italy.

(46) Were the Commission to regard the writing-off of these
sums as State aid within the meaning of Article 87(1) of
the Treaty,
the conditions for a
derogation under Article 87(3)(c) of the Treaty would be
met since such aid would comply with the Community
Guidelines on State aid for rescuing and restructuring
firms in difficulty (11).

Italy believes that

(47)

Italy holds that the measures in favour of ACCL comply
fully with the conditions laid down in the applicable
guidelines, since they were implemented under a restruc-
turing programme intended to restore the company's
efficiency and viability without unduly distorting the
conditions of competition and in compliance with the
principle of proportionality.

(48) ACCL was a company in difficulty in accordance with
the relevant guidelines. From Italy's viewpoint,
this
conclusion is self evident having regard to the annual
need to write off operating losses.

(11) OJ C 283, 19.9.1997, p. 2.

(38) After considering whether any aid was granted to the
buyer through the privatisation procedure, the Commis-
sion went on to analyse the impact of the conditions of
sale, which favour Lazio milk producers. The Commis-
sion noted that bidders had to undertake to buy at least
80 % (or other percentage as laid down by the legislation
in force) of their supplies of raw materials from Lazio
milk producers for five years at the price obtaining on
the market.

(39)

For a company whose main product
is fresh milk,
distance from raw-materials suppliers must have an
impact on the production/marketing process. Lazio milk
producers enjoy this ‘natural’ competitive advantage over
other Italian and Community producers. If this competi-
tive edge did not suffice to offset other disadvantages,
the Commission held that the producers must be less
efficient in general than other EC producers. Accord-
ingly, the fact that a condition was imposed on the
company requiring it to buy at least 80 % of its supplies
from Lazio milk producers implies that this would not
be the case under normal market conditions.

(40)

Furthermore, the possibility of reducing the 80 % of
milk supplied locally to another percentage as provided
for by the legislation in force is mysterious to the
Commission since it is not aware of any such provisions
under the common organisation of the market. The
Commission has called on the Italian authorities to
provide any information that may help in evaluating this
clause by forwarding any provisions on the subject.

(41)

The condition on the buyer to purchase at least 80 % of
its raw materials from local producers involves preferen-
tial treatment that constitutes both State aid in their
favour and a breach of the relevant common market
organisation rules.

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(49) With a view to any future privatisation of the company,
a restructuring plan was drawn up for the period 1995
to 1997 (the ‘business plan’) by a group of experts in the
sector to restructure and relaunch the company and
improve production and marketing. The business plan
provided for three consecutive phases involving restruc-
turing in 1995, consolidation in 1996 and diversifica-
tion of production in 1997.

(50)

The plan comprised internal restructuring measures to
restore ACCL's long-term viability. The main measures
involved:

— rationalising general expenditure and industrial costs,

— substantially reducing the workforce (from 610 in

1993 to 402 in 1997),

— investments to replace plant and equipment (ITL 10
billion) with a view to improving efficiency and
reducing the impact on the environment without
increasing capacity,

— restructuring and improving efficiency of distribu-

tion,

— a shift in the product range to products with higher
added value (long-life milk, special milk, yoghurt,
fruit juice, etc.).

(51)

These internal measures were geared to restoring the
company's viability in reasonable time. The implementa-
tion of the restructuring plan allowed the company to
generate a positive balance (ITL 1,5 billion according to
the 1998 balance sheet).

(52) As

regards

the prevention of undue distortion of
competition, the Italian authorities stress that the meas-
ures sought solely to improve ACCL's viability without
adversely affecting the position of its competitors. All
measures taken had the sole effect of substantially
reducing staff,
improving the efficiency of production
plant and diversifying to products with higher added
value. To back up this argument, Italy cites the fact that
the Italian antitrust authorities, who looked into the
acquisition of ACCL in the light of Articles 81 and 82 of
the Treaty, concluded that the measures in favour of
ACCL had no adverse impact on competition in the
market for milk. Italy also stresses that ACCL did not
adopt an aggressive marketing policy or
secure a
‘captive’ consumer base for itself.

(54) According to the Italian authorities, the validity of the
restructuring process was confirmed by the fact that the
private buyer followed the guidelines and the industrial
plan after taking control of the company.

(55)

Should the Commission regard the aid as not compat-
ible with Article 87(3)(c) of the Treaty,
it should be
borne in mind that the beneficiary is ACCL, a company
in liquidation, and not Centrale del Latte di Roma SpA.
Since the sales procedure complied fully, in Italy's view,
with conditions on the market, Centrale del Latte di
Roma SpA and its buyer did not benefit in any way
from the aid granted previously. ACCL, not Centrale del
Latte di Roma SpA, should accordingly be asked to
reimburse any aid to be recovered.

