2000/648/EC: Commission Decision of 21 June 2000 on State aid which Italy is planning to implement for Siciliana Acque Minerali Srl (notified under document number C(2000) 1730) (Text with EEA relevance) (Only the Italian text is authentic)
Date: 2000-06-21
Institutions: European Commission
Subjects: Italy, State aid, beverage industry, bottling, control of State aid, infringement of EU law

L 272/36

EN

Official Journal of the European Communities

25.10.2000

COMMISSION DECISION

of 21 June 2000

on State aid which Italy is planning to implement for Siciliana Acque Minerali Srl

(notified under document number C(2000) 1730)

(Only the Italian text is authentic)

(Text with EEA relevance)

(2000/648/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular Article 10, and the first subpara-
graph of Article 88(2) thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having regard to Council Regulation (EC) No 659/1999 laying
down detailed rules for the application of Article 93 of the EC
Treaty (1),

Having regard to the Commission communication to the
funds to public under-
Member States on the transfer of
takings (2),

Having regard to the Community guidelines on State aid for
rescuing and restructuring firms in difficulty (3),

Having regard to the Commission Decision of 3 June 1999 (4)
to initiate the procedure laid down in Article 88(2) in respect
of aid C 34/99 and to invite the Italian authorities to provide
all the necessary information within one month,

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

Whereas:

I. PROCEDURE

(1)

By letter dated 19 August 1997 from its Permanent
Representation, Italy notified the Commission pursuant
to Article 88(3) of the EC Treaty of aid that the Region
of Sicily planned to grant
to the company Siciliana
Acque Minerali Srl (hereafter ‘SAM’) to cover its balance-
sheet
the legal basis for the operation being
Article 19 of Regional Law No 46 of 24 December
1997 concerning provisions governing the carrying on
of professional activities by travel and tourism agencies
in Sicily. On the sole ground that, under Article 22 of

losses,

(1) OJ L 83, 27.3.1999, p. 1.
(2) OJ C 307, 13.11.1993, p. 3.
(3) See point 98 of the new guidelines on State aid for rescuing and
restructuring firms in difficulty (OJ C 288, 9.10.1999, p. 2), which
provides that aid for SMEs individually notified before 30 April
2000 will be assessed in the light of the guidelines previously in
force (OJ C 368, 23.12.1994, p. 12).

(4) OJ C 365, 18.12.1999, p. 3.

(2)

(3)

(4)

(5)

(6)

Law No 46/97, Article 19 is subject to prior approval by
the Commission within the meaning of Articles 87 et
seq. of the Treaty, the measure in question was entered
in the register of notified aid under N 576/97.

By letter dated 3 June 1999 (SG (99) D/4000), the
Commission informed Italy that it had decided to initiate
the procedure laid down in Article 88(2) of the EC
Treaty in respect of the aid, since the recapitalisation of
SAM could involve elements of State aid within the
meaning of Article 87 of
the Treaty and since the
extremely small amount of information received obliged
the Commission to request that the Italian authorities
provide, within one month, all the documents and infor-
the
mation required to assess the compatibility of
measure,
including a restructuring plan and a note
setting out in detail the procedure regarding any future
sale of SAM.

In the same decision, the Commission also informed the
Italian authorities that, in the absence of such documen-
tation,
it would take a decision on the basis of the
information available to it.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Communi-
ties (5). The Commission invited interested parties to
submit
their comments on the measure within one
month of the date of publication.

No comments on the matter have been received by the
Commission either from interested parties or from the
Italian authorities.

II. DETAILED DESCRIPTION

Article 19 of Regional Law No 46/97 authorises the
member of the Sicilian Regional Executive responsible
for tourism, communications and transport to make an
outright grant to the Acireale Springs Agency (a public
institution set up by Sicilian Presidential Decree No 12
of 30 December 1954)
the recapitalisation of
Siciliana Acque Minerali Srl, which is controlled by the
above agency.

for

(5) See footnote 4.

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L 272/37

The amount of the planned grant is ITL 3 000 million
(EUR 1,5 million).