Aid to Lazio milk producers

(56) According to Italy, not only did ACCL never buy milk
from Iocal producers at above the market price but the
it bought never exceeded its processing
quantities
requirements. As far as the prices it paid to producers
are concerned, Italy claims that ACCL applied Italian
Law No 88 of 16 March 1988 laying down rules on
interbranch agreements and contracts for the cultivation
and sale of agricultural products.

(57)

In support of
Italy provided statistics
comparing the prices paid by ACCL and a private oper-
ator in the Lazio Region.

that claim,

Year

1993

1994

1995

1996

1997

(ITL/kg)

ACCL

661

700

700

700

725

Private operator

677

687

772

742

725

the

Italy claims

(58) As regards the quantity of raw materials bought by
ACCL,
raw materials were
that
purchased on the basis of supply contracts with produ-
cers' groups. It has supplied information demonstrating
that the total quantity of milk bought by ACCL declined
steadily from 1993 to 1997 while the ratio of packaged
products to milk delivered was stable over the same
period (at between 90 % and 93 %).

Privatisation of ACCL

(53)

The Italian authorities add that the restructuring plan
was commensurate with the objective sought, i.e, to sell
ACCL under the best possible conditions. They also state
that ACCL contributed significantly to the restructuring
process with its own resources (ITL 44 billion). Italy
also notes that if the Municipality of Rome had chosen
to wind up the company, it would have had to bear
much higher costs.

(59) According to the Italian authorities, ACCL was privatised
under Italian Law No 474/94 on the sale of public
assets, which allows such sales to take place by private
contract. According to the Italian authorities, the rele-
vant Community legislation does not require a public
invitation to tender to be held in such cases, but this
does not call the sales procedure applied into question.

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(60)

(61)

The privatisation was carried out with the assistance of
consultants selected in accordance with the procedure
provided for in Council Directive 92/50/EEC of 18 June
1992 relating to the coordination of procedures for the
award of public services contracts (12). The consultants
chosen were J. P. Morgan, a highly reputed international
merchant bank.

In the Italian authorities' view, the publication of the
notice on ACCL's privatisation in two national newspa-
pers was sufficiently well publicised, witness the 25 bids
received. As for the fact that no notices were published
in the international press, Italy holds that, given the
special features of the freshmilk market and the privati-
sation, it had assumed that only Italian companies and
foreign companies already operating in Italy were likely
to be interested. The Italian authorities rule out any
interest on the part of operators not established in Italy
at the time and they point out that any foreign operators
interested in establishing themselves
in Italy were
unlikely not to consult the main financial newspaper in
which one of the notices was published on a regular
basis.

(62) As regards acceptance of the highest bid, the Italian
authorities quote the Commission when it initiated the
Article 88(2) procedure: ‘the Commission noted that the
successful candidate offered an amount of capital signifi-
cantly higher than its competitors (ITL 106,6 billion).
This offer was also significantly higher than the compa-
ny's value,
expert
(ITL 75,272 billion), notwithstanding that the successful
candidate also gave a series of onerous undertakings’. In
their view, that assessment, together with the degree of
openness and transparency of the bidding procedure, is
an ample guarantee that no State aid within the meaning
of Article 87(1) of the Treaty was granted to the buyer.

judged by an independent

as

(65)

(66)

(67)

Italy also argues that the Commission does not have any
factual evidence that the conditions under which the
privatisation took place had any — much less than a
significant effect — on the market value of
the
company. The Italian authorities stress that the expert
opinion that served as a basis for determining the
market value of the company did not take any condi-
tions into account and that the final price was 29 %
higher than that estimated. Furthermore, Italy empha-
sises that the final price offered by the buyer (ITL 106,6
billion) was equal to that offered by another bidder who
was unwilling to accept those conditions.

The Italian authorities say that one of the conditions for
the application of Article 87(1) of the Treaty is not met
and that,
in their opinion, the buyer was granted no
advantage under the privatisation procedure.

Secondarily, the Italian authorities argue that, even if the
Commission considers that the buyer did receive aid
under the privatisation procedure, any such aid must be
deemed compatible with Article 87(3)(c) of the Treaty in
so far as it seeks to encourage privatisation and elimi-
nate distortion of competition for which State-owned
companies are normally responsible.

(68) As regards the clause requiring the buyer of Centrale del
Latte di Roma SpA to purchase at least 80 % of its raw
materials from local milk producers, Italy argues that
this does not constitute State aid since the clause in
question also requires the milk to be bought at market
prices.

IV

ASSESSMENT

(63)

(64)

The Commission's claim that, ‘Even if the company was
sold to the highest bidder for a price significantly higher
than its estimated value, an element of State aid may, in
the Commission's view, have been involved if the private
investor paid a lower price than it would have had such
conditions not been imposed’ is based, in its view, on
pure conjecture and speculation of no practical rele-
vance.

The Italian authorities consider that the general principle
that a privatisation must not be subject to special condi-
tions must not be viewed as absolute. The conditions
laid down may be compatible with the principle
governing the private investor in a market economy (as
an example, Italy cites the fact that Rolls Royce was sold
by one private undertaking to another).

Applicability of Article 87(1) of the Treaty

(69)

In accordance with Article 87(1) of the Treaty, any aid
granted by a Member State or through State resources in
any form whatsoever which distorts or threatens to
distort competition by favouring certain undertakings or
the production of certain goods is incompatible with the
common market in so far as it affects trade between
Member States.

(70) Article 37 of Council Regulation (EC) No 1255/1999 of
17 May 1999 on the common organisation of
the
market in milk and milk products (13) stipulates that,
save as otherwise provided in that Regulation, Articles
87, 88 and 89 of the Treaty are to apply to the produc-
tion of and trade in the products listed in Article 1 of
the Regulation, which includes virtually the whole
output of ACCL (fresh milk, long-life milk, yoghurt and
other dairy products).

(12) OJ L 209, 24.7.1992, p. 1.

(13) See footnote 1.

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(71)

(72)

(73)

(74)

Consequently, Articles 87, 88 and 89 of the Treaty
apply in full to the assistance granted by the Munici-
pality of Rome to ACCL. In order to assess whether
State aid within the meaning of Article 87(1) of the
Treaty was involved, the Commission considered the
the operating losses
three measures
written off, the assistance to Lazio milk producers and
the aid granted under the privatisation process.

separately,

i.e.

Writing-off of operating losses

The Commission accepts the Italian authorities' argu-
ment that the overall debt written off should be put at
ITL 96,6 billion. First, the years 1992 (ACCL was estab-
lished in December 1992) and 1997 (the company was
sold in June 1997) should be disregarded. Secondly, the
Commission agrees that a significant proportion of
ACCL's debt was covered by its own funds (ITL 99,25
billion) and that ITL 5 billion was never written off.

Consequently, from 1993 to 1996 the Municipality of
Rome systematically wrote off operating losses totalling
ITL 96,6 billion on behalf of ACCL. The debts written
off must accordingly be regarded as aid granted from the
public purse (the Municipality of Rome is a public
authority)
to a particular food-industry undertaking,
which indisputably enjoyed an undue economic and
financial advantage to the detriment of other competi-
tors in Italy and other Member States who did not
receive the same contribution.

The measures concerned definitely have an effect on
trade between the Member States: there is substantial
In 1998 Italy's milk
intra-Community trade in milk.
imports from other EU Member States totalled 4,34
million tonnes, while its exports to the rest of the EU
totalled 20 391 tonnes. In the same year, Italy produced
milk to the value of ECU 4,2 billion, while EU output as
a whole was worth ECU 38,5 billion (14).

(75) No specific data are available at Community level on
trade in ACCL's main product (fresh milk). Its share of
the Rome market in this product in 1997 was 60 %.
However,
the measures in question
affect trade between the Member States because of the
special characteristics of the fresh-milk market (strict
limitation on shelf life and marketing at regional level).

Italy denies that

(76)

In the Commission's view, however, the relevant market
for consideration in the case in point is the EU milk
market as a whole. This covers all types of milk with
which fresh ACCL's milk is or may be in competition, as
well as products
that could replace fresh milk in
consumers' buying patterns (in particular long-life UHT
milk). Furthermore, the Court of Justice has ruled that
aid to an undertaking may be such as to affect trade
between the Member States and distort competition
where that undertaking competes with products from
other Member States even if the undertaking concerned

(14) Source: Eurostat.

does not itself export its products. A similar situation
may arise even where there is no excess capacity in the
sector concerned. Where a Member State grants aid to
an undertaking, domestic production may for
that
reason be maintained or increased, with the result that
undertakings established in other Member States have
less chance of exporting their products to the market in
that Member State. Such aid is therefore likely to affect
trade
distort
between
competition (15).

Member

States

and

(77)

The Commission therefore concludes that the measures
to write off ACCL's operating losses fall within the scope
of the prohibition in Article 87(1) of the EC Treaty.