V. ASSESSMENT OF THE AID

(7)

(8)

(9)

(10)

The final beneficiary of the aid is SAM, a company
specialising in managing industrial plants for bottling
and distributing mineral water and beverages. SAM was
set up in 1993, with 95 % of its capital coming from the
Acireale Springs Agency and 5 % from private partners.
It initially had a workforce of 30. On 31 December
1996 it employed 26 people. Its turnover was some
ITL 3 859 million in 1996 (about EUR 2 million),
representing a loss of ITL 710 million (EUR 362 000),
of which ITL 500 million was attributable to the day-
to-day management of the business and ITL 210 million
to its financial management. This loss, equivalent to
18 % of turnover, which followed substantial losses in
previous years (ITL 1 922 million in 1995, ITL 1 075
million in 1994 and ITL 376 million in 1993), brought
the company's difficulties to such a critical point that its
capital base became negative to the extent of ITL 2 584
million (EUR 1,3 million) as at 31 December 1996.

Article 19 of Regional Law No 46/97 provides that the
aid in question is intended to cover SAM's losses and to
reconstitute its capital with a view to privatisation.

The market in bottling and distributing mineral water
and beverages, SAM's main activity,
is one in which
companies
the European Union are in
throughout
competition. Available information (6) shows that the
main producers are in France, the United Kingdom, Italy
and Spain. More specifically in 1998, intra-Community
exports of beverages totalled some EUR 13 billion, of
which EUR 4 485 957 000 is accounted for by France,
Kingdom,
EUR 1 983 600 000
EUR 1 699 926 000 by Italy and EUR 1 159 648 000
by Spain (7).

United

the

by

III. COMMENTS FROM INTERESTED PARTIES

(11) No comments from interested parties were received
following publication in the Official Journal of the Euro-
pean Communities of the Commission decision to initiate
the procedure (5).

(16)

IV. COMMENTS FROM ITALY

(12) No comments were received from the Italian authorities,
nor was a reply received to the Commission's request for
information in its decision to initiate the procedure.

(5) See footnote 4.
(6) See European Commission, Panorama of EU industry 1997, 3-146,

1994 data.

(7) See Comext2, Eurostat 1999 figures.

(8) See footnote 2.
(9) OJ L 195, 29.7.1980.
(10) OJ L 229, 28.8.1985, p. 20.
(11) OJ L 254, 12.10.1993, p. 16.

(13) As to the existence of the aid, since a capital injection
was provided by a public authority to a State-owned
firm, the measure must be assessed according to the
‘market economy investor principle’ set out
in the
Commission communication to the Member States on
the transfer of funds to public undertakings (8).

(14)

(15)

SAM is a public undertaking within the meaning of
Article 2 of Commission Directive 80/723/EEC of 25
June 1980 on the transparency of financial relations
between Member States and public undertakings (9), as
amended by Directive 85/413/EEC (10) and by Directive
93/84/EEC (11). This Article provides that a public under-
taking is considered to be any undertaking over which
the public authorities may exercise directly or indirectly
a dominant influence. According to the second para-
graph of this Article, a dominant influence on the part
of the public authorities is presumed when these author-
ities, directly or indirectly in relation to an undertaking,
hold the major part of its subscribed capital. This is
undoubtedly the case of SAM, 95 % of whose capital is
held by the Acireale Springs Agency, a public institution
set up by the Region of Sicily.

It is clear that in certain circumstances public enterprises
can derive an advantage from the nature of their rela-
tionship with public authorities. Consequently,
‘to
ensure respect for the principle of neutrality the aid
must be assessed as the difference between the terms on
which the funds were made available by the State to the
public enterprise and the terms which a private investor
would find acceptable in providing funds to a compar-
able private undertaking when the private investor is
operating under normal market economy conditions’
(market economy investor principle — point 11 of the
Commission communication to the Member States on
the transfer of funds to public undertakings).