Aid to Lazio milk producers

(78) When initiating the procedure under Article 88(2) of the
Treaty,
in view of the allegations about higher prices
paid to local producers or higher quantities delivered,
the Commission held that the way ACCL was operated
as a ‘public service’, entailing the writing-off of operating
losses each year, constituted State aid to Lazio milk
producers.

(79) According to the Italian authorities, there are no specific
provisions requiring ACCL to buy milk from Lazio milk
producers. Furthermore, the Commission notes that the
price policy followed by ACCL in the past involved
aligning prices on those laid down by the interbranch
agreements on milk. Statistical data provided show
clearly that prices paid by ACCL have systematically
been lower than those paid by a large private company
the statistics
operating in the same sector. Likewise,
show that
always
commensurate with ACCL's production.

the quantities purchased were

(80)

Consequently, on the basis of the information supplied
by the Italian authorities and given the lack of evidence
that such a positive price policy in favour of Lazio milk
producers exists, the Commission concludes that ACCL's
activity from 1993 to 1997 did not involve State aid
within the meaning of Article 87(1) of the EC Treaty to
Lazio milk producers.

Privatisation of ACCL

(81) When initiating the procedure under Article 88(2) of the
Treaty, on the basis of the information available at the
time the Commission was unable to rule out the poss-
ibility that aid had been granted to the buyer under the
privatisation procedure.

(82)

The Commission's concerns spring from two different
sources. First, the notice announcing the privatisation of
ACCL was published in two Italian newspapers only
while possible interest in the privatisation among other
European companies could not be ruled out. Secondly,

(15) Judgment of the Court of Justice in Case 102/87 French Republic v

Commission of the European Communities [1988] ECR 4067.

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even if the company was sold to the highest bidder for a
price significantly higher than its estimated value, the
sale was subject to certain conditions. An element of
State aid may have been involved if the price the private
investor paid was lower than it would have been had
those conditions not applied, namely the maintenance of
certain numbers of
jobs and continuing purchase of
supplies of raw materials from local producers.

(88)

follows from the abovementioned communication
It
that in sales of public assets, Member States are not
obliged to organise formal invitations to tenders or to
apply the rules governing open invitations to tender.
Consequently, whether or not it has been actively and
widely publicised, the sale of public assets by direct
agreement is acceptable under Community rules.

(83)

Italy disputed the Commission's approach in initiating
the Article 88(2) procedure and claims that the privatisa-
tion did not involve any grant of State aid within the
meaning of Article 87(1) of the Treaty to the buyer.

(84) As regards the specific reasons for the Commission's
doubts, the Italian authorities argue that the publication
of the privatisation notice was sufficiently well publi-
cised, witness the 25 bids received. In addition, Italy
regards as pure conjecture and speculation the argument
that the conditions attaching to the privatisation deal
had an impact on the market value of the company, and
denies that
those
conditions influenced the price of the company. Italy
accordingly claims that no use was made of State
resources.

there is any factual evidence that

(85)

(86)

(87)

In its preliminary examination of the aid, the Commis-
sion followed its established practice with regard to the
sale of public assets (see recital 32.). It considers at this
stage that the initial assessment must be supplemented
by an assessment of the privatisation procedure in the
light of the Commission Communication on State aid
elements in sales of land and buildings by public author-
ities (16).

In accordance with the communication, sales of public
land and buildings following a well-publicised, open and
unconditional bidding procedure do not entail State aid.
This does not apply in the case in point, since the sale of
the company was not unconditional.

The communication lays down rules for determining
whether State aid exists where a sale does not take place
under an unconditional bidding procedure.
In such
cases, the market value of an asset is to be determined
by an independent expert prior to the sale negotiations.
A price may be deemed to be in line with the market
value where it does not differ by more than 5 % from
the value so determined. Furthermore,
in the public
interest special obligations relating to the land and build-
ings concerned and not to the buyer or his economic
activities may attach to the sale, provided that all poten-
tial buyers are required and able to fulfil them.

(16) OJ C 209, 10.7.1997, p. 3.

(89) As regards the price at which the company is sold in the
case of sales where no formal tender is organised, the
Commission normally only requires the selling price to
be in line with the market value of the assets as deter-
mined by an independent expert.

(90)

First, a valuation was carried out by an independent
expert prior to the final round of negotiations in accord-
ance with Article 2343 of the Italian Civil Code. The
expert, who was designated by the President of
the
Tribunale di Roma, estimated the value of Centrale del
Latte di Roma SpA as totalling ITL 75,272 billion. The
Commission notes that the company was sold to the
bidder submitting the best offer in financial terms. That
offer (ITL 106,6 billion) was also 29 % higher than the
company's market value as determined by the indepen-
dent expert.

(91) As

regards

the conditions governing the sale,

the
Commission notes, first, that the sale of public assets on
special conditions is acceptable under Community law
where those conditions do not discriminate among the
potential buyers. In the sale in question, none of the
conditions (safeguarding of jobs,
implementation of a
business plan, obligation to buy at least 80 % of raw
materials from local producers, and obligation not to
transfer the place of production for five years) discrimi-
nates among the potential buyers. The Commission also
takes the view that some of the conditions may affect
the real market price of the company. As regards the
maintenance of jobs, the Commission notes that the
buyer has undertaken to maintain only 200 of the 392
existing workforce. In the light of the other bids and the
estimates in the business plan, that workforce seems
sufficient for the company to operate satisfactorily. The
buyer has also undertaken to implement an industrial
plan for a total of ITL 59,409 billion, which is higher
than that proposed by the other bidders. The other
conditions seem to be designed to ensure the continua-
tion of the company's production model. Accordingly,
the Commission agrees with the Italian authorities that
the effect of
those conditions on the market price
cannot be calculated and it may be neutralised by the
fact that the selected bidder's offer is substantially higher
than the value of the company, as determined by the
independent expert (42 %).

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(92)

(93)

the Commission's initial concern that
Consequently,
State aid within the meaning of Article 87(1) of the
Treaty may have been granted to the buyer under the
privatisation procedure has been allayed.

In view of the foregoing conclusion, the Commission
considers that a further examination of the conditions of
sale in the light of Articles 87, 88 and 89 of the Treaty
is no longer called for.

Possible derogations pursuant to Article 87 of the
Treaty

(94)

In view of the initial assessment, the Commission has
concluded that State aid within the meaning with Article
87(1) of the Treaty is confirmed only in respect of one
of the three original grounds for initiating the Article
88(2) procedure (the writing-off of ACCL's operating
losses).

(95) None the less, the prohibition on State aid contained in
Article 87(1) is not unconditional. The exemptions listed
in Article 87(2) clearly do not apply given the nature of
the aid measures concerned and their objectives. More-
over, Italy has not invoked the application of Article
87(2) to those measures.

(96) Article 87(3) specifies the circumstances under which
State aid may be considered to be compatible with the
common market. Compatibility with the common
market must be assessed from the point of view of the
Community and not of the individual Member State.
With a view to ensuring that the common market func-
tions properly, the exemptions from the ban on State aid
must be interpreted restrictively.

(97) Article 87(3)(a) clearly does not apply since the aid is
not
intended to promote the development of areas
where the standard of living is abnormally low or where
there is serious underemployment.

(98) As regards Article 87(3)(b), the aid in question is not
intended to promote the execution of an important
project of common European interest or to remedy a
serious disturbance in the Italian economy.

(99)

This aid is not
intended to achieve or suitable for
achieving the objectives referred to in Article 87(3)(d).

(100) Under Article 87(3)(c) of the Treaty, aid to facilitate the
development of certain economic activities or of certain
economic areas may be considered compatible with the
common market provided that it does not adversely
affect trading conditions to an extent contrary to the
common interest.

service’ under

(101) To start with, the Commission notes that from the end
of 1992 to its sale in mid-1997 ACCL operated as a
‘public
any
outstanding operating losses were to be covered by the
Municipality of Rome. On the substance of the case, the
Commission would normally consider such debt write-
offs as operating aid that does not lead to any develop-
ment of the sector or the region (17).

arrangements whereby

(102)

Italy claims, however, that the aid qualifies under the
derogation provided for in Article 87(3)(c) of the Treaty
in so far as it is compatible with the Community Guide-
lines on State aid for rescuing and restructuring firms in
difficulty (18).
Initially, the Commission assessed these
provisions having regard to the Community guidelines
in force at the time the aid was granted and the proce-
dure provided for in Article 87(2) of the Treaty was
initiated. Those Guidelines were subsequently consol-
idated in mid-1999 (19). In accordance with point 7(5)(b)
of the new Guidelines, the Commission is to examine
the compatibility with the common market of any
rescue or restructuring aid granted before their entry
into force on the basis of the guidelines in force at the
time the aid was granted.

(103) As ACCL was incurring systematic annual losses, it may
be regarded as meeting the conditions for consideration
as a firm in difficulty within the meaning of point 2.1 of
the applicable guidelines.