The information in the Commission's possession shows
that in 1996, the year when the decision on recapitalisa-
tion was taken, SAM was in a particularly weakened
the losses and the
financial situation as a result of
erosion of the firm's capital base described at recital 8.
Furthermore, no particulars have been submitted to the
Commission to suggest that there was some prospect of
the recapitalisation of the firm, at a cost of ITL 3 000
million, being profitable enough to cover the cost of
capital which a private investor might be willing to
advance and to provide a satisfactory return on the
capital investment. Therefore, since it is not in line with
the market economy investor principle, the capital injec-
tion for SAM constitutes State aid.

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Official Journal of the European Communities

25.10.2000

(17)

This aid could distort or threaten to distort competition
in that it allows SAM to strengthen its market position
at the expense of its competitors. It could also affect
trade within the Community since, according to the
information available (see recital 10), the Community
market in bottling and distributing mineral water is a
very competitive one. Moreover, during the formal
investigation procedure, the Italian authorities did not
dispute the Commission's affirmation that, if recapitali-
sation had not taken place, the company would have
had to be put into liquidation, releasing market shares or
enabling some of its competitors in the Community to
bid for its assets.

(20)

rescuing and restructuring firms

SAM could be defined as a ‘firm in difficulty’ unable to
recover through its own resources within the meaning
of point 2.1 of the Community guidelines on State aid
for
in difficulty.
However, the scant information which the Commission
has at its disposal does not allow it to establish whether
the planned capital injection by the Region of Sicily for
SAM could be classified as rescue or restructuring aid
compatible with the
common market within the
meaning of Article 87(3)(c) of the Treaty.

(21)

To be authorised as rescue aid intended temporarily to
sustain a firm in difficulty, the recapitalisation of SAM
would have had:

(18) As to whether the aid is lawful, it should be noted that
the measure was kept in the register of notified aid
solely because, under Article 22 of Regional Law No
46/1997, Article 19 is subject to prior approval by the
Commission within the meaning of Articles 87 et seq. of
the Treaty. The Commission did not receive any specific
information that the aid had not been granted. It must
therefore conclude that the provisions of the Treaty were
respected but it cannot rule out the possibility that the
aid may none the less have been unlawfully imple-
mented. Indeed, on the basis of the information avail-
able, SAM is still
this
Decision.

in business on the date of

(19) As regards the compatibility of the aid, the Commission
considers that, since it does not rank as aid having a
social character granted to individual consumers or as
aid to make good the damage caused by natural disasters
or exceptional occurrences, the exemptions in Article
87(2)(a) and (b) are not applicable. Since, furthermore, it
is not aid to promote the execution of an important
project of common European interest or to remedy a
serious disturbance in the economy of a Member State,
the exemption in Article 87(3)(b) cannot be applied. The
exemption in Article 87(3)(d) is not relevant given the
nature of this case. Finally, since the aid is not intended
to encourage economic development in Sicily, which
would have been considered admissible under
the
exemption in Article 87(3)(a), the only exemption that
indicated by the
could possibly be considered, as
decision to initiate the formal investigation procedure, is
the one provided for in Article 87(3)(c) for the non-
regional aspect; in particular, in view of the nature of the
aid, the compatibility of the measure should be exam-
ined in the light of the Community guidelines on State
aid for rescuing and restructuring firms in difficulty (12),
which in any event take account of development needs
in the regions assisted.

(12) See footnote 3.

(a) to consist of

liquidity help in the form of
guarantees or loans at market interest rates;

loan

(b) to be restricted to the amount needed to keep the

firm in business;

(c) to be paid only for the time needed (generally not
exceeding six months) to identify the necessary and
feasible recovery plan;

(d) to be warranted on the grounds of serious social
difficulties and have no undue adverse effects on the
industrial situation in other Member States (see point
3.1 of the Community guidelines on State aid for
rescuing and restructuring firms in difficulty) (12).

Since the capital injection for SAM was planned in the
form of an outright grant, in breach of condition (a), and
since there is no evidence that the other conditions were
satisfied, the Commission is unable to conclude that the
aid in question is compatible with the common market
as rescue aid.