(104)

In the Commission's view, the debt write-offs by the
Municipality of Rome do not comply with the general
objective of rescuing firms in difficulty, which is simply
to offer companies in difficulty a brief respite while a
long-term solution is worked out. In order to be author-
ised, rescue aid must:

— consist of liquidity support in the form of loan guar-
antees or reimbursable loans granted at interest rates
equivalent to those on the market,

— be limited to the amount needed to keep the firm in
business (e.g. by covering the costs of wages and
salaries and routine supplies),

— be paid only for the time needed (generally not
exceeding six months) to determine the restructuring
measures necessary,

— be warranted on the grounds of serious social diffi-
culties and have no unduly adverse effects on the
industrial or agricultural situation in other Member
States,

— in principle be one-off operations.

(17) See footnote 5.
(18) See footnote 11.
(19) OJ C 288, 9.10.1999, p. 2.

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(105) The above annual write-offs do not imply a return on
capital at interest rates equivalent to those on the market
and they are not one-off operations. They cannot there-
fore be considered to fulfil the conditions in the Guide-
lines on State aid for rescuing and restructuring firms in
difficulty.

(106) Under the applicable guidelines, restructuring aid can
only be approved where the following general condi-
tions are fulfilled.

(107)

discharge all
Commission's decision.

the obligations provided for in the

e) Monitoring and annual reports

Granting of restructuring aid must be monitored at
regular intervals on the basis of adequate reports.

In general
there is no obvious link between ‘public
service’ status for the coverage of operating losses and
any restructuring measures undertaken within the
company.
Indeed, debts have been written off since
1992, while implementation of the restructuring plan
(1995 to 1997 business plan) only started in 1995.

(108) As far as restoring viability within a reasonable timescale
the

the business plan provides

for

is concerned,
following measures:

— a 5,6 % reduction in industrial costs through more

efficient processing,

— a 37,5 % reduction in general processing costs, to be
achieved largely through cutting the workforce and
general administrative costs. The business plan
provides for staff to be cut by almost 200 (from an
existing pre-plan workforce of 488 to a target of
280 in 1997). The attendant reduction in operating
costs was estimated to amount to ITL 15 billion/
year,

— the implementation of an investment plan for
ITL 9,8 billion a year until 1997, with the main aim
of updating the existing processing lines, and in
particular the long-life UHT milk processing line,

— the business plan relied on a shift in the product
range. It provides for an overall increase of 6 % in
sales of packaged milk products. Overall this corre-
sponds to a 5 % decrease in production of fresh milk
and a substantial increase for other types of dairy
products, namely cream (+60 %), yoghurt and long-
life milk (300 %). By 1997 the company turnover
was expected to increase by 37 %;

— restructuring of distribution, which was held to be
inefficient, and development of a new marketing
policy.

(109) ACCL's business plan contains an important set of core
internal measures that could be considered a restruc-
turing plan in accordance with the Community guide-
lines. However, from the outset the plan did not actually
anticipate a return to viability but rather an improve-
ment in the trading results (from – ITL 13,0 billion in
1995 to – ITL 5,9 billion in 1997), which would simply
have prepared the ground for a return to profit. Accord-
ingly, it did not seek to restore viability in accordance
with the guidelines, i.e. by generating sufficient profits to
cover all costs and ensure some return on capital. Even
if the company did produce a profit (ITL 1,5 billion) in
1998 following its privatisation,
in the Commission's
view, seeing that ACCL was sold, the new company can

a) Restoration of viability

All restructuring plans must enable the firm's long-
term viability to be restored within a reasonable time-
scale and on the basis of realistic assumptions as to
its future operating conditions. The improvement in
viability must derive mainly from internal measures
and may be based on external factors only to the
extent
that assumptions regarding the way those
factors will develop are widely accepted. To fulfil the
viability criteria, restructuring plans must enable the
company to cover all its costs, including depreciation
and financial charges, and to generate a minimum
return on capital such that the firm can compete in
the marketplace on its own merits.

b) Preventing undue distortion of competition brought about

by the aid

Measures should be taken to mitigate as far as
possible the adverse effects on competitors. Where an
objective assessment of the supply and demand situa-
tion shows an excess of production capacity, the
restructuring plan must make a contribution that is
commensurate with the aid received to the restruc-
turing of
the relevant EC market by irreversibly
reducing or abandoning capacity.

c) Proportionality of aid in terms of restructuring costs and

benefits

In rate and amount the aid must be kept to the bare
restructuring and must be
minimum needed for
commensurate with the benefits
anticipated at
Community level. Aid beneficiaries will be expected
to make a significant contribution to the restruc-
turing programme from their own resources or using
external financing at market conditions. In order to
limit distortion, the amount of the aid or the form in
which it
is granted must be such as to avoid
providing the company with surplus cash which
could be used for aggressive, market-disturbing activ-
ities.

d) Full implementation of restructuring plan and observance

of conditions

The company must fully implement the restructuring
plan approved by the Commission and must

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no longer be regarded as a firm in difficulty (see recital
25 of this Decision and point 7 of the new Community
Guidelines on State aid for rescuing and restructuring
firms in difficulty (20). Moreover, that income appears to
derive from the implementation of a further set of meas-
ures. Even taking certain extraordinary costs related to
ACCL's liquidation into account, the trading results for
1997 were clearly negative ( – ITL 57,1 billion), which
suggests that the business plan (as confirmed by Italy)
was not fully implemented. Consequently, the Commis-
sion does not consider that the first condition of the
guidelines on restructuring has been fulfilled.

sector by irreversibly reducing or

(110) As far as the second condition is concerned, ACCL's
business plan for 1995 to 1997 makes no provision for
any measures to mitigate as far as possible any adverse
effects on competitors. In addition, restructuring aid in
sectors where there is structural overcapacity at Euro-
pean level must contribute to the restructuring effort of
the
eliminating
capacity. ACCL was active in the milk and dairy-prod-
ucts sector, where there is significant overcapacity at
Community level. This is demonstrated by the existence
(during the period when the restructuring took place) of
limits on investments both in primary
strict sectoral
production (Article 6 of Council Regulation (EC) No
950/97 on 20 May 1997 on improving the efficiency of
agricultural structures (21)) and in the processing and
marketing of milk products (point 2.3 of the Annex to
Commission Decision 94/173/EC (22). Neither the busi-
ness plan nor the Italian authorities' remarks hint at
eliminating production or marketing capacity.
In the
Commission's view, therefore, the second condition of
the Guidelines on restructuring is not fulfilled.

(111) The third condition relates to proportionality,

i.e. the
cost of the restructuring aid as set against the benefits to
the Community. This condition is not fulfilled since,
given the form of
the aid (writing-off of operating
losses), in the Commission's view the aid was not kept
to the bare minimum necessary for restructuring. On the
contrary, the debt write-offs under which the company
was operating provided a constant supply of liquidity
that exceeded what was required for restructuring (recital
107).

(112) The Commission accordingly holds that the aid measure
does not comply with the applicable guidelines on
rescuing and restructuring firms in difficulty.

(20) OJ C 288, 9.10.1999, p. 2.
(21) OJ L 142, 2.6.1997, p. 1.
(22) Commission Decision on the selection criteria to be adopted for
investments for improving the processing and marketing conditions
for agricultural and forestry products and repealing Decision 90/
342/EEC (OJ L 79, 23.3.1994, p. 29).

Applicability of Article 86(2) of the Treaty

(113) When it initiated the procedure provided for in Article
88(2) of the Treaty, the Commission considered that
ACCL's activities did not exhibit special characteristics
allowing it to be considered for derogation under Article
86(2) of the Treaty (23). Furthermore, the Commission
held that companies producing and marketing products
listed in Annex I
to the Treaty and covered by a
common market organisation could not be regarded as
undertakings entrusted with the operation of services of
general economic interest within the meaning of Article
86(2) of the Treaty.

(114)

In their reply, the Italian authorities did not dispute the
Commission's position.

(115) The Commission accordingly maintains its previous
position to the effect that Article 87(2) of the Treaty
cannot apply to a company producing and marketing
dairy products.

V

CONCLUSIONS

(116) The Commission considers that the measures for writing
off ACCL's operating losses from 1992 to 1997 consti-
tute State aid within the meaning of Article 87(1) of the
Treaty.

(117) However, in the Commission's view the abovementioned
measures in favour of Lazio milk producers do not
constitute State aid within the meaning of Article 87(1)
of the Treaty. Likewise, the Commission holds that the
ACCL privatisation procedure does not involve State aid
within the meaning of Article 87(1) of the Treaty.

(118) The Commission deplores the fact that Italy has unlaw-
fully applied the abovementioned aid in breach of
Article 88(3) of the Treaty.

(119) For the reasons set out above, none of the exemptions
provided for in Article 87(2) or (3) of the Treaty can
apply to aid satisfying the requirements of Article 87(1).
Likewise, the derogation provided for in Article 86(2) of
the Treaty is not applicable to that aid, which is there-
fore incompatible with the common market.

(120) That conclusion is without prejudice to any position that
the Commission may adopt pursuant to Articles 87, 88
and 89 of the Treaty on the relevant provisions of Italian
Law No 142 of 8 June 1990 on the provisions
governing local authorities.