(22)

To be authorised by the Commission as restructuring aid
intended to restore the long-term viability of the firm
through reorganisation, rationalisation or diversification
of its activities, the recapitalisation of SAM and its subse-
quent privatisation, as provided for in Regional Law No
46/97, would have had:

(a) to be linked to a restructuring plan intended to
restore the long-term viability of the firm within a
reasonable timescale;

(b) to be associated with measures aimed at offsetting as
far as possible any adverse effects on competitors;

(c) to be limited, as regards the amount and intensity of
the aid, to the strict minimum needed to enable
restructuring to be undertaken;

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(d) to be accompanied by full

implementation of the
restructuring plan and observance of the conditions
laid down in the Commission Decision;

(e) to include an undertaking from the Member State
to the
report
concerned to submit an annual
Commission to enable it
to monitor the imple-
mentation, progress and success of the restructuring
plan (see point 3.2 of the Community guidelines on
State aid for rescuing and restructuring firms in
difficulty) (12).

It should be noted that, despite the Commission's
request for information in the decision of 3 June 1999
initiating the procedure, no restructuring plan or any
other documentation to justify the recapitalisation has
been received from SAM. Accordingly, given the lack of
the other
information regarding the observance of
conditions, the Commission cannot conclude that the
aid in question is compatible with the common market
as restructuring aid.

(23) As regards the procedure for any future sale of SAM,
referred to in the Commission decision of 3 June 1999,
following the privatisation of the company provided for
by Article 19 of Regional Law No 46/97, the Commis-
sion has no information at its disposal which would
allow it to establish whether or not this took place. As a
result, the Commission is not in a position to judge
whether the general conditions for the sale of public
undertakings were respected; these would form the basis
for a decision on the existence or otherwise of State
aid (13). This Decision does not, therefore, prejudge any
position the Commission might
take on the matter
should privatisation take place in the future.

(24)

In conclusion, the Commission considers that the Italian
authorities, by neglecting to provide the information
needed to assess the case in question, have failed to fulfil
their obligation to cooperate in good faith as laid down
in Article 10 of the EC Treaty.

VI. CONCLUSION

(25)

The Commission:

— notes that

the Italian authorities have failed to
comply with its request for information and that, as
a consequence, this Decision must be adopted on the
basis of
in accordance
with Article 7 of Regulation (EC) No 659/1999,

the information available,

(12) See footnote 3.
(13) The Commission Decision of 3 June 1999 (see footnote 4) impli-
citly refers to the letter of 14 July 1993 to the Director-General of
the French competition authority; these criteria were reaffirmed by
the Commission in its XXIIIrd Report on competition policy.

— concludes on that basis that, since none of

the
exemptions in Article 87(2) and (3) are applicable,
the aid in question is incompatible with the common
market and cannot therefore be implemented,

— concludes that any aid implemented in spite of the
condition laid down in Article 22 of Regional Law
No 46/97 must be recovered. This is necessary to
restore the previous situation by removing the finan-
cial advantages from which the recipient has bene-
fited unlawfully from the date on which the aid was
improperly granted. Recovery of incompatible and
unlawful aid is provided for in Regulation (EC) No
659/1999. The aid must be recovered without delay
and in accordance with the procedures of national
and
these
law, provided that
immediate execution of the Commission Decision.
Interest is payable from the date on which the aid
was at the disposal of the beneficiary until the date
of its recovery. Interest is calculated on the basis of
the reference rate used for calculating the grant
equivalent of regional aid,

allow effective

HAS ADOPTED THIS DECISION:

Article 1

1.
The State aid which Italy is planning to implement for
Siciliana Acque Minerali Srl, amounting to ITL 3 000 million is
incompatible with the common market.

2.

The aid may accordingly not be implemented.

Article 2

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

Article 3

1.
Italy shall take all necessary measures to recover from the
recipients any aid which may have been unlawfully granted.

2.
Recovery shall be effected without delay and in accord-
ance with the procedures of national law provided that they
allow the immediate and effective execution of this Decision.
The aid to be recovered shall include interest from the date on
which it was at the disposal of the recipients until the date of
its recovery. Interest shall be calculated on the basis of the
reference rate used for calculating the grant equivalent of
regional aid.

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Official Journal of the European Communities

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This Decision is addressed to the Italian Republic.

Article 4

Done at Brussels, 21 June 2000.

For the Commission

Mario MONTI

Member of the Commission