(23) See judgment cited in footnote 7.

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(121)

In cases like that in point, where non-notified aid is
granted before the Commission has
taken a final
decision, the binding nature of the rules of procedure
laid down in Article 88(3) of the Treaty, the direct effect
of which has been recognised by the Court of Justice in
its judgments in Case 77/72 (Carmine Capolongo v
Azienda Agricola Maya) (24), Case 120/73 (Gebr. Lorenz
GmbH v Federal Republic of Germany) (25) and Case 78/76
(Steinicke und Weinlig v Federal Republic of Germany) (26),
prevents any retrospective legitimation of the aid (judg-
ment in Case C-354/90 (Fédération nationale du commerce
extérieur des produits alimentaires and others v France) (27)).

the operation
the Commission takes the view that
should be regarded as an ‘asset deal’ in which Centrale
del Latte di Roma SpA was simply an instrument.
Furthermore,
(a major private industrial
group) has not received any benefit from the aid granted
previously, since it no longer has an independent legal
status and is thus not liable to repay the aid. The aid
should accordingly be reimbursed by ACCL.

the buyer

(126) This Decision is without prejudice to any conclusions
that the Commission may draw as regards the financing
of
the common agricultural policy by the European
Agricultural Guidance and Guarantee Fund (EAGGF),

(122) Article 14(1) of Council Regulation (EC) No 659/1999
of 22 March 1999 laying down detailed rules for the
application of Article 88 of the EC Treaty (28) provides
that where a negative decision is taken in a case of
unlawful aid,
the
Member State concerned must take all necessary meas-
ures to recover the aid from the beneficiary. Recovery is
necessary in order to restore the previous situation by
removing all financial advantages unduly gained by the
beneficiary since the date of granting of the aid.

the Commission is to decide that

HAS ADOPTED THIS DECISION:

Article 1

(123) Article 14(2) of Regulation (EC) No 659/1999 states that
the sums to be recovered are to bear interest at an
is
appropriate rate set by the Commission.
payable from the date on which the unlawful aid is
made available to the beneficiary until the date of its
recovery.

Interest

(124) The aid is to be repaid in accordance with the rules of
procedure laid down by Italian law. The aid is to include
interest from the date on which it was granted until its
actual recovery. The interest is calculated on the basis of
the reference rate used to calculate the grant equivalent
of regional aid (29).

(125)

In the case in point, the party from whom the aid is to
be recovered must also be specified. From 1992 to
1997, ACCL received overall aid amounting to ITL 96,6
billion to write off operating losses. By decision of the
Municipality of Rome of 8 July 1996, ACCL's assets
were transferred to Centrale del Latte di Roma SpA. The
latter company was subsequently sold at normal market
rates, an operation that, compared with conventional
liquidation, allowed the State to obtain the best possible
financial return for its assets. Under the circumstances,

(24) [1973] ECR 611.
(25) [1973] ECR 1417.
(26) [1977] ECR 595.
(27) [1991] ECR I-5505.
(28) OJ L 83, 27.3.1999, p. 1.
(29) OJ C 74, 10.3.1998, p. 9.

1.
The measures for the writing-off of the operating losses
incurred by Azienda Comunale Centrale del Latte di Roma
from 1992 to 1997 do not constitute State aid within the
meaning of Article 87(1) of the Treaty to Lazio milk producers.

2.
The procedure for the privatisation of Azienda Comunale
Centrale del Latte di Roma does not involve State aid within
the meaning of Article 87(1) of the Treaty.

3.
The measures for the writing-off of the operating losses
of Azienda Comunale Centrale del Latte di Roma between
1992 and 1997 are incompatible with the common market.

Article 2

1. Within two months of notification of this Decision, the
Italian authorities shall take all measures necessary to recover
from the beneficiaries the aid referred to in Article 1(3) that
was unlawfully granted to them.

The aid shall be recovered in accordance with the proced-
2.
ures laid down by Italian law. The sums to be recovered shall
bear interest from the date on which they were made available
to the beneficiaries until their actual recovery. Interest shall be
calculated on the basis of the reference rate used for calculating
the grant equivalent of regional aid.

Article 3

Within two months of notification of this Decision, Italy shall
inform the Commission of the measures it has taken to comply
with it.

L 265/28

EN

Official Journal of the European Communities

19.10.2000

This Decision is addressed to the Italian Republic.

Article 4

Done at Brussels, 11 April 2000.

For the Commission

Franz FISCHLER

Member of the Commission